nep-exp New Economics Papers
on Experimental Economics
Issue of 2016‒05‒28
twenty-one papers chosen by
Daniel Houser
George Mason University

  1. You’ll never walk alone. An experimental study on receiving money By Tjøtta, Sigve
  2. Cooperation or Competition? A field experiment on non-monetary learning incentives By Margherita Fort; Maria Bigoni; Mattia Nardotto; Tommaso Reggiani
  3. Selfies, therefore Selfish? An Experiment on the Impact and Value of a Selfie By Holm, Hakan J.; Samahita, Margaret
  4. Risk Aversion and Catastrophic Risks: the Pill Experiment By Julien Blasco; Graciela Chichilnisky
  5. Loss Aversion and Competition in Vickrey Auctions: Money Ain't No Good By Rosato, Antonio; Tymula, Agnieszka A.
  6. Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions By Aniol Llorente-Saguer; Roman M. Sheremeta; Nora Szech
  7. Delegation and Public Pressure in a Threshold Public Goods Game: Theory and Experimental Evidence By Doruk Iris; Jungmin Lee; Alessandro Tavoni
  8. Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions By Aniol Llorente-Saguer; Roman M. Sheremeta; Nora Szech
  9. Incentivizing creativity: A large-scale experiment with tournaments and gifts By Bradler, Christiane; Neckermann, Susanne; Warnke, Arne Jonas
  10. Games played through agents in the laboratory: A test of Prat & Rustichini's model By Ensthaler, Ludwig; Huck, Steffen; Leutgeb, Johannes
  11. Incentives in Experiments: A Theoretical Analysis By Paul J. Healy; Yaron Azrieli; Christopher P. Chambers
  12. A nonparametric welfare analysis on water quality improvement of the floating people on Inlay Lake via a randomized conjoint field experiment By Su Thet Hninn; Keisuke Kawata; Shinji Kaneko; Yuichiro Yoshida
  13. Information Cascades with Informative Ratings: An Experimental Test By Paul J. Healy; John Conlon; Yeochang Yoon
  14. Evaluating prediction markets for internal control applications By Werner, Max
  15. Nonpoint source pollution: An experimental investigation of the Average Pigouvian Tax By Hamet SARR; Mohamed Ali BCHIR; François COCHARD; Anne ROZAN
  16. Does nominal illusion generate collusive equilibria? By Enrique Fatas; Antonio J. Morales
  17. Whom do people trust after a violent conflict? Experimental evidence from Maluku, Indonesia By Werner, Katharina
  18. Democracy for Polarized Committees: The Tale of Blotto's Lieutenants By Alessandra Casella; Jean Francois Laslier; Antonin Macé
  19. Do Field Experiments on Labor and Housing Markets Overstate Discrimination? Re-examination of the Evidence By David Neumark; Judith Rich
  21. Experimental Auctions with Exogenous and Endogenous Information Treatment: Willingness to Pay for Improved Parboiled Rice in Benin By Demont, Matty; Zossou, Esperance; Van Mele, Paul

  1. By: Tjøtta, Sigve (Department of Economics, University of Bergen)
    Abstract: Is more money better than less? Not always. It depends on the situation. If more money for oneself means less money for a stranger, the majority of participants in dictator games choose less money for themselves. But if they really are alone - and thus do not have to share with a stranger - will they always choose to receive more money instead of less? Here, I report results from seven experiments. On average, one-third of a total of 3,351 participants chose to receive less money instead of more. In one experiment even a majority choose to receive less money. In four of the experiments the participants also faced the corresponding dictator experiment where there is an explicit anonymous recipient of the foregone money. There is a high positive correlation between “giving” as a dictator and when alone. This result opens up possibilities for broader interpretations that go beyond social the preference interpretation of giving in the dictator game.
    Keywords: More or less Money; Dictator game; Distributional and non-distributional norms
    JEL: D01 D03 D63
    Date: 2016–05–13
  2. By: Margherita Fort; Maria Bigoni; Mattia Nardotto; Tommaso Reggiani
    Abstract: We assess the effect of two antithetic non-monetary incentive schemes based on grading rules on students' effort, using experimental data. We randomly assigned students to a tournament scheme that fosters competition between paired up students, a cooperative scheme that promotes information sharing and collaboration between students and a baseline treatment in which students can neither compete nor cooperate. In line with theoretical predictions, we find that competition induces higher effort with respect to cooperation, whereas cooperation does not increase effort with respect to the baseline treatment. Nonetheless, we find a strong gender effect since this result holds only for men while women do not react to this type of non-monetary incentives.
