nep-exp New Economics Papers
on Experimental Economics
Issue of 2015‒11‒15
seventeen papers chosen by
Daniel Houser
George Mason University

  1. Risk-tolerant women donate more than men: Experimental evidence of dictator games By Müller, Stephan; Rau, Holger A.
  2. Outsourcing with Identical Suppliers and Shortest-First Policy: A Laboratory Experiment By Flip Klijn; Marc Vorsatz
  3. Voting with Endogenous Information Acquisition: Theory and Evidence By Sourav Bhattacharya; John Duffy; Sun-Tak Kim
  4. An experimental evaluation of an anti-corruption intervention among Ukrainian university students By Denisova-Schmidt, Elena; Huber, Martin; Prytula, Yaroslav
  5. The Role of Verifiability and Privacy in the Strategic Provision of Performance Feedback: Theory and Experimental Evidence By Seda Ertac; Levent Kockesen; Duygu Ozdemir
  6. Nudge for (the Public) Good: How Defaults can affect Cooperation By Toke Reinholt Fosgaard; Marco Piovesan
  7. Equality concerns and the limits of self-governance in heterogeneous populations By Lata Gangadharan; Nikos Nikiforakis; Marie Claire Villeval
  8. Does performance disclosure influence physicians’ medical decisions? An experimental study* By Godager, Geir; Hennig-Schmidt, Heike; Iversen, Tor
  9. The neural bases of framing effects in social dilemmas By Julian Macoveanu; Thomas Zoëga Ramsøy; Martin Skov; Hartwig R. Siebner; Toke Reinholt Fosgaard
  10. Dishonest or professional behavior? Can we tell? A comment on: Cohn et al. 2014, Nature 516, 86-89, ÒBusiness culture and dishonesty in the banking industryÓ By Thomas Stšckl
  11. Truth-telling under Oath By Nicolas Jacquemet; Stéphane Luchini; Julie Rosaz; Jason Shogren
  12. The Logic of Relative Frustration: Boudon’s Competition Model and Experimental Evidence By Joël Berger; Andreas Diekmann
  13. Efficiency versus Equality in Bargaining By Fabio Galeotti; Maria Montero; Anders Poulsen
  14. Behavior in All-Pay Auctions with Ties By Alan Gelder; Dan Kovenock; Roman Sheremeta
  15. Asymmetric and Endogenous Within-Group Communication in Competitive Coordination Games By Timothy N. Cason; Roman M. Sheremeta; Jingjing Zhang
  16. Are Entrepreneurs more Optimistic and Overconfident than Managers and Employees? By Martin Koudstaal; Randolph Sloof; Mirjam van Praag
  17. Testing Models of Belief Bias: An Experiment By Coutts, Alexander

  1. By: Müller, Stephan; Rau, Holger A.
    Abstract: In a within-subjects experiment we test the relation of risk preferences and charitable giving. Women not only give substantially more than men, but also show an economically significant positive correlation between risk tolerance and donation levels. We find no such correlation for men. Men and relative risk-averse women do not differ in donations. Thus, common findings of gender differences in charitable giving may be explained by risk-tolerant women donating more.
    Keywords: dictator game,experiment,gender differences,risk preferences
    JEL: C91 D64 D81 J16
    Date: 2015
  2. By: Flip Klijn; Marc Vorsatz
    Abstract: We report on a laboratory experiment based on a stylized model of decentralized decision-making situations in which companies outsource production orders or jobs to multiple identical suppliers. Each firm aims to minimize the sum of its completion times. We assume that each supplier employs the shortest-first policy, i.e., processes jobs optimally by placing them in order of increasing processing time. We find that even though subjects manage to coordinate more often when matched in fixed pairs than when randomly rematched each round, the sum of all completion times (social costs) is not significantly different across treatments. This implies that social costs are more variable in the treatment with fixed partners. Finally, the treatment dynamics reveal that while subjects show more of a general tendency to play dominated stage strategies when matched in fixed pairs, they also manage over time to avoid these strategies more so in this treatment.
