nep-exp New Economics Papers
on Experimental Economics
Issue of 2016‒02‒29
twenty-one papers chosen by

  1. Are Individuals Luck Egalitarians?: An Experiment on the Influence of Brute and Option Luck on Social Preferences By Tinghög, Gustav; Andersson, David
  2. Does informal risk sharing induce lower efforts? Evidence from lab-in-the-field experiments in rural Mexico By Alger, Ingela; Juarez, Laura; Juarez-Torres, Miriam; Miquel-Florensa, Josepa
  3. The Efficiency of Crackdowns: A Lab-in-the-Field Experiment in Public Transportations By Zhixin Dai; Fabio Galeotti; Marie Claire Villeval
  4. GThou shalt not steal (from hard-working people)An experiment on respect for property claims By Marco Faillo; Matteo Rizzolli; Stephan Tontrup
  5. Privacy protection, risk attitudes, and the need for control: An experimental study By Alisa Frik; Alexia Gaudeul
  6. Overcoming Coordination Failure in a Critical Mass Game: Strategic Motives and Action Disclosure By Aidas Masiliunas
  7. Asymmetric labor-supply responses to wage-rate changes: Evidence from a field experiment By Doerrenberg, Philipp; Duncan, Denvil; Löffler, Max
  8. The Effectiveness of Individual Targeting Through Smartphone Application in Retail: Evidence from Field Experiment By Mariia I. Okuneva; Dmitriy B. Potapov
  9. College Admissions with Entrance Exams: Centralized versus Decentralized By Isa E. Hafalir; Rustamdjan Hakimov; Dorothea Kübler; Morimitsu Kurino
  10. Deception and Self-Deception By Peter Schwardman; Joël van der Weele
  11. Frustration and Anger in Games: A First Empirical Test of the Theory By Persson, Emil
  12. The disposition effect: who and when? By Carlos Cueva Herrero; Iñigo Iturbe-Ormaetxe Kortajarene; Giovanni Ponti; Josefa Tomás Lucas
  13. To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda - Working Paper 387 By Greg Fischer, Dean Karlan, Margaret McConnell, and Pia Raffler
  14. The Effect of Incentives on Real Effort: Evidence from the Slider Task By Lise Vesterlund
  15. Bonus versus Penalty: How Robust Are the Effects of Contract Framing? By Jonathan de Quidt; Francesco Fallucchi; Felix Koelle; Daniele Nosenzo; Simone Quercia
  16. More Is Not Always Better: An Experimental Individual-Level Validation of the Randomized Response Technique and the Crosswise Model By Marc Höglinger; Ben Jann
  17. The Implications of Daylight Saving Time: A Field Experiment on Cognitive Performance and Risk Taking By Markus Schaffner; Jayanta Sarkar; Benno Torgler; Uwe Dulleck
  18. Knowing me, imagining you: Projection and overbidding in auctions By Breitmoser, Yves
  19. Bargaining under the Illusion of Transparency By Madarász, Kristóf
  20. Anchoring and Property Prices: The Influence of Echelle Des Crus Ratings on Land Sales in the Champagne Region of France By Gergaud, Olivier; Plantinga, Andrew J.; Ringeval-Deluze, Aurelie
  21. Coordination and Cheap Talk: Indirect versus Direct Messages By Buyukboyaci, Muruvvet; Kucuksenel, Serkan

  1. By: Tinghög, Gustav (Division of Economics, Department of Management and Engineering, Linköping University); Andersson, David (Division of Economics, Department of Management and Engineering, Linköping University)
    Abstract: According to luck egalitarianism, inequalities should be deemed fair as long as they follow from individuals’ deliberate and fully informed choices, i.e. option luck – while inequalities should be deemed unfair if they follow from choices over which the individual has no control, i.e. brute luck. This study investigates if individuals’ fairness preferences correspond with the luck egalitarian fairness position. More specifically, in a laboratory experiment we test how individuals choose to redistribute gains and losses that stem from option luck compared to brute luck. A two-stage experimental design with real incentives was employed. In total, 226 subjects were randomly assigned to either the brute luck or option luck treatment. Treatments were identical except for how monetary compensation for participation in the experiment was settled in stage one. In the option luck treatment, subjects were given the option to chose between a safe option (50 SEK) and a risky option (a 50/50 gamble between 0 SEK and 150 SEK). In the brute luck treatment no such choice was given, instead all subjects were compensated based on outcome of the risky option. In the second stage, subjects were asked to distribute additional endowments (100 SEK) in an anonymous dictator game using the strategy method, i.e. making decisions contingent on the recipient losing or wining in the gamble. Individuals change their action associated with re-allocation depending on the underlying conception of luck. Subjects in the brute luck treatment equalized outcomes to larger extent (p=0.0069). Thus, subjects redistributed a larger amount to unlucky losers and a smaller amount to lucky winners compared to equivalent choices made in the option luck treatment. We find strong support for people having a fairness preference not just for outcomes, but also for how those outcomes are reached. Our findings are potentially important for understanding the role citizens assign individual responsibility for life outcomes, i.e. health and wealth.