    Date: 2015
  3. By: Holm, Hakan J. (Department of Economics, Lund University); Samahita, Margaret (Department of Economics, Lund University)
    Abstract: We investigate whether taking a selfie affects our willingness to cooperate and what factors affect our willingness to publish certain information on the web. Consistent with behavioral addiction theories, taking a selfie has a strong negative impact on cooperation among subjects who take selfies frequently, but not on other subjects. We also find that adding a selfie to information about the subject's degree of cooperation will increase the subject's unwillingness to publish her information. This selfie premium is significantly negatively correlated with the subject's degree of cooperation. Furthermore, we find lower heterogeneity in the premium demanded for publishing a subject's degree of cooperation when it is accompanied by a selfie, as subjects become less concerned about hiding or promoting their contribution.
    Keywords: selfie; cooperation; social media; social image
    JEL: C90 C91 D80 D82
    Date: 2016–05–05
  4. By: Julien Blasco; Graciela Chichilnisky
    Abstract: This article focuses on the work of O. Chanel and G. Chichilnisky (2013) on the flaws of expected utility theory while assessing the value of life. Expected utility is a fundamental tool in decision theory. However, it does not fit with the experimental results when it comes to catastrophic outcomes ---see, for example, Chichilnisky (2009) for more details. In the experiments conducted by Olivier Chanel in 1998 and 2009, several subjects are ask to imagine they are presented 1 billion identical pills. They are paid \$220,000 to take and swallow one, knowing that one out of 1 billion is deadly. The objective of this article is to show that risk aversion phenomenon cannot explain the experimental results found. This is an additional reason why a new kind of utility function is necessary: the axioms proposed by Graciela Chichilnisky will be briefly presented, and it will be shown that it better fits with experiments than any risk aversion utility function.
    Date: 2015–08
  5. By: Rosato, Antonio; Tymula, Agnieszka A.
    Abstract: A key prediction of expectations-based reference-dependent preferences and loss aversion in second-price (Vickrey) auctions with private values is that the number of bidders should affect bids in auctions for real objects but not in auctions with induced monetary values. We develop an experiment with a within-subject design aimed at testing this distinctive comparative statics prediction. Our results are consistent with expectations-based reference-dependent preferences and loss aversion. In real-object auctions, we find that subjects' bids are affected by the number of competitors and, on average, they decline with the intensity of competition. In induced-value auctions, instead, bids are unaffected by the intensity of competition. We also successfully replicate an experiment from Sprenger (2015) aimed at distinguishing expectations-based loss aversion from models of Disappointment Aversion. This provides additional evidence that our findings in the auction experiments are due to expectations-based loss aversion.
    Keywords: Utility; decision-making; reference point; neuroeconomics
    Date: 2016–05
  6. By: Aniol Llorente-Saguer (School of Economics and Finance, Queen Mary University of London); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University); Nora Szech (Institute of Economics, Karlsruhe Institute of Technology and WZB and CESifo Institute)
    Abstract: A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the “discouragement effect.” Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer’s revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.
    Keywords: all-pay auction, rent-seeking, bid-caps, tie-breaks, contest design
    JEL: C72 C91 D72
    Date: 2016
  7. By: Doruk Iris (Sogang University); Jungmin Lee (Sogang University and Institute for the Study of Labor (IZA)); Alessandro Tavoni (London School of Economics, Grantham Research Institute on Climate Change and Environment)
    Abstract: The provision of global public goods, such as climate change mitigation and managing fisheries to avoid overharvesting, requires the coordination of national contributions. The contributions are managed by elected governments who, in turn, are subject to public pressure on the matter. In an experimental setting, we randomly assign subjects into four teams, and ask them to elect a delegate by a secret vote. The elected delegates repeatedly play a one shot public goods game in which the aim is to avoid losses that can ensue if the sum of their contributions falls short of a threshold. Earnings are split evenly among the team members, including the delegate. We find that delegation causes a small reduction in the group contributions. Public pressure, in the form of teammates’ messages to their delegate, has a significant negative effect on contributions, even though the messages are designed to be payoff-inconsequential (i.e., cheap talk). The reason for the latter finding is that delegates tend to focus on the least ambitious suggestion. In other words, they focus on the lower of the two public good contributions preferred by their teammates. This finding is consistent with the prediction of our model, a modified version of regret theory.
