nep-exp New Economics Papers
on Experimental Economics
Issue of 2015‒10‒17
twenty-one papers chosen by

  1. Cheating and Incentives: Learning from a Policy Experiment By Cesar Martinelli; Susan W. Parker; Ana Cristina PeÌrez-Gea; Rodimiro Rodrigo
  2. Equality Concerns and the Limits of Self-Governance in Heterogeneous Populations By Lata Gangadharan; Nikos Nikiforakis; Marie Claire Villeval
  3. More effort with less pay: On information avoidance, belief design and performance By Huck, Steffen; Szech, Nora; Wenner, Lukas M.
  4. Analysing farmers' preferences for collaborative arrangements: an experimental approach By Feil, Jan-Henning; Anastassiadis, Friederike; Mußhoff, Oliver; Kasten, Philipp
  5. Demand Reduction in Multi-Object Auctions with Resale: An Experimental Analysis By Marco Pagnozzi; Krista J. Saral
  6. Communication and conflict management By Gerald Eisenkopf
  7. An Experimental Evaluation of a Proactive Pastoral Care Initiative Within An Introductory University Course By Michael P. Cameron; Sialupapu Siameja
  8. Stochastic income and conditional generosity By Kellner, Christian; Reinstein, David; Riener, Gerhard
  9. Role of Personality Style on Bargaining Outcomes By Bryan C. McCannon; John B. Stevens
  10. Overbidding and heterogeneous behavior in contest experiments: A comment on the endowment effect By Subhasish M. Chowdhury; Peter G. Moffatt
  11. Truth-telling under Oath By Nicolas Jacquemet; Stéphane Luchini; Julie Rosaz; Jason F. Shogren
  12. Utilizing the Discrete Choice Experiment Approach for Designing a Socially Efficient Cultural Policy: The case of municipal theaters in Warsaw By Aleksandra Wiśniewska; Mikołaj Czajkowski
  13. Does the number of discrete choice alternatives matter for respondents’ stated preferences? The case of tap water quality improvements By Mikołaj Czajkowski; Marek Giergiczny; Ewa Zawojska
  14. Leadership and Motivation for Public Goods Contributions By Bryan C. McCannon
  15. On the interpretation of World Values Survey trust question - global expectations vs. local beliefs By Ritwik Banerjee
  16. Lying, spying, sabotaging: Procedures and consequences By Chlaß, Nadine; Riener, Gerhard
  17. Bancarizing with Credit Cards: Experimental Evidence on Interest Rates and Minimum Payments Elasticities for New Clients By Seira Enrique; Castellanos Pascacio Sara Gabriela; Jiménez Hernández Diego J.
  18. Conservation vs. equity: Can payments for environmental services achieve both? By Vorlaufer, Miriam; Ibanez, Marcela; Juanda, Bambang; Wollni, Meike
  19. The Perils of Peer Punishment: Evidence from a Common Pool Resource Experiment By de Melo Gioia; Piaggio Matías
  20. To friends everything, to strangers the law? An experiment on contract enforcement and group identity By Marian Panganiban
  21. Financial Competence, Overconfidence, and Trusting Investments: Results from an Experiment By Bryan C. McCannon; Colleen Tokar Asaad; Mark Wilson

  1. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Susan W. Parker (Center for Research and Teaching in Economics, Centro de Investigación y Docencia Económicas (CIDE)); Ana Cristina PeÌrez-Gea (Instituto Tecnológico Autónomo de México (ITAM)); Rodimiro Rodrigo (SecretariÌa de Hacienda y CreÌdito PuÌblico, MeÌxico)
    Abstract: We use a database generated by a policy intervention that incentivized learning as measured by standardized exams to investigate empirically the relationship between cheating by students and cash incentives to students and teachers. We adapt methods from the education measurement literature to calculate the extent of cheating, and show that cheating is more prevalent under treatments that provide monetary incentives to students (versus no incentives, or incentives only to teachers), both in the sense of a larger number of cheating students per classroom and in the sense of more cheating relations per classroom. We also provide evidence of learning to cheat, with both the number of cheating students per classroom and the average number of cheating relations increasing over the years under treatments that provide monetary incentives to students.
