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on Experimental Economics |
| By: | Ispano, Alessandro; Schwardmann, Peter |
| Abstract: | Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the traveler’s dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Our experimental design allows us to show that this treatment effect is best explained by reference-dependent risk preferences and referencedependent strategic sophistication. We discuss policy implications and relate our findings to other experimental games played in the loss domain. |
| Keywords: | cooperation; traveler’s dilemma; social dilemma; loss domain; diminishing sensitivity; cognitive hierarchy |
| JEL: | C90 D01 D03 D81 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:27576&r=exp |
| By: | Pan He (ETH Zurich); Marcella Veronesi (Department of Economics (University of Verona)); Stefanie Engel (Institute for Environmental Decisions, ETH Zurich) |
| Abstract: | A variety of measures have been developed to elicit individual risk preferences. How these measures perform in the field, in particular in developing countries with non-student subjects, is still an open question. We implement an artefactual field experiment using a large sample of Chinese farmers to investigate (i) whether subjects behave in a consistent manner across incentivized experimental risk measures, (ii) whether non-incentivized survey measures can elicit actual risk preferences, and (iii) possible explanations for risk preference inconsistency across measures. We find that inconsistent risk preferences across survey and experimental measures may be explained by ambiguity preferences. In the survey, subjects seem to mix risk and ambiguity preferences. |
| Keywords: | risk preferences, ambiguity preferences, field experiments, socio-economic survey, China |
| JEL: | C93 D81 O1 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:03/2016&r=exp |
| By: | Mette Trier Damgaard (Department of Economics and Business Economics, Aarhus University, Denmark); Christiana Gravert (University of Gothenbuerg, Sweden) |
| Abstract: | We document the hidden costs of one of the most policy-relevant nudges, reminders. Sending reminders, while proven effective in facilitating behavior change, may come at a cost for both senders and receivers. Using a large scale field experiment with a charity, we find that reminders increase donations, but they also substantially increase unsubscriptions from the mailing list. To understand this novel finding, we develop a dynamic model of donation and unsubscription behavior with limited attention which is tested in reduced-form using a second field experiment. We also estimate our model structurally to perform a welfare analysis, showing that reminders are welfare diminishing for the potential donors as non-givers incur welfare loss of $2.35 for every reminder. The net benefit of every reminder to the charity is $0.18. Our evaluation shows the need to evaluate nudges on their intended as well as unintended consequences. |
| Keywords: | Avoiding-the-ask, charitable giving, field experiment, inattention, nudge, reminders |
| JEL: | C93 D03 D64 H41 |
| Date: | 2016–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2016-03&r=exp |
| By: | Vessela; ; ; |
| Abstract: | This paper presents an experiment investigating the effect of social identity on hiring decisions. The question is whether people discriminate between own and other group candidates. Key features of the experimentare: First, to consider whether they do so in individual, as well as in joint decisions; Second, to document whether the identity of the co-decisionmaker matters in joint decisions. Substantial discrimination occurs in both individual and joint decision-making situations. In joint decisions,decision makers discriminate when deciding with someone from their own group, but not when deciding with someone from the other group. |
| Keywords: | social identity, discrimination, favoritism, coordination, experimental evidence |
| JEL: | C72 C91 D84 J71 |
| Date: | 2016–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1555&r=exp |
| By: | Syngjoo Choi; Edoardo Gallo; Shachar Kariv; |
| Abstract: | This chapter surveys experimental research on networks in economics. The first part considers experiments on games played on networks. The second part discusses experimental research on markets and networks. It concludes by identifying important directions for future research. |
| Keywords: | experiments, social networks, network games, markets, coordination, public goods, cooperation, social learning, communication, trading. |
| JEL: | C91 C92 D85 L14 Z13 |
| Date: | 2015–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1551&r=exp |
| By: | Francesco Bogliacino; Cristiano Codagnone; Giuseppe Alessandro Veltri; Francisco Lupiáñez-Villanueva; George Gaskell; Andriy Ivchenko |