    Keywords: fairness; luck egalitarianism; brute luck; option luck; dictator game; laboratory experiment
    JEL: D03
    Date: 2016–02–19
  2. By: Alger, Ingela; Juarez, Laura; Juarez-Torres, Miriam; Miquel-Florensa, Josepa
    Abstract: How does informal risk sharing affect incentives to avoid risk? While moral hazard is expected under formal insurance, theory suggests that the incentive effects of informal risk sharing are ambiguous: internalization of the external effects of transfers on others may reduce or enhance incentives to avoid risk. To study this issue, which is particularly relevant for developing economies, we designed a novel real-effort lab experiment and conducted it in 16 small villages in rural Mexico. We find that subjects internalize the effects of transfers enough for the presence of transfers to significantly increase effort compared to autarky situations.
    Keywords: informal insurance, effort, moral hazard, free-riding effect, empathy effect
    JEL: C93 D64 O12
    Date: 2016–02
  3. By: Zhixin Dai (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 - Centre National de la Recherche Scientifique); Fabio Galeotti (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 - Centre National de la Recherche Scientifique); 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 - Centre National de la Recherche Scientifique)
    Abstract: The concentration of high frequency controls in a limited period of time (" crackdowns ") constitutes an important feature of many law-enforcement policies around the world. In this paper, we offer a comprehensive investigation on the relative efficiency and effectiveness of various crackdown policies using a lab-in-the-field experiment with real passengers of a public transport service. We introduce a novel game, the daily public transportation game, where subjects have to decide, over many periods, whether to buy or not a ticket knowing that there might be a control. Our results show that (a) concentrated crackdowns are less effective and efficient than random controls; (b) prolonged crackdowns reduce fare-dodging during the period of intense monitoring but induces a burst of fraud as soon as they are withdrawn; (c) pre-announced controls induces more fraud in the periods without control. Overall, we also observe that real fare-dodgers fraud more in the experiment than non-fare-dodgers.
    Keywords: Crackdowns, fraud, risk, monitoring, transportation, field experiment
    Date: 2016
  4. By: Marco Faillo (University of Trento); Matteo Rizzolli (LUMSA University); Stephan Tontrup (New York University)
    Abstract: Abstract The institution of property is void without legal and social enforcement against theft. To address wasteful competition over resources, societies have long developed strategies that encompass -inter alia- behavioral traits, social norms and legal institutions to promote the respect and enforcement of property rights. On the other hand, a growing body of biological and ethological evidence suggests that several other animal species establish and respect some forms of property even in the absence of institutions. Would human beings respect others' property in the absence of institutions? Do people posses some innate sense of property, or do they respect property only because of legal and social enforcement? In this study, we explore this issue with a lab experiment that resembles a famous thought experiment proposed by Plato. As Plato sought to understand how one ought to behave when he or sheis completely shielded by the consequences of his actions,we study whether people respect property once full anonymity is granted. In this experiment, we implement a Free-Form Dictator game where participants can both give and take up to five scratchcards from a passive counterpart that they have either previously bought outside the lab with their own money (legal treatments) or gained inside the lab via an effort task (effortful treatments). In conclusion to the experiment, evidence is provided of a (weak) sense of property. We also provide evidence that property in the lab is better established through an effort tasks than through the use of subject's own real property brought from outside the lab.
