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on Experimental Economics |
| By: | Azeem Shaikh; John List; Yang Xu |
| Abstract: | Empiricism in the sciences allows us to test theories, formulate optimal policies, and learn how the world works. In this manner, it is critical that our empirical work provides accurate conclusions about underlying data patterns. False positives represent an especially important problem, as vast public and private resources can be misguided if we base decisions on false discovery. This study explores one especially pernicious influence on false positives-multiple hypothesis testing (MHT). While MHT potentially affects all types of empirical work, we consider three common scenarios where MHT influences inference within experimental economics: jointly identifying treatment effects for a set of outcomes, estimating heterogenous treatment effects through subgroup analysis, and conducting hypothesis testing for multiple treatment conditions. Building upon the work of Romano and Wolf (2010), we present a correction procedure that incorporates the three scenarios, and illustrate the improvement in power by comparing our results with those obtained by the classic studies due to Bonferroni (1935) and Holm (1979). Importantly, under weak assumptions, our testing procedure asymptotically controls the familywise error rate - the probability of one false rejection - and is asymptotically balanced. We showcase our approach by revisiting the data reported in Karlan and List (2007), to deepen our understanding of why people give to charitable causes. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:artefa:00402&r=exp |
| By: | Hoff,Karla; Stiglitz,Joseph E. |
| Abstract: | This paper is an attempt to broaden economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas the concept of the decision-maker in standard economics is the rational actor and, in early work in behavioral economics, the quasi-rational actor influenced by the context of the moment of decision-making, in some recent work in behavioral economics the decision-maker could be called the enculturated actor. This actor's preferences, perception, and cognition are subject to two deep social influences: (a) the social contexts to which he has become exposed and, especially, accustomed; and (b) the cultural mental models?including categories, identities, narratives, and worldviews?that he uses to process information. The paper traces how these factors shape individual behavior through the endogenous determination of preferences and the lenses through which individuals see the world?their perception and interpretation of situations. The paper offers a tentative taxonomy of the social determinants of behavior and describes the results of controlled and natural experiments that only a broader view of these determinants can plausibly explain. The perspective suggests more realistic models of human behavior for explaining outcomes and designing policies. |
| Keywords: | Cultural Policy,Economic Theory&Research,Psychology,Educational Sciences,Environmental Economics&Policies |
| Date: | 2016–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7537&r=exp |
| By: | Dipali Gandhi; Bhumika Mangrola |
| Abstract: | The classroom is a laboratory for the teachers to experiment on behaviors of an individual and mould their personality. Some individuals find it harder to learn with other individuals of the same age needs to get support from their teachers, or some extra help in the schools. A few individuals have more complicated learning difficulties, and may need extra help or equipment in school to help them access an appropriate education. Owing to lack of knowledge, educational access and technology, such individuals are initially treated as unwanted and segregated from other individuals and their education is carried out in special schools. The concept of Inclusive Education has changed the outlook for the children having all those deformities and differences. To touch the emotional domain of pre service teachers, an experiment was carried out with special children. The present paper reflects the views of pre service teachers towards special children. Key words: Inclusive Education, Pre service Teachers, Special Children |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:vor:issues:2015-12-07&r=exp |
| By: | Nobuyuki Hanaki (Université Nice Sophia Antipolis; GREDEG-CNRS; IUF); Eizo Akiyama (University of Tsukuba, Japan); Ryuichiro Ishikawa (University of Tsukuba, Japan) |
| Abstract: | We investigate (a) whether eliciting future price forecasts influences market outcomes, and (b) whether differences in the way subjects are incentivized to submit ''accurate'' price forecasts influence the market outcomes as well as the forecasts submitted by subjects in an experimental asset market. We consider three treatments: one without forecast elicitation (NF) and two with forecast elicitations. In one of the latter treatments, subjects are paid based on both their performance of forecasting and trading (Bonus), while in the other, they are paid based only on one of the two that is chosen randomly at the end of the experiment (Unique). While we found no statistical differences in terms of mispricing, trading volumes, and trading behavior between NF and Unique treatments, there were some statistically significant differences between NF and Bonus treatments. Thus, if the aim is to avoid influencing the behavior of subjects and the market outcomes by eliciting price forecasts compared to NF treatment, then the Unique treatment seems to be better than the Bonus treatment. |
| Keywords: | Price forecast elicitation, Experimental asset markets |
