nep-exp New Economics Papers
on Experimental Economics
Issue of 2016‒06‒09
thirty papers chosen by
Daniel Houser
George Mason University

  1. Identification of Biased Beliefs in Games of Incomplete Information Using Experimental Data By Aguirregabiria, Victor; Xie, Erhao
  2. Group and individual Time Preferences in Laboratory Experiments By Manami Tsuruta
  3. Mimetic behaviour and institutional persistence: A two-armed bandit experiment By Innocenti, Stefania; Cowan, Robin
  4. Separated Decisions By Paul J. Healy; Alexander L. Brown
  5. Cooperation, Punishment and Organized Crime: A Lab-in-the-Field Experiment in Southern Italy By Nese, Annamaria; O'Higgins, Niall; Sbriglia, Patrizia; Scudiero, Maurizio
  6. Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions By Llorente-Saguer, Aniol; Sheremeta, Roman M.; Szech, Nora
  7. Social exchanges and attitudes toward uncertainty of different types of subjects: Experimental evidence from Bangladesh By Ahsanuzzaman; George, Norton
  8. Motivating Effort In Contributing to Public Goods Inside Organizations: Field Experimental Evidence By Andrea Blasco; Olivia S. Jung; Karim R. Lakhani; Michael Menietti
  9. Impacts of an HIV counseling and testing initiative -- results from an experimental intervention in a large firm in South Africa By Arimoto, Yutaka; Hori, Narumi; Ito, Seiro; Kudo, Yuya; Tsukada, Kazunari
  10. Can Information Help Reduce Imbalanced Application of Fertilizers in India? Experimental Evidence from Bihar By Fishman, Ram; Kishore, Avinash; Rothler, Yoav; Ward, Patrick
  11. Consumer Preferences Before and After a Food Safety Scare: An Experimental Analysis of the 2010 Egg Recall By Li, Tongzhe; Bernard, John; Johnston, Zachary; Messer, Kent; Kaiser, Harry
  12. A little skin in the microfinance game: reducing moral hazard in joint liability group lending through a mandatory collateral requirement By Flatnes, Jon Einar; Carter, Michael R.
  13. Can a specially designed information intervention around the WASH-agriculture linkages make any difference? Experimental evidence of behavioral changes and health impacts By Malek, Mohammed Abdul; Khan, Tahsina Naz; Gerber, Nicolas; Saha, Ratnajit; Mohammad, Ikhtiar
  14. College Students on the Job Market and the Screening of Prospective Employers: Evidence from a Randomized Experiment in China By Zhang, Jian; Li, Tao; Wang, Haigang
  15. Social Influence Bias in Online Ratings: A Field Experiment By S. Cicognani; P. Figini; M. Magnani
  16. How do traders and consumers in sub-Saharan Africa value maize moisture content? Evidence from an experimental auction in Senegal By McCoy, Stacy; Ricker-Gilbert, Jacob; Sall, Moussa; Bauchet, Jonathan
  17. Understanding the Effect of Product Displays on Consumer Choice and Food Waste: A Field Experiment By Meadowcroft, Devon; Bernard, John C.