    Keywords: property rights, dictator game, bully game, taking, stealing, anonymity, effort, scratchcards
    JEL: C91 D23 K11 P14 P26
    Date: 2016–01
  5. By: Alisa Frik; Alexia Gaudeul
    Abstract: We expose subjects in our experiment to the risk of having to reveal private information to other participants. We show that the decision to incur this risk is driven mainly by their general attitude to monetary risk. Survey attitudes to privacy play only a marginal role in explaining attitudes to privacy risk. Subjects who are more willing to pay or to accept payment for their private information do not appear to be more or less likely to incur privacy risks than others once their overall level of risk aversion is taken into account. We further test the relation between privacy and control, that is, whether depriving subjects of full control over whether their personal information will be revealed leads them to lose interest in protecting it. We find that this is not the case. We finally find that subjects who are asked for their preferences over monetary risk before being asked for their preferences over privacy risks tend to choose riskier options in privacy lotteries. This provides evidence of the importance of framing for privacy decisions; inducing subjects to think of privacy decisions in the context of financial decisions reduces their aversion to privacy risk.
    Date: 2016
  6. By: Aidas Masiliunas (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    Abstract: We study whether coordination failure is more often overcome if players can easily disclose their actions. In an experiment subjects first choose their action and then choose whether to disclose this action to other group members, and disclosure costs are varied between treatments. We find that no group overcomes coordination failure when action disclosure costs are high, but half of the groups do so when the costs are low. Simulations with a belief learning model can predict which groups will overcome coordination failure, but only if it is assumed that players are either farsighted, risk-seeking or pro-social. To distinguish between these explanations we collected additional data on individual preferences and the degree of farsightedness. We find that in the low cost treatment players classified as more farsighted more often deviate from an inefficient convention and disclose this action, while the effect of risk and social preferences is not significant.
    Keywords: lock-in,coordination failure,learning,strategic teaching,information,collective action,critical mass
    Date: 2016–02
  7. By: Doerrenberg, Philipp; Duncan, Denvil; Löffler, Max
    Abstract: The standard labor-supply literature typically assumes that the labor supply response to wage increases is the same as that for equivalent wage decreases. However, evidence from the behavioral-economics literature suggests that people are loss averse and thus perceive losses differently than gains. This behavioral insight may imply that workers respond differently to wage increases than to wage decreases. We estimate the effect of wage increases and decreases on labor supply using a randomized field experiment with workers on Amazon's Mechanical Turk. The results provide evidence that wage increases have smaller effects than wage decreases, suggesting that the labor-supply response to wage changes is asymmetric. This finding is especially strong on the extensive margin where the elasticity for a wage decrease is twice that for a wage increase. These findings suggest that a reference-dependent utility function that incorporates loss aversion is the most appropriate way to model labor supply.
    Keywords: labor supply,loss aversion,labor supply elasticities w.r.t. wages
    JEL: J22 J31 D03
    Date: 2016
  8. By: Mariia I. Okuneva (National Research University Higher School of Economics); Dmitriy B. Potapov (National Research University Higher School of Economics)
    Abstract: Smartphone applications are becoming an important marketing channel that allows to build long-term relationship with customers. The main advantage of advertising through this kind of media is an opportunity to individually target users with different offers, taking into consideration their characteristics and purchase history. However, little is known about the effectiveness of such practice. We use a purely randomized natural field experiment with 11338 customers of large Russian retail chain to understand factors that influence the effectiveness of advertising through smartphone application. We find that the impact of conducted advertising campaign either on number of purchases or purchase amount is slightly negative on average. While most previous studies report positive effect of advertising through mobile devices, we can explain the average negative effect by influence of small discount (less than 20%) offers on consumers’ behavior. Holiday text of the message makes this effect even stronger. Consistent with the literature, the average effect of advertising depends on RFM characteristics of customers. However, the loyalty of consumers or different texts of an advertising message do not affect the effectiveness of advertising via mobile application. These results can help a retail chain to elaborate rules for individual targeting that assure more profits
    Keywords: mobile targeting, randomized field experiment, mobile application, advertising effectiveness.