    Date: 2015–10
  2. By: Lata Gangadharan (Monash University, Department of Economics - Monash University); Nikos Nikiforakis (New York University Abu Dhabi - Abu Dhabi); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)
    Abstract: Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, often – such as when agents are heterogeneous – there is a trade-off between efficiency and equality. Agents' concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism which allows individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populations – where there is no tension between efficiency and equality – the mechanism permits group to obtain maximum efficiency. This is not the case in heterogeneous populations where individuals derive different benefits from cooperation. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest that equality concerns can impose limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.
    Keywords: Communication, rewards, cooperation, normative conflict, heterogeneity
    Date: 2015
  3. By: Huck, Steffen; Szech, Nora; Wenner, Lukas M.
    Abstract: In a tedious real effort task, subjects know that their piece rate is either low or ten times higher. When subjects are informed about their piece rate realization, they adapt their performance. One third of subjects nevertheless forego this instrumental information when given the choice - and perform stunningly well. Agents who are uninformed regarding their piece rate tend to outperform all others, even those who know that their piece rate is high. This also holds for enforced instead of self-selected information avoidance. All our findings can be captured by a model of optimally distorted expectations following Brunnermeier and Parker (2005).
    Keywords: Optimal Expectations,Belief Desing,Performance,Real Effort Task,Coarse Incentive Structures,Workplace Incentives
    JEL: D83 D84 J31 M52
    Date: 2015
  4. By: Feil, Jan-Henning; Anastassiadis, Friederike; Mußhoff, Oliver; Kasten, Philipp
    Abstract: This paper analyses farmers' preferences for farm-level collaborative arrangements (CAs) based upon a discrete choice experiment conducted in Germany. A mixed logit and a generalized multinominal logit model are used to determine whether farmers' decisions to establish a CA with a potential partner are influenced by non-monetary attributes like the age of the partner, the years of acquaintance with the partner or the production activities of the partner. Moreover, a monetary attribute is included to calculate the average individual's willingness-to-pay or 'implicit price' for a change in each of the non-monetary attributes. The results show that farmers' preferences for CAs increase, the closer their age is, the more years of (positive) acquaintance between them exist and the more similar their production activities are.
    Keywords: Farm-level collaborative arrangement, discrete choice experiment, generalized multinominal logit, Farm Management, Institutional and Behavioral Economics,
    Date: 2015
  5. By: Marco Pagnozzi (Università di Napoli Federico II and CSEF); Krista J. Saral (George Herbert Walker School of Business and Technology)
    Abstract: We analyze the effects of different resale mechanisms on bidders’ strategies in multi-object uniform-price auctions with asymmetric bidders. Our experimental design consists of four treatments: one without resale and three resale treatments that vary the information available and the bargaining mechanism in the resale market. The presence of a resale market induces demand reduction by high-value bidders and speculation by low-value bidders, thus affecting the allocation of the objects on sale. The magnitude of these effects, however, depends on the form of the resale market. Features of the resale market that tend to increase its efficiency result in lower auction efficiency and seller’s revenue. We also show that, without resale, asymmetry among bidders reduces demand reduction.
    Keywords: multi-object auctions, resale, asymmetric bidders, bargaining, economic experiments
    JEL: D44 C90
    Date: 2015–10–07
  6. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany)
    Abstract: The paper studies an experimental conflict in a repeated game and tests the robustness of communication as an intermediate conflict resolution instrument. The results show a strong and persistent impact of communication. Most conflict parties refrain from conflict expenditures even after the opportunity for communication has expired. Third party involvement with punishment options do not enhance this effect while the indivisibility of the contest prize reduces it. The initial intensity of the conflict has a small but long-term negative impact on conflict resolution.