    Keywords: game theory, outsourcing, Scheduling, efficiency, shortest-first policy
    JEL: C72 D71 D82
    Date: 2015–10
  3. By: Sourav Bhattacharya (Department of Economics, Royal Holloway, University of London); John Duffy (Department of Economics, University of California-Irvine); Sun-Tak Kim (Department of Economics, National Taiwan University)
    Abstract: The standard model of jury or committee voting, with costless, exogenously given and noisy but informative signals regarding the true state of the world, predicts that the efficiency of group decision-making increases unambiguously with the group size. However, once signal acquisition is made a costly and endogenous decision, there are important free-riding considerations that counterbalance the information aggregation effect. If the cost of acquiring information is fixed, then rational voters have disincentives to purchase information as the group size becomes larger since the impact of their vote becomes smaller. In this paper we investigate the extent to which human subjects recognize this trade-off between information aggregation and free-riding in a laboratory experiment where we vary the group size, the cost of information acquisition and the precision of signals. We find that in most of the settings we study, free-riding incentives are weak as there is a pronounced tendency for subjects to over-acquire information relative to equilibrium predictions and we offer several possible explanations for this finding.
    Keywords: Voting; Condorcet jury model; Information aggregation; Endogenous information acquisition; Experimental economics
    JEL: C72 D72 D81
    Date: 2015–11
  4. By: Denisova-Schmidt, Elena; Huber, Martin; Prytula, Yaroslav
    Abstract: In this paper, we investigate experimentally the effect of an anti-corruption intervention -an info folder based on materials developed by Transparency International- on Ukrainian university students’ willingness to participate in an anti-corruption campaign and their general attitude toward corruption. In a survey of 600 students in the Ukrainian city of Lviv, individuals were randomly exposed to either the anti-corruption folder (treatment group) or a folder with information about Lviv (control group). The results suggest that students who have previous experience with bribing are more open to the campaign, while the effect on the total sample is not statistically significant. Furthermore, the intervention increases the overall perception that corruption is a (long-term) part of society rather than a temporary phenomenon. Finally, students with experience in corrupt practices tend to adopt a more negative view of corruption. For those without such experiences, however, we find some indication that the treatment could bolster the acceptance of corruption by instructing the students about its dissemination. The effects of this intervention are therefore ambivalent and appear to depend on the students’ previous exposure to corruption.
    Keywords: Anti-Corruption Campaigns; Corruption; Academic Integrity; University; Students; Ukraine; Experiment; Randomized Trial
    JEL: D73 C93
    Date: 2015–11–05
  5. By: Seda Ertac (Department of Economics, Koç University); Levent Kockesen (Department of Economics, Koç University); Duygu Ozdemir (Institute for Social and Economic Research, University of Essex)
    Abstract: We theoretically and experimentally analyze the role of verifiability and privacy in strategic performance feedback using a “one principal-two agent” context with real effort. We confirm the theoretical prediction that information transmission occurs only in verifiable feedback mechanisms and private-verifiable feedback is the most informative mechanism. Yet, subjects also exhibit some behavior that cannot be explained by our baseline model, such as telling the truth even when this will definitely hurt them, interpreting “no feedback” more optimistically than they should, and being influenced by feedback given to the other agent. We show that a model with individual-specific lying costs and naive agents can account for some, but not all, of these findings. We conclude that in addition to being naive, some agents also suffer from self-serving biases and engage in non-Bayesian social comparisons in their interpretation of performance feedback.
    Keywords: Lab experiments, Performance feedback, Strategic communication, Cheap talk, Persuasion, Multiple audiences, Lying.