| JEL: | C90 D84 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2016-02&r=exp |
| By: | Ozkan Eren |
| Abstract: | Using data from a well-executed randomized experiment, we examine the effects of gender composition and peer achievement on high school students' outcomes in disadvantaged neighborhoods. Our results show that a higher proportion of female peers in the classroom improves girls' math test scores only in less advanced courses. For male students, the estimated gender peer effects are positive, but less precisely estimated. We also find no effect of average classroom achievement on female math test scores. Males, on the other hand, seem to benefit from a higher achieving classroom. We propose mechanisms relating to lower gender stereotype influences and gender-specific attitudes towards competition as potential expla- nations for our peer effects findings. Finally, it appears that a higher proportion of female students in the classroom decreases student absenteeism among male students without any impact on female attendance. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2016-01&r=exp |
| By: | John J. Nay; Yevgeniy Vorobeychik |
| Abstract: | The Prisoner's Dilemma has been a subject of extensive research due to its importance in understanding the ever-present tension between individual self-interest and social benefit. A strictly dominant strategy in a Prisoner's Dilemma (defection), when played by both players, is mutually harmful. Repetition of the Prisoner's Dilemma can give rise to cooperation as an equilibrium, but defection is as well, and this ambiguity is difficult to resolve. The numerous behavioral experiments investigating the Prisoner's Dilemma highlight that players often cooperate, but the level of cooperation varies significantly with the specifics of the experimental predicament. We present the first computational model of human behavior in repeated Prisoner's Dilemma games that unifies the diversity of experimental observations in a systematic and quantitatively reliable manner. Our model relies on data we integrated from many experiments, comprising 168,386 individual decisions. The computational model is composed of two pieces: the first predicts the first-period action using solely the structural game parameters, while the second predicts dynamic actions using both game parameters and history of play. Our model is extremely successful not merely at fitting the data, but in predicting behavior at multiple scales in experimental designs not used for calibration, using only information about the game structure. We demonstrate the power of our approach through a simulation analysis revealing how to best promote human cooperation. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1601.07792&r=exp |
| By: | Park, Andreas (University of Toronto); Sgroi, Daniel (University of Warwick) |
| Abstract: | We analyze and confirm the existence and extent of rational informational herding and rational informational contrarianism in a financial market experiment, and compare and contrast these with equivalent irrational phenomena. In our study, subjects generally behave according to benchmark rationality. Traders who should herd or be contrarian in theory are the signicant sources of both within the data. Correcting for subjects who can be identified as less rational increases our ability to predict herding or contrarian behavior considerably. |
| Keywords: | Herding ; Contrarianism ; Informational Efficiency ; Experiments JEL classification numbers: C91 ; D82 ; G14 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wcreta:17&r=exp |
| By: | Marco Faillo (University of Trento); Alessandra Smerilli (PFSE-Auxilium); Robert Sugden (University of East Anglia) |
| Abstract: | We investigate experimentally the conditions under which bounded best response and collective optimality reasoning are used in coordination games. Using level-k and team reasoning theories as exemplars, we study games with three pure-strategy equilibria, two of which are mutually isomorphic. The third is always team-optimal, but whether it is predicted by level-k theory differs across games. We find that collective optimality reasoning is facilitated if the collectively optimal equilibrium gives more equal payoffs than the others, and is inhibited if that equlibrium is Pareto-dominated by the others, considered separately. We suggest that coordination cannot be explained by a single theory. |
| Keywords: | team reasoning, level-k theory, coordination games |
| JEL: | C7 C9 |
| Date: | 2016–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-01&r=exp |
| By: | Rahul Mehrotra; Vincent Somville; Lore vandewalle |
| Abstract: | Recent evidence highlights the importance of trust in explaining bank account savings. According to economic theory, repeated interactions can play a crucial role in shaping trust. We designed the first field experiment that tests whether increased interactions between clients and bankers influence a client's trust in bankers. We promoted interactions by randomly (i) opening accounts for the unbanked and (ii) making weekly payments on their accounts. At the end of these interventions, we measured trust by playing trust games between clients on the one hand, and their own local banker as well as an anonymous other banker on the other hand. The only intervention that has a signicant impact on the number of interactions is opening a bank account. It also greatly increases trust in the anonymous banker, but not in their own banker. Next, we investigate the importance of trust for account savings. We find a strong positive correlation between the clients' trust in their own banker and savings in the account, but their trust in another banker does not correlate with savings. From the decomposition of trust in its different determinants, we learn that expected trustworthiness matters most in explaining savings, while there is a minor role for social preferences and no role for risk attitudes. We conclude that the personalized client-banker relationships are crucial, but not malleable. Strategies which can deal with the expected trustworthiness - such as providing access to an ATM, or to a denser network of local bankers - might promote bank account savings. |