    Keywords: Conflict Resolution, Experiment, Communication, Social Preferences
    JEL: C92 F3 H8
    Date: 2015–09–30
  7. By: Michael P. Cameron (University of Waikato); Sialupapu Siameja (University of Waikato)
    Abstract: Improving student retention and academic performance is a key objective for higher education institutions, and finding effective interventions for assisting with at-risk students is therefore important. In this paper we evaluate a proactive pastoral care intervention that was trialled in an introductory economics course. We first identified students at high risk of failure, and then randomised these students into two treatment groups and a control group. The first treatment group received an email with information about academic support, while the second treatment group received the email as well as a personal telephone call to follow up. In evaluating the impact of the intervention trial, we found that the first intervention did not significantly improve student outcomes, but the second intervention did improve outcomes in one of the two semesters evaluated. However, the statistically insignificant results were positive and statistical insignificance may be due to a lack of statistical power. Overall, the initiative was a qualified success. It is both simple and cost-effective, and should be considered for wider implementation and further evaluation.
    Keywords: academic performance; pastoral care; student retention; randomised-controlled trial; New Zealand
    JEL: A22 I21
    Date: 2015–09–13
  8. By: Kellner, Christian; Reinstein, David; Riener, Gerhard
    Abstract: We study how other-regarding behavior extends to environments with uncertain income and conditional commitments. Should fundraisers ask a banker to donate "if he earns a bonus" or wait and ask after the bonus is known? Standard EU theory predicts these are equivalent; loss-aversion and signaling models both predict a larger commitment before the bonus is known; theories of affect predict the reverse. In field and lab experiments, we allow people to donate from lottery winnings, varying whether they decide before or after learning the lottery's outcome. Males are more generous when making conditional donations before knowing the outcome, while females' donations are unaffected. Males also commit more in treatments where income is certain but the donation's collection is uncertain. This supports a signaling explanation: it is cheaper to commit to donate before the uncertainty is unresolved, thus a larger donation is required to maintain a positive image. This has implications for experimental methodology, for fundraisers, and for our understanding of pro-social behavior.
    Keywords: social preferences,contingent decision-making,signaling,uncertainty,prospect theory,affective state,gender,charitable giving,public goods,experiments,field experiments,bonuses
    JEL: D64 C91 L30 D01 D84
    Date: 2015
  9. By: Bryan C. McCannon (West Virginia University, Department of Economics); John B. Stevens (Saint Bonaventure University)
    Abstract: Purpose: The motivation for the research is to identify whether personality traits can help explain the outcomes that arise in bargaining outcomes. Design: Experiments with subjects playing the alternating-offers bargaining game are considered. Both full information and asymmetric information treatments are considered. Subjects also complete standardized Myers-Briggs Type Indicator assessments. Findings: Personality type measurements are shown to help explain the opening offers, rejections, and resulting wealth in the negotiations. It is shown that interactions between the personality dimensions are important and that the interaction between personality and information play a key role in bargaining outcomes. Research limitations/implications – The research utilizes laboratory experiments to generate data. This expands our understanding of individual level behaviour, but suffers from the limitation of not replicating realistic bargaining situations. Practical Implications: The work should serve as a guide to organizations to identify traits of effective negotiators. Social Implications: Bargaining is a central economic activity. Being able to identify the root of differences in outcomes from negotiations should be able to inform institutional design issues. Originality/Value: Little work has been done connecting the rich literature in social psychology and management on personality to economic outcomes. The research on bargaining neglects to incorporate individual-level traits into the process. This research begins to bridge this gap and informs both bargaining theory as well as emphasizes the importance of personality in application.