| Abstract: | This article presents the results of a laboratory experiment and an online multi-country experiment testing the effect of motor vehicle eco-labels on consumers. The laboratory study featured a discrete choice task and questions on comprehension, while the ten countries online experiment included measures of willingness to pay and comprehension. Labels focusing on fuel economy or running costs are better understood, and influence choice about money-related eco-friendly behaviour. We suggest that this effect comes through mental accounting of fuel economy. In the absence of a cost saving frame, we do not find a similar effect of information on CO2 emissions and eco-friendliness. Labels do not perform as well as promotional materials. Being embedded into a setting, which is designed to capture the attention, the latter are more effective. We found also that large and expensive cars tend to be undervalued once fuel economy is highlighted. |
| Keywords: | eco-label; nudge; willingness to pay; fuel economy; experiments |
| JEL: | C9 D3 Q56 Q58 |
| Date: | 2016–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:col:000178:014330&r=exp |
| By: | Francesco Fallucchi (University of East Anglia); Simone Quercia (University of Bonn) |
| Abstract: | We conduct a real-effort experiment to test the effects of an affirmative action policy that reserves a share of the prize to subjects of a disadvantaged category in rent-seeking contests. We test three potential critiques to affirmative action policies in our setting: (i) whether the introduction of the policy reduces overall effort or distorts selection in the contest, (ii) whether it leads to reverse discrimination and (iii) whether the possibility of ex-post retaliatory actions undermines the effectiveness of the policy. We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. Moreover, the introduction of the policy does not negatively affect performance. However, we find that the possibility of retaliation can undermine the benefits of the affirmative action policy reducing contest participation. This suggests that retaliation is an important aspect to consider when implementing affirmative action policies. |
| Keywords: | rent-seeking, contest design, affirmative action, retaliation |
| JEL: | C72 D72 J78 |
| Date: | 2016–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-03&r=exp |
| By: | Thomas Buser (University of Amsterdam, the Netherlands) |
| Abstract: | I study how gender differences in willingness to compete evolve over time in response to experience. Participants in a lab experiment perform the same real-effort task over several rounds. In each round, they have to choose between piece-rate remuneration and a winner-takes-all competition. At the end of each round, those who compete get feedback on the competition outcome. The main result is that women are much more likely than men to stop competing after a loss, which leads to the appearance of a significant gender gap in competitiveness even among those who are initially willing to compete. This gender effect is also present for high performers. In an additional experiment, I show that giving feedback to non-competers might further increase the gender gap in willingness to compete as men who initially choose not to compete react more strongly to positive feedback compared to women. |
| Keywords: | competitiveness; gender; feedback; career decisions; laboratory experiment |
| JEL: | C91 D03 J01 J16 |
| Date: | 2016–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160017&r=exp |
| By: | Mariya Teteryatnikova; James Tremewan |
| Abstract: | This paper studies the e¤ects of transparency on information transmission and decision-making theoretically and experimentally. We develop a model in which a de- cision maker seeks the advice of a better-informed adviser. Before giving advice, the adviser may choose to accept a side payment from a third party, where accepting this payment binds the advisor to give a particular recommendation, which may or may not be dishonest. Without transparency, the decision maker learns only the recom- mendation of the adviser. With transparency, the decision maker learns in addition the decision of the adviser with respect to the side payment. Prior research has shown that transparency is either ine¤ective or harmful to decisionmakers? because con?icted advisers become more dishonest in their advice. The novelty of our model is that the con?ict of interest is endogeneous as the adviser can choose to decline the third-party payment. Our theoretical results predict that transparency is never harmful and may help decision makers. Our experimental results show that transparency improves the accuracy of decision making. However, we also observe that (i) while transparency clearly improves decision making when it is mandatory, the evidence in favor of a voluntary form of transparency is much weaker, and that (ii) the positive e¤ects of transparency decline over time. |