    Keywords: Delegation, Cooperation, Threshold Public Goods Game, Climate Experiment, Regret Theory
    JEL: C72 C92 D81 H4 Q54
    Date: 2016–03
  8. By: Aniol Llorente-Saguer (Queen Mary University of London); Roman M. Sheremeta (Case Western Reserve University and Chapman University); Nora Szech (Karlsruhe Institute of Technology, WZB, and CESifo Institute)
    Abstract: A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the "discouragement effect." Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer's revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.
    Keywords: All-pay auction, Rent-seeking, Bid-caps, Tie-breaks, Contest design
    JEL: C72 C91 D72
    Date: 2016–05
  9. By: Bradler, Christiane; Neckermann, Susanne; Warnke, Arne Jonas
    Abstract: This paper reports the results from a large-scale laboratory experiment investigating the impact of tournament incentives and wage gifts on creativity. We find that tournaments substantially increase creative output, with no evidence for crowding out of intrinsic motivation. By comparison, wage gifts are ineffective. Additional treatments show that it is the uncertain mapping between effort and output that inhibits reciprocity. This uncertainty is prevalent in creative and other complex tasks. Our findings provide a rationale for the frequent use of tournaments when seeking to motivate creative output.
    Keywords: creativity,incentives,tournament,reciprocity,experiment,crowding-out
    JEL: C91 D03 J33 M52
    Date: 2016
  10. By: Ensthaler, Ludwig; Huck, Steffen; Leutgeb, Johannes
    Abstract: From the regulation of sports to lawmaking in parliament, in many situations one group of people ("agents") makes decisions that affect payoffs of others ("principals") who are inactive. As the principals have a stake in the agents' decisions they face an incentive to offer payments in order to sway their decisions. Prat and Rustichini (2003) characterize pure-strategy equilibria of such Games Played Through Agents, in which principals commit to action-contingent transfers to agents. Specifically, they predict the equilibrium outcome in pure strategies to be efficient under some conditions. With field data hard to come by, we test the theory in a series of experimental treatments with human principals and computerized agents. The theory explains the data remarkably well. Subjects predominantly offer payments that implement efficient outcomes. In some treatments offers fall short of equilibrium predictions though. These minor deviations from equilibrium behavior are explored in a quantal response equilibrium framework.
    Keywords: games played through agents,experiment,quantal response equilibrium
    Date: 2016
  11. By: Paul J. Healy (Department of Economics, Ohio State University); Yaron Azrieli (Department of Economics, Ohio State University); Christopher P. Chambers (Department of Economics, University of California, San Diego)
    Abstract: Experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks. We provide a theoretical framework for analyzing this question. Assuming monotonicity (dominated gambles are never chosen) and nothing else, we prove that paying for one randomly-chosen problem — the random problem selection (RPS) mechanism — is essentially the only incentive compatible mechanism. Paying for every period is similarly justified when we assume only a ‘no complementarities at the top’ (NCaT) condition. To help experimenters decide which is appropriate for their particular experiment, we also discuss empirical tests of these two assumptions.
    Keywords: Experimental design, decision theory, mechanism design
    JEL: C90 D01 D81
    Date: 2016–01
  12. By: Su Thet Hninn (Graduate School for International Development and Cooperation, Hiroshima University); Keisuke Kawata (Graduate School for International Development and Cooperation, Hiroshima University); Shinji Kaneko (Graduate School for International Development and Cooperation, Hiroshima University); Yuichiro Yoshida (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: This study evaluates the potential surplus gain of a water improvement policy and the causal effects of its components on choice probabilities for the floating people on Inlay Lake, Myanmar, based on a randomized conjoint field experiment. In our experimental design, respondents rank three options: two alternative policies and one status quo. We then present a method that enables us to estimate the minimum willingness-to-pay for a policy in the form of compensating variations under a set of weak assumptions using this conjoint data. Results show inter alia that the provision of toilet facilities and a collective wastewater treatment, and joint implementation of the policy by the government and local NGOs have a positive effects on the choice probabilities. Results also show that the surplus gain from a water-quality improvement policy is at least as large as 22.9% of the average annual per-capita income of those on the lake.