    Keywords: personality, bargaining, bargaining outcomes
    Date: 2015–05
  10. By: Subhasish M. Chowdhury (University of East Anglia); Peter G. Moffatt (University of East Anglia)
    Abstract: We revisit the meta-analysis of Sheremeta (2013) on overbidding in contest experiments and focus on the effect of endowment on overbidding. Whereas Sheremeta (2013) assumes that there is a monotonic relationship between endowment and overbidding in his meta-analysis, Baik et al. (2014) find an inverted-U shaped relationship in the analysis of a single experiment. We use the same data as in Sheremeta (2013), but employ a different econometric model which leads to support for the inverted-U shaped relationship. Following Baik et al. (2014) we explain the result in terms of a wealth effect.
    Keywords: experiments, contests, overbidding, endowment, meta-analysis
    JEL: C72 C91
    Date: 2015–10–09
  11. By: Nicolas Jacquemet (Paris School of Economics and BETA - Université de Lorraine); Stéphane Luchini (GREQAM-CNRS - Université de Marseille); Julie Rosaz (LAMETA - Université de Montpellier 1); Jason F. Shogren (Department of Economics and Finance - University of Wyoming)
    Abstract: A growing experimental literature has explored how monetary incentives affect truth-telling and lying behavior. We extend this literature to consider how to non-monetary incentives–a loaded environment and commitment through a truth-telling oath–affect truth-telling and lying behavior. For a loaded environment, we revise the standard lying experiment by making it explicit and clear to the person that “a lie is a lie”. We then combine the lying experiment with a solemn oath procedure, by which subjects commit themselves to tell the truth before entering the laboratory. Both non-monetary incentive devices affect a person's willingness to tell the truth: subjects lie slightly less frequently in the loaded environment, and drastically less after they signed the solemn oath. Interestingly, the loaded environment and oath have distinct effects–the oath changes the incentive to lie only when truthfulness is made meaningful through the loaded environment
    Keywords: Deception; lies; truth-telling oath; experiments
    JEL: C92 D03 D63
    Date: 2015–07
  12. By: Aleksandra Wiśniewska (Faculty of Economic Sciences, University of Warsaw); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw)
    Abstract: While public support for culture, and performing arts in particular has become a less self-evident privilege all over Europe than in the past, the economic evidence for benefits a society gains from those goods has become essential for both of the following: scientific research in the area of cultural economics and cultural policy. Although the non-market valuation has been employed as a tool for measuring social benefits generated by cultural resources, the budget constraint has not been considered in most studies regarding the performing arts. Due to that constraint, the crucial question that decision-makers have to answer is then not “whether to finance” or “how big the support should be”, but rather “how to allocate scarce resources”. The aim of our study is to investigate socially preferred ways of allocating public resources in the context of the types of performances offered by municipal theaters in Warsaw. The problem investigated is a current issue for local policy-making, but in a broader sense, it illustrates how state-of-the-art stated preference methods could be employed to support cultural policy. We find that inhabitants of Warsaw assign positive value to the broader accessibility of municipal theaters, and their willingness to pay for making the theaters a truly public good (by introducing a program of highly discounted tickets) exceeds the costs of such a policy. However, we also find that the cost-benefit relationship varies across theaters with different types of plays in their repertories. Our results imply a different level of socially efficient support for experimental, drama, children’s and entertainment theaters.