| JEL: | C72 C91 D82 D83 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1602&r=exp |
| By: | Matthias Greiff (University of Giessen); Kurt A. Ackermann (Fehr Advice & Partners); Ryan O. Murphy (University of Zürich) |
| Abstract: | A variety of different social contexts have been used when measuring distributional preferences. This could be problematic as different degrees of social interdependence may affect people’s distributional preferences, and this contextual variance may inadvertently muddle the measurement process and complicate comparisons between different strands of research. In the present study, we systematically measure distributional preferences embedded within different social contexts, as well as cooperative choices in a strategic setting. More specifically, we use a within-subjects design and compare the choices people make in resource allocation tasks with role certainty, role uncertainty, decomposed games, and matrix games. Results show that, at the aggregate level, role uncertainty and decomposed games both lead to higher degrees of prosociality when compared to role certainty. At the individual level, we observe considerable differences in behavior across the social contexts, indicating that the majority of people are sensitive to these different social settings but respond in different ways. We conclude with some recommendations for measuring distributional preferences as an individual difference and reiterate that social context is an inherent part of measurement methodology when considering social motivations. |
| Keywords: | Distributional Preferences, Social Preferences, Other Regarding Preferences, Social Value Orientation (SVO), Measurement Methods, Individual Differences |
| JEL: | C91 D03 D64 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201606&r=exp |
| By: | Adena, Maja; Huck, Steffen |
| Abstract: | Is there a way of matching donations that avoids crowding out? We introduce a novel matching method where the matched amount is allocated to a different project, present some simple theoretical considerations that predict reduced crowding out or more crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experiment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes. |
| Keywords: | Charitable giving,Matched fundraising,Natural field experiment |
| JEL: | C93 D64 D12 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2015302r&r=exp |
| By: | Nobuyuki Hanaki; Angela Sutan; Marc Willnger |
| Abstract: | Recent experimental studies have shown that observed outcomes deviate signiffcantly more from the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This "strategic environment effect" offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect. We show theoretically that the effect operates for interactions among three or more agents. Our experimental results partially support this theory, showing a statistically significant strategic environment effect for groups offive or more agents. Our findings establish that experiments involving a small number of interacting agents can provide major insights into macro phenomena and bolster previous work done on such issues as price dynamics. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:03-16&r=exp |
| By: | Bettina Rockenbach; Irenaeus Wolff |
| Abstract: | Considerable experimental evidence has been collected on rules enhancing contributions in public goods dilemmas. These studies either confront subjects with pre-specified rules or have subjects choose between different rule environments. In this paper, we completely endogenize the institution design process by asking subjects to design and repeatedly improve rule sets for a public goods problem in order to investigate which rules social planners facing a social dilemma “invent†and how these rules develop over time. We make several noteworthy observations, in particular the strong and successful use of framing, the concealment of individual contribution information and the decreasing use of punishment. |
| Keywords: | Public good, strategy method, experiment, public choice |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0104&r=exp |
| By: | KAYABA, Yutaka; MATSUSHIMA, Hitoshi; TOYAMA, Tomohisa |
| Abstract: | We experimentally examine repeated prisoners' dilemma with random termination, where monitoring is imperfect and private. Our estimation indicates that a significant proportion of subjects follow generous Tit-For-Tat (g-TFT) strategies, straightforward extensions of Tit-For-Tat. However, the observed retaliating policies are inconsistent with the g-TFT equilibria. Contrarily to the theory, subjects tend to retaliate more with high accuracy than with low accuracy. They tend to retaliate more than the theory predicts with high accuracy, while they tend to retaliate lesser with low accuracy. In order to describe these results as unique equilibrium, we demonstrate an alternative theory that incorporates naetand reciprocity. |