    JEL: C72 C92 D23 D82 D83 M12 M54
    Date: 2015–11
  6. By: Toke Reinholt Fosgaard (Department of Food and Resource Economics, University of Copenhagen); Marco Piovesan (Department of Economics, University of Copenhagen)
    Abstract: In this paper we test the effect of non-binding defaults on the level of contribution to a public good. We manipulate the default numbers appearing on the decision screen to nudge subjects toward a free-rider strategy or a perfect conditional cooperator strategy. Our results show that the vast majority of our subjects did not adopt the default numbers, but their stated strategy was affected by the default. Moreover, we find that our manipulation spilled over to a subsequent repeated public goods game where there default was not manipulated. Here we found that subjects who previously saw the free rider default were significantly less cooperative than those who saw the perfect conditional cooperator default.
    Keywords: Cooperation, Nudging
    JEL: C90
    Date: 2015–11
  7. By: Lata Gangadharan (Department of Economics, Monash University, Clayton, Australia); Nikos Nikiforakis (Social Science Division, New York University Abu Dhabi, P.O. Box 129188, Abu Dhabi, United Arab Emirates); Marie Claire Villeval (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France)
    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
    JEL: C92 H41 D74
    Date: 2015
  8. By: Godager, Geir (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (BonnEconLab); Iversen, Tor (Department of Health Management and Health Economics)
    Abstract: Quality improvements in markets for medical care are key objectives in any Health reform. An important question is whether disclosing physicians’ performance can contribute to achieving these goals. Due to the asymmetric information inherent in medical markets, one may argue that changes in the information structure are likely to influence the environment in which health care providers operate. In a Laboratory experiment with medical students that mimics a physician decision-making environment we analyze the effect of disclosing performance information to peers. Our results suggest that the information structure does influence the individual physician’s supply of medical services. Under performance disclosure, choices that are in accordance with the medical norm or maximize the joint benefit become more frequent.
    Keywords: Physician payment system; laboratory experiment; incentives; performance disclosure; fee-for-service; information and product quality
    JEL: C91 H40 I11 J33 L15
    Date: 2015–11–09
  9. By: Julian Macoveanu (Danish Research Centre for Magnetic Resonance, Copenhagen University Hospital Hvidovre); Thomas Zoëga Ramsøy (Center for Decision Neuroscience, Dept. of Marketing, Copenhagen Business School); Martin Skov (Center for Decision Neuroscience, Dept. of Marketing, Copenhagen Business School); Hartwig R. Siebner (Danish Research Centre for Magnetic Resonance, Copenhagen University Hospital Hvidovre); Toke Reinholt Fosgaard (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: Human behavior in social dilemmas is strongly framed by the social context, but the mechanisms underlying this framing effect remains poorly understood. To identify the behavioral and neural responses mediating framing of social interactions, subjects underwent functional Magnetic Resonance Imaging while playing a Prisoners Dilemma game. In separate neuroimaging sessions, the game was either framed as a cooperation game or a competition game. Social decisions where subjects were affected by the frame engaged the hippocampal formation, precuneus, dorsomedial prefrontal cortex and lateral temporal gyrus. Among these regions, the engagement of the left hippocampus was further modulated by individual differences in empathy. Social decisions not adhering to the frame were associated with stronger engagement of the angular gyrus and trend increases in lateral orbitofrontal cortex, posterior intraparietal cortex, and temporopolar cortex. Our findings provide the first insight into the mechanisms underlying framing of behavior in social dilemmas, indicating increased engagement of the hippocampus and neocortical areas involved in memory, social reasoning and mentalizing when subjects make decisions that conform to the imposed social frame.
    Keywords: Social reasoning, prisoners dilemma, fMRI, framing
    JEL: C90
    Date: 2015–11
  10. By: Thomas Stšckl
    Abstract: By means of a coin tossing experiment Cohn et al. (2014) study business culture in the banking industry and report that employees of a large, international bank behave honestly in a control condition while a significant proportion of them becomes dishonest when their professional identity as bank employees is rendered salient. The authors conclude that the business culture in the banking industry weakens and undermines the honesty norm. We argue that the data allows for an alternative interpretation based on so far unrecognized dynamics in the experimental design. This interpretation classifies bankersÕ behavior in the treatment condition to be in accordance with the professional requirements of the banking industry. The two competing interpretations cannot be flawlessly separated and, consequently, bankersÕ behavior cannot reliably be classified as resulting from a problematic business culture.