  18. What is the Causal Impact of Knowledge on Preferences in Stated Preference Studies? By Jacob LaRiviere; Mikolaj Czajkowski; Nick Hanley; Katherine Simpson
  19. Intraday Markets for Power: Discretizing the Continuous Trading By Karsten Neuhoff; Nolan Ritter; Aymen Salah-Abou-El-Enien; Philippe Vassilopoulos
  20. The Effects of Self-Control on Subsequent Purchasing Decisions By Palma, Marco; Segovia, Michelle; Kassas, Bachir; Ribera, Luis; Hall, Charles
  21. Bounded rationality as an essential component of the holdup problem By Erlei, Mathias; Roß, Wiebke
  22. Risk Aversion and Inconsistencies - Does the Choice of Risk Elicitation Method and Display Format Influence the Outcomes? By Bauermeister, Golo; Musshoff, Oliver
  23. The Effects of Honesty Oath and Consequentiality in Choice Experiments By Kemper, Nathan; Nayga, Rodolfo M. Jr.; Popp, Jennie; Bazzani, Claudia
  24. Ellsberg Re-revisited: An Experiment Disentangling Model Uncertainty and Risk Aversion By Berger, Loic; Bosetti, Valentina
  25. Communication in Vertical Markets: Experimental Evidence By Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
  26. Priming in economics By Alain Cohn; Michel André Maréchal
  27. Retail Channel and Beef Preferences in Argentina: Experimental Results from Consumers in Buenos Aires By Colella, Florencia; Ortega, David
  28. Accommodating satisficing behavior in stated choice experiments By Sandorf, Erlend Dancke; Campbell, Danny
  29. The effect of front-of-pack nutrition labelling formats on consumers’ food choices and decision-making: merging discrete choice experiment with an eye tracking experiment By Erdem, Seda; McCarthy, Tony
  30. All Over the Map: Heterogeneity of Risk Preferences across Individuals, Prospects, and Countries By Olivier l’Haridon; Ferdinand Vieider

  1. By: Aguirregabiria, Victor; Xie, Erhao
    Abstract: This paper studies the identification of players'; preferences and beliefs in empirical applications of discrete choice games using experimental data. The experiment comprises a set of games with similar features (e.g., two-player coordination games) where each game has different values for the players'; monetary payoffs. Each game can be interpreted as an experimental treatment group. The researcher assigns randomly subjects to play these games and observes the outcome of the game as described by the vector of players' actions. Data from this experiment can be described in terms of the empirical distribution of players' actions conditional on the treatment group. The researcher is interested in the nonparametric identification of players' preferences (utility function of money) and players' beliefs about the expected behavior of other players, without imposing restrictions such as unbiased or rational beliefs or a particular functional form for the utility of money. We show that the hypothesis of unbiased/rational beliefs is testable and propose a test of this null hypothesis. We apply our method to two sets of experiments conducted by Goeree and Holt (2001) and Heinemann, Nagel and Ockenfels (2009). Our empirical results suggest that in the matching pennies game, a player is able to correctly predict other player's behavior. In the public good coordination game, our test can reject the null hypothesis of unbiased beliefs when the payoff of the non-cooperative action is relatively low.
    Keywords: Testing biased beliefs; Multiple equilibria; Strategic uncertainty; Coordination game.
    JEL: C57 C72
    Date: 2016–05
  2. By: Manami Tsuruta (Graduate School of Economics, Osaka University)
    Abstract: In this paper I analyze how different between groups and individual time preferences. I compare two hypothesis | Altruistic decision making and Selfish majority decision making | by laboratory experiments. In Altruistic decision making hypothesis I assume Altruistic people who discount themselves more than other group members, thus discount more themselves more than group decision making. In Selfish majority decision making hypothesis I assume selfish people and group time preferences are decided by majority rule. In experiments group are three persons. There are three condition. (1)Individual decision making for themselves. (2)Individual decision making for other group members. (3)Group decision making. In Group decision making Subjects anonymously talk with each other by PC. I found three results. First, people discount more in individual decision making for themselves than in group decision making. Second, Selfish majority decision making hypothesis is supported. Third, Reason why Individual time preferences and group time preferences differ is due to distortion of individual discount factor.
    Keywords: time preference, laboratory experiment, group decision making
    JEL: C91 C92 D03
    Date: 2016–05
  3. By: Innocenti, Stefania (UNU‐MERIT, Maastricht University); Cowan, Robin (UNU‐MERIT, Maastricht University, and Beta, Universite de Strasbourg)
    Abstract: Institutions are the result of many individual decisions. Understanding how agents filter available information concerning the behaviour of others is therefore crucial. In this paper we investigate whether and how agents' self-efficacy beliefs affect mimetic behaviour and thus, implicitly the evolution of institutions. We propose an experimental task, which is a modified version of the two-armed bandit with finite time horizon. In the first treatment, we study in detail individual learning. In the second treatment, we measure how individuals use the information they gather while observing a randomly selected group leader. We find a negative relation between self-efficacy beliefs and the propensity to emulate a peer. This might ultimately affect the likelihood of institutional change.