| Keywords: | Repeated Prisoner's Dilemma, Imperfect Private Monitoring, Experiments, Generous Tit-For-Tat, Behavioral Model |
| JEL: | C70 C71 C72 C73 D03 |
| Date: | 2016–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-23&r=exp |
| By: | Karagözoğlu, Emin; Kocher, Martin G. |
| Abstract: | We experimentally investigate the effect of time pressure in a rich-context, unstructured bargaining game with earned status and competing reference points. Our results show that average opening proposals, concessions, and agreed shares are very similar across different levels of time pressure. Nevertheless, as predicted, time pressure systematically influenced agreements. In particular, the likelihood of bargainers reaching the explicit reference point outcome in agreements increases with time pressure, and the likelihood of reaching the implicit reference point (equal division) in agreements decreases with time pressure. Disagreement rates and the frequency of last-moment agreements are strongly affected: the disagreement rate rises dramatically with time pressure, and last-moment agreements are significantly more frequent. This effect is explained by a stronger connection between the tension in first proposals and the final bargaining outcome under time pressure than without time pressure. |
| Keywords: | Bargaining; Disagreements; Last-moment Agreements; Reference Points; Time Pressure. |
| JEL: | C71 C91 D74 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:26642&r=exp |
| By: | John Lynam (UHERO, University of Hawai‘i at Manoa); Kohei Nitta (University of Hawai‘i at Manoa, UHERO); Tatsuyoshi Saijo; Nori Tarui (UHERO, University of Hawai‘i at Manoa) |
| Abstract: | A number of studies have estimated how much energy conservation is achieved by providing households with real-time information on energy use via in-home displays. However, none of these studies tell us why real-time information changes energy-use behavior. We explore the causal mechanisms through which real-time information affects energy consumption by conducting a randomized-control trial with residential households. The experiment disentangles two competing mechanisms: (i) learning about the energy consumption of various activities, the “learning effect”, versus (ii) having a constant reminder of energy use, the “saliency effect”. We have two main results. First, we find a statistically significant treatment effect from receiving real-time information. Second, we find that learning plays a more prominent role than saliency in driving energy conservation. This finding supports the use of energy conservation programs that target consumer knowledge regarding energy use. |
| Keywords: | energy efficiency; energy conservation; real-time information; experiment |
| JEL: | D03 D12 Q41 Q48 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:hae:wpaper:2014-11&r=exp |
| By: | Yutaka Kayaba (Hitotsubashi Institute for Advanced Study, Hitotsubashi University); Hitoshi Matsushima (Faculty of Economics, The University of Tokyo); Tomohisa Toyama (Division of Liberal Arts, Kogakuin University) |
| Abstract: | We experimentally examine repeated prisoners' dilemma with random termination, where monitoring is imperfect and private. Our estimation indicates that a significant proportion of subjects follow generous Tit-For-Tat (g-TFT) strategies, straightforward extensions of Tit-For-Tat. However, the observed retaliating policies are inconsistent with the g-TFT equilibria. Contrarily to the theory, subjects tend to retaliate more with high accuracy than with low accuracy. They tend to retaliate more than the theory predicts with high accuracy, while they tend to retaliate lesser with low accuracy. In order to describe these results as unique equilibrium, we demonstrate an alternative theory that incorporates naïveté and reciprocity. |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2016cf1004&r=exp |
| By: | Ayse Gül Mermer; Wieland Müller; Sigrid Suetens |
| Abstract: | This paper studies the effects of transparency on information transmission and decision-making theoretically and experimentally. We develop a model in which a de- cision maker seeks the advice of a better-informed adviser. Before giving advice, the adviser may choose to accept a side payment from a third party, where accepting this payment binds the advisor to give a particular recommendation, which may or may not be dishonest. Without transparency, the decision maker learns only the recom- mendation of the adviser. With transparency, the decision maker learns in addition the decision of the adviser with respect to the side payment. Prior research has shown that transparency is either ine¤ective or harmful to decisionmakers? because con?icted advisers become more dishonest in their advice. The novelty of our model is that the conflict of interest is endogeneous as the adviser can choose to decline the third-party payment. Our theoretical results predict that transparency is never harmful and may help decision makers. Our experimental results show that transparency improves the accuracy of decision making. However, we also observe that (i) while transparency clearly improves decision making when it is mandatory, the evidence in favor of a voluntary form of transparency is much weaker, and that (ii) the positive e¤ects of transparency decline over time. |