    Keywords: Experimental finance, Dishonesty, Business culture, Banking industry
    JEL: G21 G28 C91
    Date: 2015–11
  11. By: Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, BETA - Bureau d'économie théorique et appliquée - CNRS - Université Nancy 2 - Université de Strasbourg); Stéphane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - AMU - Aix-Marseille Université); Julie Rosaz (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Institut national de la recherche agronomique (INRA) - UM1 - Université Montpellier 1 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM]); Jason Shogren (Departement of Economics and Finance, University of Wyoming - 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.
    Abstract: Un nombre croissant de travaux en économie expérimentale s'intéresse à l'effet d'incitations financières sur les comportements d'honnêteté et de mensonge. Nous étudions l'effet de deux incitations non-monétaires – un environnement avec connotation explicite et un engagement à dire la vérité en prêtant serment – sur les comportements d'honnêteté et de mensonge. L'environnement avec connotation explicite correspond à une modification de l'expérience usuelle qui rend explicite et clair le fait qu'un “mensonge est un mensonge”. Cet environnement est également associé à une procédure de serment, par laquelle les sujets s'engagent, avant d'entrer dans le laboratoire, à dire la vérité. Ces deux mécanismes d'incitation non-monétaire ont un effet sur la propension des individus à dire la vérité : les participants de l'expérience mentent légèrement moins dans l'environnement avec connotation explicite et nettement moins après avoir signé un serment. L'environnement avec connotation explicite et le serment ont des effets très différenciés : le serment change l'incitation à mentir uniquement lorsque le comportement de mensonge a été rendu explicite, à travers l'environnement avec connotation explicite.
    Keywords: Deception,lies,truth-telling oath,experiments,Mensonge,serment à dire la vérité,expérience en laboratoire
    Date: 2015–07
  12. By: Joël Berger; Andreas Diekmann
    Abstract: An improvement in the availability of opportunities for actors in a social system (e.g. a society or a firm) can coincide with a growing rate of frustrated individuals. For instance, uprisings have repeatedly been preceded by forms of political liberalisation that have actually provided greater opportunities (the so-called Tocqueville paradox). In organisations, satisfaction with regard to promotion opportunities can be negatively associated with objective chances of promotion. Raymond Boudon has proposed a game-theoretic competition model which specifies the micro-mechanisms that produce these puzzling phenomena at the aggregate level, and clarifies the conditions under which they emerge. We conducted three laboratory experiments to test the model’s predictions, making our study the first empirical test of Boudon’s model. The results are mixed: when opportunities increased, the rate of the relatively frustrated losers in the group remained constant, or increased only slightly. However, when applying another aggregation rule, which accounts for all social comparison processes and does not merely focus on the losers an increase in relative frustration under improved conditions was observed. Our results imply that under specific conditions there is a trade-off between opportunities and social mobility, on the one hand, and social inequality and relative frustration, on the other.
    Keywords: game theory, laboratory experiment, relative deprivation, social inequality, social mobility, Tocqueville’s paradox, winner-take-all
    JEL: C72 I24 M51
    Date: 2015–11–04
  13. By: Fabio Galeotti (University of Lyon); Maria Montero (Department of Economics, University of Nottingham); Anders Poulsen (Department of Economics, University of East Anglia)
    Abstract: We report experimental data from bargaining situations where bargainers can make proposals as often and whenever they want, and can communicate via written messages. We vary the set of feasible contracts, thereby allowing us to assess the focality of three properties of bargaining outcomes: equality, Pareto efficiency, and total earnings maximization. Our main findings are that subjects avoid an equal earnings contract if it is Pareto inefficient; a large proportion of bargaining pairs avoid equal and Pareto efficient contracts in favor of unequal and total earnings maximizing contracts, and this proportion increases when unequal contracts offer larger earnings to one of the players, even though this implies higher inequality. Finally, observed behavior violates the Independence of Irrelevant Alternatives axiom, a result we attribute to a ‘compromise effect’.