    Keywords: Emulation, mimicry, laboratory experiment, self-efficacy, institutional change
    JEL: B52 C13 C91 D02 D03 D83
    Date: 2016–05–19
  4. By: Paul J. Healy (Department of Economics, Ohio State University); Alexander L. Brown (Department of Economics, Texas A&M University)
    Abstract: An essential requirement in the analysis of choice data is that its elicitation be incentive compatible: the incentives provided should not skew agents’ choices. We test incentive compatibility of the random problem selection (RPS) payment mechanism, wherein one choice is randomly chosen for payment. We find that it is not incentive compatible when all decisions are shown in a standard list format. But when the rows of the list are randomized and shown on separate screens, incentive compatibility is restored. This causes more inconsistency between choices, but, since the experiment is incentive compatible, this inconsistency must be inherent in subjects’ preferences.
    Keywords: Payment mechanism, experimental methodology, monotonicity, decisions under uncertainty
    JEL: C90 D01 D03 D81
    Date: 2016–01
  5. By: Nese, Annamaria (University of Salerno); O'Higgins, Niall (ILO International Labour Organization); Sbriglia, Patrizia (University of Naples II); Scudiero, Maurizio (Ministry of Justice, Italy)
    Abstract: This paper reports the results of an experimental investigation which allows a deeper insight into the nature of social preferences amongst organized criminals and how these differ from "ordinary" criminals on the one hand and from the non‐criminal population in the same geographical area on the other. We provide experimental evidence on cooperation and response to sanctions by running Prisoner's Dilemma and Third Party Punishment games on three different pools of subjects; students, 'Ordinary Criminals' and Camorristi (Neapolitan 'Mafiosi'). The latter two groups being recruited from within prisons. We are thus able to separately identify 'Prison' and 'Camorra' effects. Camorra prisoners show a high degree of cooperativeness and a strong tendency to punish, as well as a clear rejection of the imposition of external rules even at significant cost to themselves. In contrast, ordinary criminals behave in a much more opportunistic fashion, displaying lower levels of cooperation and, in the game with Third Party punishment, punishing less as well as tending to punish cooperation (almost as much) as defection. Our econometric analyses further enriches the analysis demonstrating inter alia that individuals' locus of control and reciprocity are associated with quite different and opposing behaviours amongst different participant types; a strong sense of self‐determination and reciprocity both imply a higher propensity to cooperate and to punish for both students and Camorra inmates, but quite the opposite for ordinary criminals, further reinforcing the contrast between the behaviour of ordinary criminals and the strong internal mores of Camorra clans.
    Keywords: experimental economics, economics of crime, models of identity, prisoner's dilemma, third party punishment
    JEL: A13 D63 D23 C92 K42 Z13
    Date: 2016–04
  6. By: Llorente-Saguer, Aniol; Sheremeta, Roman M.; Szech, Nora
    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: Ahsanuzzaman; George, Norton
    Abstract: The literature discusses risk aversion as one of the behavioral determinants of technology adoption. However, little attention has been paid to measuring ambiguity aversion of poor people in developing countries or in finding the role of ambiguity aversion in technology adoption. Risk experiments in the previous studies have been designed in such a way that individuals face the risky and/or ambiguous situations alone. Individuals in the real world, especially farmers in developing countries, are likely to get information from peers before making any decision regarding a new innovation that has an ambiguous nature. This paper addresses two broad issues. The first issue is to measure the risk and ambiguity preferences of Bangladeshi rural farmers. The paper investigates whether the attitudes toward uncertainty (risk and ambiguity) differ when farmers face the uncertainty alone versus when they are allowed to communicate with peer groups of 3 or 6. It also investigates whether farmers’ demographic characteristics affect their attitudes toward uncertainty or not. A second issue is to find whether measures of attitudes toward uncertainty is same across different groups of subjects using experimental lotteries. To do so, this paper replicates the same experiments with groups of students in two universities in Bangladesh. Finally, the paper also investigates whether demographic variables affect the attitudes toward risk and ambiguity aversion or not. It finds that risk attitudes of farmers and students are same when deciding alone. However, farmers tend to show higher variation in risk aversion than students sample when deciding in a group of 3. In the latter case, farmers tend to show less risk aversion than students. While disaggregating the measured risk attitudes across gender, female students tend to show more risk aversion as well as higher variation in risk aversion than male students in the sample. The study also finds that The study also finds that students’ and farmers’ demographic characteristics affect both risk and ambiguity aversion.