    Keywords: eutrophication, randomized conjoint experiment, nonparametric welfare analysis, envirodevonomics
    JEL: Q53 Q56 Q58
    Date: 2016–05
  13. By: Paul J. Healy (Department of Economics, Ohio State University); John Conlon (Department of Economics, Ohio State University); Yeochang Yoon (Department of Economics, Ohio State University)
    Abstract: We study behavior in an information cascades setting where previous buyers of the product leave noisy but informative ratings of the product. Although this increases the amount of public information available, Yoon (2015, working paper) shows that ratings can actually increase the frequency of cascades in which buyers do not purchase even though the product is of high quality. This occurs because non-buyers do not leave ratings. Although we find some evidence roughly in line with the theory, those results are swamped by a strong tendency for subjects to purchase even when public information suggests they should not.
    Keywords: Information Cascades; Herding; Activity Bias
    JEL: D83 C92 D03
    Date: 2016–05
  14. By: Werner, Max (Helmut Schmidt University, Hamburg)
    Abstract: This study estimates the suitability of prediction markets (as instruments of internal control) by analyzing their event and progress sensitivity based on comprehensive experimental data. The underlying experiment was designed using expected average grades and closely observing students’ (rank and file) and teachers’ (leadership) behaviors. First, a kick-off study asked both parties about the factors that may influence the outcome of the teaching process. The resulting data served as the basis for a detailed tracking survey of four topic-specific indicators. Each week of the experiment, both students and teachers were asked to report on these indicators for 12 courses, thus producing two sets of 48 time-series data. Concurrently, 12 prediction markets were set up, in which the participants could buy and sell their forecasts 24 hours a day, seven days a week. The market utilized just one type of variable (i.e., the final average grade of each course) and the best traders could earn special commendations. The students were also encouraged to keep a trading journal that included the motives for their purchases and sales. For some courses, fake information was fed to the students in order to understand how it would influence the survey indicators, the prediction market prices, and their sensitivity to misinformation. Finally, this study reveals the results of these two extremely different control mechanisms (i.e., periodic detailed surveys vs. voluntary single-number prediction markets) and reports on how they performed and how fast their indications were adapted.
    Keywords: Prediction Markets; Forecast; Internal Control; Business Intelligence; Decision Support Systems; Strategic Control
    JEL: B41 M10 M29
    Date: 2016–05–11
  15. By: Hamet SARR (ENGEES, UMR GESTE, université Strasbourg); Mohamed Ali BCHIR (ENGEES, UMR GESTE, université Strasbourg); François COCHARD (CRESE EA3190 Univ. Bourgogne Franche-Comté); Anne ROZAN (ENGEES, UMR GESTE, université Strasbourg)
    Abstract: The “Average Pigouvian Tax” (APT) was proposed by Suter et al. (2008) to reduce the financial burden of the standard ambient tax. This instrument consists in a standard ambient tax divided by the number of firms, which requires polluters to cooperate in order to achieve the social optimum. To enable polluters to cooperate, communication is allowed. We introduce different types of communication: cheap talk, exogenous costly communication (communication is imposed), and endogenous costly communication (conducted on a voluntary basis after a vote). Our experiment confirms that the instrument induces polluters to reduce their emissions under cheap talk. However, we find that group emissions are less reduced when communication is costly. This result still holds even when we endogenize communication by introducing a voting phase.
    Keywords: nonpoint source pollution, ambient tax, social dilemma, cooperation, cheap talk, costly communication, vote.
    JEL: C92 H23 Q53
    Date: 2016–05
  16. By: Enrique Fatas (University of East Anglia); Antonio J. Morales (University of Malaga)
    Abstract: We investigate nominal illusion in experimental duopoly markets in which firms choose first a market and then compete in prices. Markets are equivalent in real terms and only differ in the currency the price competition is run under. Our experimental results show a positive, persistent and monotone effect of the nominal exchange rate on prices. We introduce a simple equilibrium model based on invariant grids and nominal illusion. The model is consistent with the comparative statics observed in the experiment, it predicts well nominal and real price distributions across markets, and is consistent with more than 90% of the symmetric price profiles.