    Keywords: cultural economics, theater, non-market valuation, discrete choice experiment, public expenditures
    JEL: Z1 Z11 Z18 D61
    Date: 2015
  13. By: Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Marek Giergiczny (Faculty of Economic Sciences, University of Warsaw); Ewa Zawojska (Faculty of Economic Sciences, University of Warsaw)
    Abstract: Contingent valuation is among the most widely used techniques for studying consumers’ preferences. Nevertheless, whether respondents reveal their true preferences in contingent valuation surveys is still the subject of academic debate. The existing literature indicates that the truthful disclosure of preferences pivots on the number of alternatives presented in a single choice task. On a theoretical basis, the use of a two-alternative task format has long been recommended because of its incentive-compatible properties, which ensure that respondents’ disclosure of their true preferences constitutes their optimal strategy. However, the empirical literature presents nascent evidence that providing more than two choice alternatives may increase the respondents’ likelihood of finding an option that satisfactorily matches their preferences; consequently, a multiple-alternative task format likely enhances the accuracy of preference disclosures. Furthermore, empirical studies often employ multiple alternatives for a single task because of statistical efficiency gains. The lack of consensus about the impact of the number of alternatives on respondents’ truthfulness when stating their preferences in contingent valuation surveys motivates this study. Using data from a discrete choice experiment, we examine whether willingness-to-pay (WTP) estimates depend on the number of alternatives provided for a single choice task. We employ a split-sample design that uses two- and three-alternative formats in a contingent valuation survey of proposed public policies for the improvement of tap water quality (iron and chorine content, hardness) in Milanówek, a town in the Warsaw agglomeration in Poland. Drawing on a generalized mixed logit model with scale heterogeneity, we find no significant differences in the mean WTP values elicited with two- and three-alternative tasks, while the WTP estimates based on three-alternative tasks appear to have relatively lower standard errors compared with two-alternative tasks. This finding indicates that using three or more alternatives per choice task may offer a way to increase efficiency without biasing the results.
    Keywords: stated preference methods; contingent valuation; discrete choice experiment; incentive compatibility; number of alternatives; field study; tap water quality
    JEL: Q51 Q25 D12 D82 C25
    Date: 2015
  14. By: Bryan C. McCannon (West Virginia University, Department of Economics)
    Abstract: Results from a leader-follower public goods game are presented. An individual, when randomlyselected to make a contribution knowing that others will observe the selection, gives more than one does in the simultaneous-move public goods game. Followers adopt a quasi-matching strategy where they systematically donate less than the leader, but contribute more when the leader does and contribute less when the leader free rides. The net result is increased provision of a public good when contributions are sequential. The results highlight that psychological preferences, rather than solely social preferences, can explain behavior.
    Keywords: experiment, leadership, psychological game theory, public goods, social preferences
    Date: 2015–06
  15. By: Ritwik Banerjee (Department of Economics and Business, Aarhus University, Denmark; School of Information, University of Michigan, USA)
    Abstract: How should we interpret the World Values Survey (WVS) trust question? We conduct an experiment in India - a low trust country, to correlate the WVS trust question with trust decisions in an incentivized Trust Game. Evidence supports findings from one strand of the fractured literature - the WVS trust question captures expectations about others’ trustworthiness, though not always. We show that WVS trust question correlates with globally determined stable expectations but does not correlate with short term locally determined fluctuations in beliefs about trustworthiness. One implication of our study is that survey based methods may not be used to measure contextualized beliefs.
    Keywords: Corruption, Social Capital, Social Norm, Trust Games
    JEL: C91 C92 D03
    Date: 2015–08–10
  16. By: Chlaß, Nadine; Riener, Gerhard
    Abstract: We study individuals who can choose how to compete with an opponent for one nonzero payoff. They can either nudge themselves into a fair set of rules where they have the same information and actions as their opponent, or into unfair rules where they spy, sabotage or fabricate their opponent's action. In an experiment, we observe significant altruism under rules which allow for fabrication and sabotage, but not under rules which allow for spying. We provide direct evidence that this altruism emanates from an ethical concern about the rules of the game. How individuals deal with this concern - whether they nudge themselves into fabrication-free, spying-free, or sabotage-free rules, or whether they assume the power to fabricate or sabotage to compensate their opponent by giving all payoff away - varies along with individuals' attitudes towards power.
    Keywords: moral judgement,psychological games,institutional design,lying aversion,sabotage aversion,spying aversion,unfair competition
    JEL: D02 D03 D63 D64
    Date: 2015
  17. By: Seira Enrique; Castellanos Pascacio Sara Gabriela; Jiménez Hernández Diego J.
    Abstract: We study the bancarization of marginal borrowers using credit cards and document that this process is difficult: default risk is substantial, returns heterogeneous, and account closings common. We also take advantage of a randomized control trial that varied interest rates and minimum payments in a very wide range. Against our hypothesis, we find that default risk is very insensitive to (randomized) large changes in interest rates and minimum payments. This could imply that regulating these contract terms may not necessarily "protect" consumers against default and that moral hazard in this market is negligible on average.