    Keywords: Ellsberg paradox, uncertainty, risk, ambiguity, technology adoption, expected utility theory, prospect theory, experimental economics, social exchange., Institutional and Behavioral Economics, International Development, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, C91, C92, C93, D81, O13, O33, Q16,
    Date: 2016
  8. By: Andrea Blasco; Olivia S. Jung; Karim R. Lakhani; Michael Menietti
    Abstract: We investigate the factors driving workers’ decisions to generate public goods inside an organization through a randomized solicitation of workplace improvement proposals in a medical center with 1200 employees. We find that pecuniary incentives, such as winning a prize, generate a threefold increase in participation compared to non-pecuniary incentives alone, such as prestige or recognition. Participation is also increased by a solicitation appealing to improving the workplace. However, emphasizing the patient mission of the organization led to countervailing effects on participation. Overall, these results are consistent with workers having multiple underlying motivations to contribute to public goods inside the organization consisting of a combination of pecuniary and altruistic incentives associated with the mission of the organization.
    JEL: D03 D23 H41
    Date: 2016–04
  9. By: Arimoto, Yutaka; Hori, Narumi; Ito, Seiro; Kudo, Yuya; Tsukada, Kazunari
    Abstract: We have run experimental interventions to promote HIV tests in a large firm in South Africa. We combined HIV tests with existing medical check programs to increase the uptake. In the foregoing survey we undertook previously, it was suggested that fears and stigma of HIV/AIDS were the primary reasons given by the employees for not taking the test. To counter these, we implemented randomized interventions. We find substantial heterogeneity in responses by ethnicity. Africans and Colored rejected the tests most often. Supportive information increased the uptake by 6 to 16% points. A tradeoff in targeting resulting in stigmatizing the targeted and a reduction of exclusion error is discussed.
    Keywords: Diseases, Public health, Labor conditions, HIV, Stigma, RCT, Testing, Corporate setting
    JEL: I19 J16
    Date: 2016–04
  10. By: Fishman, Ram; Kishore, Avinash; Rothler, Yoav; Ward, Patrick
    Abstract: The imbalanced application of chemical fertilizers in India is widely blamed for low yields, poor soil health, pollution of water resources, and large public expenditures on subsidies, amounting to about 1 percent of India’s gross domestic product. To address the issue, the government of India is investing in a large-scale, expensive program of individualized soil testing and customized fertilizer recommendations, with the hope that scientific information will lead farmers to optimize the fertilizer mix. We conducted a randomized controlled trial in the Indian state of Bihar in what we believe to be the first evaluation of the effectiveness of the program as currently implemented. We did not find evidence of a statistically significant impact of customized fertilizer recommendations on fertilizer use. The lack of impact can be attributed to several factors, including a lack of understanding, lack of confidence in the information’s reliability, or other factors such as fertilizer costs that inhibit farmers from optimizing fertilizer application ratios even if the information shifts their underlying preferences. We provide evidence that suggests lack of confidence is the main factor inhibiting farmers’ response.
    Keywords: soil testing, fertilizers, India, randomized controlled trial, Becker-DeGroot-Marschak mechanism, Agricultural and Food Policy, Environmental Economics and Policy, International Development, Research and Development/Tech Change/Emerging Technologies,
    Date: 2016
  11. By: Li, Tongzhe; Bernard, John; Johnston, Zachary; Messer, Kent; Kaiser, Harry
    Abstract: In August 2010, more than half a billion eggs were recalled in the U.S. because of a Salmonella outbreak. This study examines the effect of the recall with a unique pair of auction experiments investigating willingness to pay (WTP) for conventional and organic eggs, one conducted shortly before and one after the recall with the same participants. In addition to the before and after bids, participants bid again after a negative information or balanced information treatment about the event. Accompanying surveys showed consumers had a high level of awareness of the recall but less knowledge of specific details, and viewed information on egg farm conditions as very important in their WTP. While there were no significant before and after differences, WTP for organic eggs significantly increased in the negative information treatment, and balanced information had a positive effect on consumer WTP for conventional eggs.