    JEL: M31 M37 C93 L86
    Date: 2015
  9. By: Isa E. Hafalir; Rustamdjan Hakimov; Dorothea Kübler; Morimitsu Kurino
    Abstract: We study a college admissions problem in which colleges accept students by ranking students’ efforts in entrance exams. Students’ ability levels affect the cost of their efforts. We solve and compare the equilibria of “centralized college admissions” (CCA) where students apply to all colleges and “decentralized college admissions” (DCA) where students only apply to one college. We show that lower ability students prefer DCA whereas higher ability students prefer CCA. Many predictions of the theory are supported by a lab experiment designed to test the theory, yet we find a number of differences that render DCA less attractive than CCA compared to the equilibrium benchmark.
    Keywords: College admissions, incomplete information, student welfare, contests, all-pay auctions, experiment.
    JEL: C78 D78 I21
    Date: 2016–01
  10. By: Peter Schwardman (Ludwig Maximilian University of Munich, Germany); Joël van der Weele (University of Amsterdam)
    Abstract: We experimentally investigate the determinants of overconfidence and test the hypothesis, advanced by Robert Trivers, that overconfidence serves to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed about the possibility of earning money by convincing others of their high relative performance in a structured face-to-face interaction. Privately elicited beliefs show that informed participants are 50% more overconfident than those in a control condition, and are less responsive to objective feedback on their performance. Using random variation in confidence generated by our feedback mechanism, we find that increased confidence indeed causes higher evaluations in the ensuing interactions, unless the evaluators have been explicitly instructed to watch out for lies. These results support the idea that confidence is a strategic variable in human interaction.
    Keywords: Overconfidence; belief formation; self-deception; deception
    JEL: C91 D03 D83
    Date: 2016–02–19
  11. By: Persson, Emil (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Anger can be a strong behavioral force, with important consequences for human interaction. For example, angry individuals may become hostile in their dealings with others, and this has strategic consequences. Battigalli, Dufwenberg, and Smith (2015; BDS) develop a formal framework where frustration and anger affect interaction and shape economic outcomes. This paper designs an experiment testing the predictions based on central concepts of their theory. The focus is on situations where other-responsibility is weak or nonexistent, and in this specific context I find only limited support for the theory: While unfulfilled expectations about material payoffs seem to generate negative emotions in subjects, which is in line with BDS' conceptualization of frustration, behavior is generally not affected by these emotions to the extent predicted by the theory.
    Keywords: Emotion; Anger; Blame; Psychological games; Experiment
    JEL: C72 C91 D03
    Date: 2016–02
  12. By: Carlos Cueva Herrero (Dpto. Análisis Económico Aplicado); Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante); Giovanni Ponti (Universidad de Alicante); Josefa Tomás Lucas (Universidad de Alicante)
    Abstract: The disposition effect (DE) is a common investment bias consisting of the tendency to sell profitable assets and hold losing assets. We investigate individual determinants of the DE in a standard experimental environment as well as one with transaction costs and one with a competitive payment scheme. Overall DE is positive and significant in all trading environments. In line with previous results in the literature, we find that women are more reluctant to sell losing assets than men in the standard environment. However, this difference disappears in the presence of transaction costs. Contrary to earlier reports, we do not find a significant gender difference in the DE in any environment. Novelly, we find that the most significant psychological predictor of the reluctance to realize losses is the difficulty in recognizing one’s errors. This constitutes novel direct evidence that “investors are also reluctant to accept and realize losses because the very act of doing so proves that their first judgment was wrong” (Gross, 1982, p. 150).
    Keywords: Behavioral Finance, Experimental Economics, Disposition effect, Transaction costs, Gender differences
    JEL: C91 D70 D81 D91
    Date: 2016–01
  13. By: Greg Fischer, Dean Karlan, Margaret McConnell, and Pia Raffler
    Abstract: In a field experiment in Uganda, we find that demand after a free distribution of three health products is lower than after a sale distribution. This contrasts with work on insecticide-treated bed nets, highlighting the importance of product characteristics in determining pricing policy. We put forward a model to illustrate the potential tension between two important factors, learning and anchoring, and then test this model with three products selected specifically for their variation in the scope for learning. We find the rank order of shifts in demand matches with the theoretical prediction, although the differences are not statistically significant.