    Keywords: invariant grids, prominent numbers, price competition, money illusion, experiments, nominal representation
    JEL: C72 C9 D43 L13
    Date: 2016–05
  17. By: Werner, Katharina
    Abstract: A long-standing - although not uncontested - view is that violent conflicts reduce average levels of trust. Other theoretical and empirical work emphasizes discriminatory effects, namely that conflicts may enhance ingroup trust and erode out-group trust. The present study combines a trust game and a questionnaire to investigate the impact of direct and indirect conflict exposure on trust between Muslim and Christian students in postconflict Maluku, Indonesia. Reduced average levels of trust are found for subjects who were indirectly exposed to the conflict. Discriminatory effects are related to direct exposure: Directly exposed subjects trust in-group members much more than out-group members. The rationale may be the following: Directly exposed subjects made negative experiences with outgroup members, but also experienced solidarity within their group during the conflict. Indirectly exposed subjects, on the other hand, heard about negative experiences of others without being sufficiently involved to have made such distinct experiences with in-group and out-group members. Unable to distinguish friend from foe, they reduce trust toward everyone.
    Keywords: trust,conflict,direct exposure,indirect exposure,religion,discrimination
    JEL: C93 Z12 Z13
    Date: 2016
  18. By: Alessandra Casella; Jean Francois Laslier; Antonin Macé
    Abstract: In polarized committees, majority voting disenfranchises the minority. Allowing voters to spend freely a fixed budget of votes over multiple issues restores some minority power. However, it also creates a complex strategic scenario: a hide-and-seek game between majority and minority voters that corresponds to a decentralized version of the Colonel Blotto game. We offer theoretical results and bring the game to the laboratory. The minority wins as frequently as theory predicts, despite subjects deviating from equilibrium strategies. Because subjects understand the logic of the game — minority voters must concentrate votes unpredictably — the exact choices are of secondary importance, a result that vouches for the robustness of the voting rule to strategic mistakes.
    JEL: C72 C92 D71
    Date: 2016–05
  19. By: David Neumark; Judith Rich
    Abstract: There have been over 60 field experiments on discrimination in labor and housing markets conducted since 2000, in 16 countries. These studies nearly always find significant levels of discrimination against minority transactors in these markets. A key challenge to these findings, though, is that even in rather ideal conditions, the estimates of discrimination can be biased if there is differential variation in the unobservable determinants of productivity of majority and minority groups, conditional on the characteristics of market participants these experiments reveal to employers or landlords (Heckman, 1998). The potential bias could go in either direction, but naturally raises the question of whether this experimental literature as a whole overstates the evidence of discrimination. To assess this question, we re-assess the evidence from the nine existing studies that have sufficient information to implement a correction for this bias (Neumark, 2012). For the housing market studies, the estimated effect of discrimination is robust to this correction. For the labor market studies, in contrast, the evidence is less robust; in about half of cases covered in these studies, the estimated effect of discrimination either falls to near zero or becomes statistically insignificant.
    JEL: J71
    Date: 2016–05
  20. By: Santiago I. Sautua
    Abstract: Attitudes toward risk in?uence the decision to diversify among uncertain options. Yet, because in most situations the options are ambiguous, attitudes toward ambiguity may also play an important role. I conduct a laboratory experiment to investigate the effect of ambiguity on the decision to diversify. I fi?nd that diversi?cation is more prevalent and more persistent under ambiguity than under risk. Moreover, excess diversi?cation under ambiguity is driven by participants who stick with a status quo gamble when diversi?cation among gambles is not feasible. This behavioral pattern cannot be accommodated by major theories of choice under ambiguity
    Keywords: risk, ambiguity, inertia, diversi?cation, reference-dependent preferences, indecisiveness, ambiguity aversion
    JEL: C91 D01 D03 D81
    Date: 2016–03–11
  21. By: Demont, Matty; Zossou, Esperance; Van Mele, Paul
    Abstract: The impact of information as an extrinsic quality cue on consumers’ valuation of intrinsic food quality attributes can be captured by incorporating ‘information treatments’ in experimental auctions. We combine ‘exogenous’ information treatments such as a video broadcast and a radio transcript on the benefits of an improved rice processing technology with an ‘endogenous’ information treatment which elicits word-of-mouth exchange among consumers to assess the combined effect of exogenous and endogenous information on consumers’ valuation of improved parboiled rice in two urban markets in Benin. We find that exogenous information increases market share of the locally improved product by 14% to the expense of imported rice, an effect which is further amplified by 10–11% through endogenous information. Endogenous information has a dampening effect on value though; while video and radio transferred 6–12% of value from imported to local rice, word-of-mouth redistributed 2% of the value back to the competing product.
    Keywords: Experimental Auction, Willingness to Pay, Collective Induction, Word-of-Mouth, Benin, Agricultural Finance, O33, Q130, Q160,
    Date: 2015

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