    Keywords: Consumer preferences, Laboratory experiments, Revealed preference, Food recall, Eggs, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, D12, M31, Q13,
    Date: 2016
  12. By: Flatnes, Jon Einar; Carter, Michael R.
    Abstract: Both collateralized individual loan contracts and joint liability group lending contracts have received much attention in the microfinance literature, yet neither contract has been found to be optimal from a welfare perspective. On the one hand, a heavily collateralized individual loan contract is very risky for borrowers, resulting in low levels of credit market participation. On the other hand, while joint liability contracts are designed to harness the social collateral among community members, numerous studies have shown that such contracts are prone to moral hazard, free-riding, and collusion. This paper analyzes an alternative contract which combines joint liability with a modest collateral requirement. Using a simple theoretical framework, we show that adding a collateral requirement to a joint liability contract reduces moral hazard but has an ambiguous effect on credit market participation. To test the predictions of the model, we conduct a unique framed field experiment among active credit group members in Tanzania. The results demonstrate that adding a collateral requirement reduces moral hazard among borrowers and helps increase repayments without compromising the effect of the social collateral in the groups. Moreover, we find evidence that a collateral requirement leads to a modest reduction in credit market participation.
    Keywords: Credit Rationing, Moral Hazard, Collateral, Field Experiments, Joint Liability, Agricultural Finance, Financial Economics, Institutional and Behavioral Economics, Risk and Uncertainty, D82, G21, O16, Q14,
    Date: 2016
  13. By: Malek, Mohammed Abdul; Khan, Tahsina Naz; Gerber, Nicolas; Saha, Ratnajit; Mohammad, Ikhtiar
    Abstract: This paper attempts to evaluate the effectiveness of the specially designed packages of water, sanitation and hygiene (WASH) interventions with ‘student brigades’ (student teams tasked with maintaining hygiene in school) on household WASH behavior and practices in both a household and farm setting. In addition, household members’ health and developmental productivity outcomes were also examined. A randomized control trial (RCT) involving student brigades (SBs) was carried out in six sub-districts (hotspots) characterized by comparatively poor WASH indicators. The specially designed WASH-agriculture treatment consisted of three interventions: (1) informing the households about the prior water testing results; (2) delivering hygiene messages with the help of posters; (3) equipping SB members with water quality test kits and asking them to test the water quality at different places and report their findings to their household. Employing the difference-in-difference (DID) multivariate regression technique, the analysis revealed that the BRAC WASH treatment performed well in terms of effecting behavioral changes and improving hygiene practices. In addition, the results suggested that informing households of their drinking water quality and conveying WASH-agriculture hygiene messages to them could have a significant incremental impact over the existing BRAC WASH treatment in changing household hygiene behavior and practices at home and on farms. This research provides evidence that students can act as agents of change in improving water quality, sanitation and health in a rural setting.
    Keywords: Water quality information, WASH-Agriculture hygiene messages, BRAC WASH program, student brigades, randomized control trial, DiD multivariate regression, behavioral change, Bangladesh, Agribusiness, Demand and Price Analysis, Environmental Economics and Policy, Farm Management, Health Economics and Policy, Research Methods/ Statistical Methods, C9, I15, Q11, Q15,
    Date: 2016–04
  14. By: Zhang, Jian; Li, Tao; Wang, Haigang
    Abstract: In this paper, relying on an experiment, we find that among all the student characteristics, only gender plays a significant role in determining the probability obtaining an onsite interview. Other things being equal, male students are much more likely to be invited for a job interview. In addition, the other characteristics of a female applicant, for example, excellence in academic performance, student leadership and strong English skill, cannot mitigate the female disadvantage.
    Keywords: Gender, College Student Characteristics, Screening of Prospect Employers, Randomization of Resume, China, International Development, Labor and Human Capital, J71,
    Date: 2016
  15. By: S. Cicognani; P. Figini; M. Magnani
    Abstract: The aim of this paper is to study the empirical phenomenon of rating bubbles, i.e. clustering on extremely positive values in e-commerce platforms and rating web sites. By means of a field experiment that exogenously manipulates prior ratings for a hotel in an important Italian tourism destination, we investigate whether consumers are influenced by prior ratings when evaluating their stay (i.e., social influence bias). Results show that positive social influence exists, and that herd behavior is asymmetric: information on prior positive ratings has a stronger influence on consumers’ rating attitude than information on prior mediocre ratings. Furthermore, we are able to exclude any brag-or-moan effect: the behavior of frequent reviewers, on average, is not statistically different from the behavior of consumers who have never posted ratings online. Yet, non-reviewers exhibit a higher influence to excellent prior ratings, thus lending support to the social influence bias interpretation. Finally, also repeat customers are affected by prior ratings, although to a lesser extent with respect to new customers.