    Keywords: subsidies; health; pricing; learning
    JEL: D11 D12 D83 I11 I18 O12
    Date: 2014–11
  14. By: Lise Vesterlund
    Abstract: Real-effort experiments are frequently used when examining a response to incentives.For any particular real-effort task to be well-suited for such an exercise subjects’ cost for exertingeffort must result in an interior effort choice. The popular slider task in Gill and Prowse (2012)has been characterized as satisfying this requirement, and the task has been increasingly used to investigatethe response to changes in both monetary and non-monetary incentives. However, despiteits increasing use, a simple between-subject examination of the slider task’s response to incentiveshas not been conducted. We provide such an examination with three different piece-rate incentives:half a cent, two cents, and eight cents per slider completed. We find that participants in the threetreatments completed on average 26.1, 26.6 and 27.3 sliders per round, respectively. The one-sliderincrease in observed performance is small, not only relative to the sixteen-fold increase in the incentives,but also relative to the observed heterogeneity across subjects, rates of learning, and evenidiosyncratic variation. Our paper cautions that the slider task will be underpowered for uncoveringa response to incentives in between-subject designs.
    Date: 2015–01
  15. By: Jonathan de Quidt (Institute for International Economic Studies, Stockholm University); Francesco Fallucchi (School of Economics, University of East Anglia); Felix Koelle (Center for Social and Economic Behavior, University of Cologne); Daniele Nosenzo (School of Economics, University of Nottingham); Simone Quercia (Institute for Applied Microeconomics, University of Bonn)
    Abstract: We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments subjects know at the time of effort provision whether they have achieved the bonus / avoided the penalty. In another set of treatments subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts. We discuss possible reasons for this null result.
    Keywords: contract framing; bonus; penalty; fine; loss aversion
    Date: 2016–01
  16. By: Marc Höglinger; Ben Jann
    Abstract: Social desirability and the fear of sanctions can deter survey respondents from responding truthfully to sensitive questions. Self-reports on norm breaking behavior such as shoplifting, non-voting, or tax evasion may therefore be subject to considerable misreporting. To mitigate such misreporting, various indirect techniques for asking sensitive questions, such as the randomized response technique (RRT), have been proposed in the literature. In our study, we evaluate the viability of several variants of the RRT, including the recently proposed crosswise-model RRT, by comparing respondents’ self-reports on cheating in dice games to actual cheating behavior, thereby distinguishing between false negatives (underreporting) and false positives (overreporting). The study has been implemented as an online survey on Amazon Mechanical Turk (N = 6,505). Our results indicate that the forced-response RRT and the unrelated-question RRT, as implemented in our survey, fail to reduce the level of misreporting compared to conventional direct questioning. For the crosswise-model RRT, we do observe a reduction of false negatives (that is, an increase in the proportion of cheaters who admit having cheated). At the same time, however, there is an increase in false positives (that is, an increase in non-cheaters who falsely admit having cheated). Overall, our findings suggest that none of the implemented sensitive questions techniques substantially outperforms direct questioning. Furthermore, our study demonstrates the importance of distinguishing false negatives and false positives when evaluating the validity of sensitive question techniques.
    Keywords: Sensitive Questions, Online Survey, Amazon Mechanical Turk, Randomized Response Technique, Crosswise Model, Dice Game, Validation
    JEL: C81 C83
    Date: 2016–02–15
  17. By: Markus Schaffner; Jayanta Sarkar; Benno Torgler; Uwe Dulleck
    Abstract: To explore the effects of daylights saving time (DST) transition on cognitive performance and risk-taking behaviour immediately before and one week after the shift to DST, this study examines two Australian populations living in similar geographic surroundings who experience either no DST transition (Queensland) or a one-hour DST desynchronization (New South Wales). This exogenous variation creates natural control (QLD) and treatment (NSW) groups that enable isolation and identification of the DST transition's effect on the two outcome variables. Proximity to the border ensures similar socio-demographic and socio-economic conditions and thus permits comparison of the cognitive performance and risk-taking behaviour of affected versus unaffected individuals. The results suggest that exposure to the DST transition has no significant impact on either cognitive performance or risk-taking behaviour.