    Keywords: Credit cards; Development finance; Consumer behavior; Mexico.
    JEL: D14 D18 D82 G21
    Date: 2015–06
  18. By: Vorlaufer, Miriam; Ibanez, Marcela; Juanda, Bambang; Wollni, Meike
    Abstract: This paper investigates the trade-off between conservation and equity considerations in the use of payments for environmental services (PES) that implicitly incorporate different distributive justice principles. Using a public good experiment with heterogeneous participants, we compare the effects on additional area conserved and distribution of earnings of two PES schemes: an equal payment and a payment based on Rawls distributional principle, which we refer to as maxi-min payment scheme. The main findings of the framed field experiment conducted in Jambi province (Indonesia) indicate that the introduction of a maxi-min PES scheme can function as a multi-purpose instrument. It realigns the income distribution in favor of low-endowed participants and does not necessarily need to be compromised by lower environmental additionality at the group level.
    Keywords: Payments for Environmental Services,efficiency equity trade-off,public good experiment,endowment heterogeneity,productivity heterogeneity
    Date: 2015
  19. By: de Melo Gioia; Piaggio Matías
    Abstract: We provide experimental evidence on the effects of social disapproval by peers among communities of Uruguayan small-scale fishers exploiting a common pool resource (CPR). We combined this treatment with an in-group (groups from a single community) / mixed group (groups composed of fishers from different communities) treatment. We find that mixed groups, unlike in-groups, reduce their exploitation of the resource in response to the threat of punishment. Both in in-groups and mixed groups there is substantial antisocial punishment, which leads to increased extraction of the CPR by those who are unfairly punished. These findings indicate that effective peer punishment requires coordination to prevent antisocial targeting and to clarify the social signal conveyed by punishment.
    Keywords: Social disapproval; Social preferences; Common pool resource.
    JEL: D03 O12 C93
    Date: 2015–06
  20. By: Marian Panganiban (Max Planck Institute for Research on Collective Goods, Bonn, and Friedrich-Schiller-Universität, Jena)
    Abstract: Although the role of formal and informal institutions in promoting economic growth and sustaining exchange relations is now well established, explaining and differentiating how informal and formal rules affect individual behavior remain a challenge. This study aims to distill the essential characteristics of formal and informal institutions and disentangle their effects on trust and performance in exchange relations through a laboratory experiment. Formal institutions are modeled as third-party contract enforcement while informal institutions are represented as shared group identity. Results show that trust choices increase as contract enforcement increases but are not affected by shared group identity. However, performance is more likely to occur in interactions with in-group members than out-group members.
    Keywords: institutions, exchange relations, contract enforcement, group identity, laboratory experiments
    JEL: C72 C91 D03 D81
    Date: 2015–10–09
  21. By: Bryan C. McCannon (West Virginia University, Department of Economics); Colleen Tokar Asaad (Baldwin-Wallace University); Mark Wilson (St. Bonaventure University)
    Abstract: Financial transactions sometimes occur in an environment where third-party enforcement is lacking. Behavioral explanations typically allude to the social preferences, where an individual’s utility is directly affected by another’s outcome, as the driver of the trusting investments and reciprocal returns. We hypothesize that, in part, these decisions are determined by an individual’s financial literacy. Experimental evidence is coupled with an innovative financial literacy assessment, which measures general competence, numeracy skills, and overconfidence in one’s knowledge. Results indicate that overconfidence is a significant determinant of behavior. Specifically, overconfident individuals make larger contributions in the investment game. We also document that there is an escalated effect in overconfident individuals who are also exhibit risk loving preferences.
    Keywords: experiment, financial literacy, investment, overconfidence, social preferences, risk preferences
    JEL: G02 C91 D03
    Date: 2015–08

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.