    Keywords: bargaining, efficiency, equality, communication, experiment, independence of irrelevant alternatives
    Date: 2015
  14. By: Alan Gelder (Economic Science Institute, Chapman University); Dan Kovenock (Economic Science Institute, Chapman University); Roman Sheremeta (Economic Science Institute, Chapman University and Department of Economics, Weatherhead School of Management, Case Western Reserve University)
    Abstract: Despite the wide occurrence of ties in a variety of contest settings, the strategic interaction that arises when ties are treated as viable outcomes has received little attention. Building on recent theoretical work, we experimentally examine an extension of the canonical two-player all-pay auction in which a tie occurs unless one player’s bid exceeds the other’s by some critical threshold. In the event of a tie, each player receives an identical fraction of the prize. For the case where players receive one-half of the prize when they tie, we find that players’ expenditures are non-monotonic in the threshold required for victory. Moreover, for certain positive thresholds, expenditures may even be higher than under the standard all-pay auction. We also find that decreasing the fraction of the prize players receive for tying may either increase or decrease total expenditures. In accordance with theory, the effect depends upon the threshold.
    Keywords: All-pay auction, contest, tie, draw, bid differential, experiment
    JEL: C72 C92 D44 D72 D74
    Date: 2015
  15. By: Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); Roman M. Sheremeta (Department of Economics, Weatherhead School of Management, Case Western Reserve and Economic Science Institute, Chapman University); Jingjing Zhang (Economics Discipline Group, University of Technology Sydney)
    Abstract: Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (i) asymmetric communication and (ii) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote to endogenously open communication channels even though this leads to lower payoffs and efficiency.
    Keywords: between-group competition, within-group competition, communication, coordination, contests, experiments
    JEL: C70 D72 H41
    Date: 2015
  16. By: Martin Koudstaal (VU University Amsterdam); Randolph Sloof (VU University Amsterdam, the Netherlands); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for top managers. In this lab-in-the-field experiment we directly compare the scores of entrepreneurs, managers and employees on a comprehensive set of measures of optimism and overconfidence (n = 2,058). The results show that on average entrepreneurs are more optimistic than others in their dispositional optimism and attributional style when bad events occur. For incentivized measures of overconfidence we find no difference between entrepreneurs and managers, although both are more prone to it than employees. Finally, exploration of within-group heterogeneities shows that optimism and success are more strongly related for managers than for entrepreneurs and that an average entrepreneur is not more optimistic than successful managers. We conclude that optimism and overconfidence are indeed characteristics of entrepreneurs, but they are not unique when compared to (top) managers.
    Keywords: Entrepreneurs; managers; dispositional optimism; attributional style; overestimation; overconfidence; behavioral economics
    JEL: L26 C93 D03 M13
    Date: 2015–11–06
  17. By: Coutts, Alexander
    Abstract: Optimistic beliefs affect important areas of economic decision making, yet direct knowledge on how belief biases operate remains limited. To better understand these biases I conduct an experiment examining beliefs about binary events with financial stakes. By varying financial prizes in outcomes, as well as incentive payments for accuracy, the experiment is able to distinguish between two leading theories of optimistic belief formation that differ in their assumptions about how such beliefs are constrained. The Optimal Expectations theory of Brunnermeier and Parker (2005) models beliefs as being constrained through the future costs of holding incorrect beliefs, while the Affective Decision Making model of Bracha and Brown (2012) argues that beliefs are constrained by mental costs of distorting reality. The results suggest that people hold optimistically biased beliefs, and comparative statics indicate that these beliefs are not constrained by increasing the costs of making inaccurate judgments. In fact, the results support the theory of Bracha and Brown (2012), as observed bias is increasing in the size of incentive payments for accuracy.
    Keywords: Beliefs, Optimism, Pessimism, Overconfidence, Anticipation, Affective expected utility.
    JEL: C91 D03 D80 D81 D83 D84
    Date: 2015–08

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