| Keywords: | India finance trust savings banking experiment rct |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:chm:wpaper:wp2016-02&r=exp |
| By: | Devesh Rustagi (Goethe University Frankfurt); Marcella Veronesi (Department of Economics (University of Verona)) |
| Abstract: | We investigate the role of social identity in explaining individual variation in social preferences in the domain of cooperation. We combine measures of social identity at both extensive and intensive margins with measures of social preferences elicited using a public goods game in the strategy method among a representative sample of Swiss households. We document a strong association between social identity and social preferences, which becomes stronger with the degree of social identity. Using different data sources, we show that social identity matters also for attitudes towards cooperation. Our results are not driven by differences in national or even local institutions, geography, historical, and economic conditions. Additional analyses show that grandparental and parental background shapes social identity, as well as social preferences. Our design allows us to go beyond behavior and disentangle social preferences from beliefs, highlighting the importance of social identity for deeper social preferences in a natural field setting. |
| Keywords: | Social identity, social preferences, conditional cooperation, attitudes towards cooperation, public goods game |
| JEL: | C93 D03 D70 H41 Z13 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:01/2016&r=exp |
| By: | Park, Andreas (University of Toronto); Sgroi, Daniel (Department of Economics, University of WarwickAbstract: We analyze and confirm the existence and extent of rational informational herding and rational informational contrarianism in a financial market experiment, and compare and contrast these with equivalent irrational phenomena. In our study, subjects generally behave according to benchmark rationality. Traders who should herd or be contrarian in theory are the significant sources of both within the data. Correcting for subjects who can be identified as less rational increases our ability to predict herding or contrarian behavior considerably) |
| Keywords: | Herding ; Contrarianism ; Informational Efficiency ; Experiments |
| JEL: | C91 D82 G14 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1109&r=exp |
| By: | Karsten Neuhoff; Nolan Ritter; Aymen Salah-Abou-El-Enien; Philippe Vassilopoulos |
| Abstract: | A fundamental question regarding the design of electricity markets is whether adding auctions to the continuous intraday trading is improving the performance of the market. To approach this question, we assess the experience with the implementation of the 3 pm local auction for quarters in Germany at the European Power Exchange (EPEX SPOT) in December 2014 to assess the impact on trading volumes/liquidity, prices, as well as market depth. We discuss further opportunities and challenges that are linked with a potential implementation of an intraday auction. |
| Keywords: | Auctions, electricity, empirical analysis, market design |
| JEL: | C5 C93 D44 L50 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1544&r=exp |
| By: | Michael Kirchler; Florian Lindner; Utz Weitzel |
| Abstract: | Rankings are a pervasive feature of the finance industry. Although they have no di- rect monetary consequences, rankings provide utility for intrinsic (positive self-image) and extrinsic (status) reasons. We recruit a unique subject pool of 204 financial professionals and investigate how anonymous rankings influence risk-taking in investment decisions. We find that rankings increase risk-taking because of financial professionals? desire for positive self-image. This particularly applies to underperformers, who take the highest risks. Incentivizing rankings monetarily does not further increase risk-taking. In a comparative study with 432 students we find that student behavior is not driven by rankings. |
| Keywords: | Experimental finance, behavioral finance, rank incentives, rankings, financial professionals, investment game, framed field experiment, tournament incentives |
| JEL: | G02 G11 D03 C93 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2016-02&r=exp |
| By: | Thomas Knispel; Roger J. A. Laeven; Gregor Svindland |
| Abstract: | We consider the problem of optimal risk sharing in a pool of cooperative agents. We analyze the asymptotic behavior of the certainty equivalents and risk premia associated with the Pareto optimal risk sharing contract as the pool expands. We first study this problem under expected utility preferences with an objectively or subjectively given probabilistic model. Next, we develop a robust approach by explicitly taking uncertainty about the probabilistic model (ambiguity) into account. The resulting robust certainty equivalents and risk premia compound risk and ambiguity aversion. We provide explicit results on their limits and rates of convergence, induced by Pareto optimal risk sharing in expanding pools. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1601.06979&r=exp |