    JEL: C93 D83 L86 Z31
    Date: 2016–02
  16. By: McCoy, Stacy; Ricker-Gilbert, Jacob; Sall, Moussa; Bauchet, Jonathan
    Abstract: In SSA, if maize moisture content cannot be detected, traders and consumers have no incentive to dry maize to ≤ 13.0 percent moisture, resulting in fungal growth and aflatoxin contamination. Using an experimental auction in SSA, we elicit trader and consumer WTP for maize labeled with varying moisture contents. Participants revealed a preference for drier maize when they knew the moisture content, but could not distinguish between unlabeled maize dried to ≤ 13.0 percent moisture and 14-15.9 percent moisture.
    Keywords: Experimental Auction, Moisture Content, Development, International Development,
    Date: 2016–05–25
  17. By: Meadowcroft, Devon; Bernard, John C.
    Abstract: This study aims to discover the link between product displays, consumer choice, and food waste at the retail level. To discover this connection, field experiments were conducted which occurred in the fall of 2015 in northern Delaware. In the study, participants were free to choose one apple from three different product displays, while being filmed in order to observe their behaviors during the selection process. However, no product display was perfect in appearance. One product display (“single”) only had one apple in it that did not have any blemishes or marks. The second display (“blemished”) was organized in appearance and fully stocked, but had blemished apples along with apples with no imperfections. The third display (“disorganized”) was fully stocked with only perfect looking apples, although it was disorganized. Our results showed that the disorganized display was the most popular option, followed by the blemished display and then the single display. Furthermore, participants rated the apple in the single display as having the lowest quality, even though it was free from any imperfections. The results obtained from this study can assist in explaining the reasoning behind why retailers keep their product displays fully stocked, and why food waste occurs in the retail sector, particularly with fresh produce. Because the product supply is greater than the consumer demand, all of the items cannot be purchased in time before they become unsellable – and thus they are thrown out and contribute to overall food waste.
    Keywords: product displays, food waste, consumer choice, food marketing, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2016
  18. By: Jacob LaRiviere (Department of Economics, University of Tennessee); Mikolaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews); Katherine Simpson (Economics Division, University of Stirling, Scotland)
    Abstract: This paper reports the results of a stated preference experiment designed to test for how information provided in a survey affects knowledge, and how knowledge affects preferences for a public good. A novel experimental design allows us to elicit subjects’ ex ante knowledge levels about a good’s attributes, exogenously vary how much new objective information about these attributes we provide to subjects, elicit subjects’ valuation for the good, and elicit posterior knowledge states about the same attributes. We find evidence of incomplete learning and fatigue: as subjects are told more information, their marginal learning rates decrease. We find there is no marginal impact of knowledge on the mean nor the variance of WTP for changes in the environmental good; but that ex ante knowledge does affect stated WTP. Our results are consistent with preference formation models of confirmation bias, costly search, or timing differences in learning and preference formation. Our results raise questions about the purpose and effects of providing information in stated preference studies.