| JEL: | L13 C72 C92 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1603&r=exp |
| By: | Matthias Greiff (University of Giessen); Henrik Egbert (Anhalt University of Applied Sciences) |
| Abstract: | We review a large number of empirical studies on Pay-What-You-Want (PWYW) pricing. We distinguish between laboratory experiments, field experiments, survey experiments and case studies. Based on this survey we identify the following two gaps in the recently flourishing literature on PWYW pricing: (1) studies on PWYW pricing for goods with high cost, and (2) studies on the long-term effects of PWYW pricing. |
| Keywords: | Pay-What-You-Want, PWYW, pricing mechanism, survey, empirical studies |
| JEL: | C90 D12 D49 M21 M30 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201605&r=exp |
| By: | Alessandra Casella (Columbia University, NBER and CEPR); Jean-François Laslier (Paris School of Economics and CNRS); Antonin Macé (Aix-Marseille Universit´e (Aix-Marseille School of Economics), CNRS and EHESS) |
| Abstract: | In a polarized committee, majority voting disenfranchises the minority. By allowing voters to spend freely a fixed budget of votes over multiple issues, Storable Votes restores some minority power. We study a model of Storable Votes that highlights the hide-and-seek nature of the strategic game. With communication, the game replicates a classic Colonel Blotto game with asymmetric forces. We call the game without communication a decentralized Blotto game. We characterize theoretical results for this case and test both versions of the game in the laboratory. We find that, despite subjects deviating from equilibrium strategies, the minority wins as frequently as theory predicts. Because subjects understand the logic of the game – minority voters must concentrate votes unpredictably – the exact choices are of secondary importance. The result is an endorsement of the robustness of the voting rule. |
| Keywords: | Storable Votes, Polarization, Colonel Blotto, Tyranny of the Majority, Committees |
| JEL: | D71 C72 C92 |
| Date: | 2016–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1612&r=exp |
| By: | Hong Luo; Julie Holland Mortimer |
| Abstract: | Effective dispute resolution is important for reducing private and social costs. We study how resolution responds to changes in price and communication using a new, extensive dataset of copyright infringement incidences by firms. The data cover two field experiments run by a large stock-photography agency. We find that substantially reducing the requested amount generates a small increase in the settlement rate. However, for the same reduced request, a message informing infringers of the price reduction and acknowledging possible unintentionality generates a large increase in settlement; including a deadline further increases the response. The small price effect, compared to the large message effect, can be explained by two countervailing effects of a lower price: an inducement to settle early, but a lower threat of escalation. Furthermore, acknowledging possible unintentionality may encourage settlement due to the typically inadvertent nature of these incidences. The resulting higher settlement rate prevents additional legal action and reduces social costs. |
| JEL: | L0 M2 O30 O34 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22082&r=exp |
| By: | Matthew Embrey (University of Sussex); Friederike Mengel (University of Essex and Maastricht University); Ronald Peeters (Maastricht University) |
| Abstract: | This paper studies whether and how strategy revision opportunities affect levels of collusion in indefinitely repeated two-player games. Consistent with standard theory, we find that such opportunities do not affect strategy choices, or collusion levels, if the game is of strategic substitutes. In contrast, there is a strong and positive effect for games of strategic complements. Revision opportunities lead to more collusion. The latter cannot be explained by renegotiation or standard risk-dominance considerations, but is consistent with a notion of fear of miscoordination based on minmax regret. |
| Keywords: | strategy revision opportunities, cooperation, repeated games, complements vs. substitutes, fear of miscoordination |
| JEL: | C73 C92 D43 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:8716&r=exp |