    Keywords: Daylight saving time, Risk-taking behaviour, Cognitive performance, Field experiment
    Date: 2015–02–06
  18. By: Breitmoser, Yves
    Abstract: Overbidding in auctions has been attributed to risk aversion, loser regret, level-k, and cursedness, though relying on different identifying assumptions. I argue that "type projection" organizes these findings and better captures observed behavior. Type projection formally models that people tend to believe others have object values similar to their own -- a robust psychological phenomenon that naturally applies to auctions. First, I show that type projection implies the main behavioral phenomena in auctions, including increased sense of competition (like loser regret) and broken Bayesian updating (like cursedness). Second, re-analyzing data from seven experiments, I show that type projection explains the stylized facts of behavior across private and common value auctions. Third, in a structural analysis nesting existing approaches and emphasizing robustness, type projection consistently captures behavior best, in-sample and out-of-sample. The results reconcile bidding patterns across conditions and have implications for behavioral and empirical analyses as well as policy.
    Keywords: auctions, overbidding, winner's curse, projection, risk aversion, cursed equilibrium, limited depth of reasoning
    JEL: C7 C91 D44
    Date: 2016–01–22
  19. By: Madarász, Kristóf
    Abstract: An uninformed seller offers an object to a privately informed buyer. The buyer projects information and exaggerates the probability that the seller is informed. Letting the buyer bargain and name her own price raises the seller's payoff above the full-commitment payoff. Under seller-offer bargaining, any positive degree of projection implies a full reversal of the Coasian result in stationary strategies. As delay between offers decreases, the seller raises his initial price and, in the limit, extracts the full surplus from trade. Dynamic bargaining without price-commitment is revenue-optimal. Existing experimental evidence is consistent with the comparative static predictions of the model.
    Keywords: Bargaining; Coase Conjecture.; Information Projection; Pricing
    JEL: C79 D03
    Date: 2015–02
  20. By: Gergaud, Olivier; Plantinga, Andrew J.; Ringeval-Deluze, Aurelie
    Abstract: Although evidence for anchoring effects has been produced in experimental settings, there have been relatively few studies testing for anchoring in actual markets. We analyze a large data set of vineyard sales in the Champagne region of France to determine whether Echelle Des Crus (EDC) ratings are an anchor in the land market. The EDC is a set of numerical scores for villages in the region that was used as part of a price-setting system for wine grapes that began in 1919 and persisted until 1990. Although grape prices are now determined in a market and the EDC no longer plays a direct role in determining them, we test whether the EDC continues to be an anchor for participants in the land market. The econometric challenge is to separately identify anchoring effects from the effects of relevant information the EDC may convey about vineyard quality. We instrument for the EDC using the average attributes of vineyards in neighboring villages, which are unlikely to be correlated with errors in prices because only the characteristics of the vineyard itself affect the rents from grape production. We find strong evidence for anchoring effects in the land market, which is further supported by analyses of grape prices. We also examine whether the anchoring effect is diminishing over time as market participants come to rely more on objective information to determine prices. We find, instead, that effect of the EDC persists many years after it became obsolete.
    Keywords: wine, quality rating, land sales, Demand and Price Analysis, Institutional and Behavioral Economics, Public Economics,
    Date: 2015–12
  21. By: Buyukboyaci, Muruvvet; Kucuksenel, Serkan
    Abstract: In this paper, we experimentally compare the effect of costless direct and indirect messages on the risky action choices, hence on coordinations in stag-hunt games. We show that there is no effect of costless indirect messages on the frequency of risky action choices and hence on coordination on the payoff-dominant equilibrium. With direct messages, however, we find that there is a significant effect of pre-play communication on efficient coordination. One potential reason of not seeing a significant effect of indirect messages is the difference in agents' message-interpretations. Another potential reason may be the existence of lie-averse agents.
    Keywords: coordination, cheap talk, risk information, costless messages
    JEL: C72 C91 D82 D84
    Date: 2016–01–21

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