    Keywords: Learning, Information, Behavioral Economics, Decision Making Under Uncertainty
    JEL: D83 D81 Q51
    Date: 2016
  19. 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 C57 C93 D44 D47 L50
    Date: 2016–03–21
  20. By: Palma, Marco; Segovia, Michelle; Kassas, Bachir; Ribera, Luis; Hall, Charles
    Abstract: The effect of self-control on individual behavior has long been a subject of debate. The psychology literature has advanced three theories to explain self-control. However, those theories carry contradictory predictions as they were restricted to linear relationships between an initial act of self-control and subsequent self-control ability. This study uses biometric measures collected in a random assignment experiment to look at possible non-linear effects. This was done by considering the variation in the effect of an initial self-control task on purchasing decisions as compliance rates with the task change. There is strong evidence pointing towards the conclusion that the self-control theories are not mutually exclusive and are actually operating simultaneously. Specifically, moderate self-control exertion in the initial task was tied to the knowledge structure and higher self-control ability in subsequent purchasing decisions. On the other hand, exerting self-control beyond a certain threshold caused a fatigue effect, which made the resource depletion models more dominant and resulted in lower self-control ability in subsequent purchasing tasks. This result was robust across several model specifications. Moreover, data from brain activation capturing approach behavior in the prefrontal cortex conformed to those findings. Finally, it seems that males were not only able to access the knowledge structure more quickly than females, but they also had higher fatigue thresholds and were able to withstand higher levels of self-control in the initial task before resource depletion became dominant.
    Keywords: Self-Control, Knowledge Structure, Resource Depletion, Non-linear Effects, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, Institutional and Behavioral Economics, C91,
    Date: 2016
  21. By: Erlei, Mathias; Roß, Wiebke
    Abstract: We provide experimental evidence for the hypothesis that bounded rationality is an important element of the theory of the firm. We implement a simplified version of a mechanism designed to perfectly solve the holdup problem under conditions of perfect rationality (Maskin 2002). We test whether this mechanism is able to perfectly solve our experimental holdup problem or may at least improve economic performance. We find that this is not the case: the implementation of the mechanism worsens economic performance. We reconstruct the main features of participants' behavior by applying the logit agent quantal response equilibrium (McKelvey and Palfrey 1998) as an equilibrium concept that takes players' potential mistakes into account.
    Keywords: bounded rationality,transaction costs,incomplete contracts,experiment,mechanism design
    JEL: D23 C92 L23
    Date: 2015
  22. By: Bauermeister, Golo; Musshoff, Oliver
    Abstract: In the past decade, many studies measured individual risk attitude with different elicitation methods in a within-subject design and found significant disparity across the elicitation methods. According to the existing literature, there are also differences in the observed understanding of the elicitation methods measured by the inconsistency rate. However, there are no studies that compare the inconsistency rate across different elicitation methods in a within-subject design. Therefore, we intrapersonally compare the inconsistency rate and the risk attitude of German agricultural students in two different lottery tasks: the lottery task by Holt and Laury (2002) as well as the one by Brick, Visser and Burns (2012). Moreover, we analyze in a between-subject design whether the visualization of a lottery task for a better understanding results in differences in the elicited risk attitude and can ultimately lead to the desired reduction of the inconsistency rate. Results show that the elicited risk attitudes measured by the different lottery tasks are significantly different in both display formats since the participants’ responses are more risk averse in the more complex Holt-and-Laury task. Moreover, we find that the visualization results in more risk averse responses in both lottery tasks. According to the inconsistency rate, we find that the Brick-Visser-Burns task is better understood than the Holt-and-Laury task, especially in the textual display format. Furthermore, the visual display format of the Holt-and-Laury task results in a significantly better understanding compared to the textual display format.
    Keywords: Between-subject design, Brick-Visser-Burns task, display formats, Holt-and-Laury task, inconsistency rate, risk attitude, within-subject design, Agribusiness, Institutional and Behavioral Economics, Risk and Uncertainty, C91 – D80 – O10,
    Date: 2016
  23. By: Kemper, Nathan; Nayga, Rodolfo M. Jr.; Popp, Jennie; Bazzani, Claudia
    Abstract: Choice experiments are now one of the most popular stated preference methods used by economists. A highly documented limitation of stated preference methods is the formation of hypothetical bias in the estimation of consumers’ willingness-to-pay (WTP) for a good or a service. Honesty oaths and consequentiality scripts are two ex ante approaches that show promise in their ability to reduce or eliminate hypothetical bias. We examine these approaches independently and together and measure their effectiveness by comparing the resulting WTP values. We also explore a potential connection between consequentiality, honesty oaths, and attribute non-attendance (ANA). We infer patterns of ANA resulting from our various treatments (i.e., consequentiality script only, honesty oath only, combined script and oath, inconsequential, and control) and examine the differences. Our results suggest that the combined ex ante approach of consequentiality script and honesty oath provided significantly lower WTP values than all other experimental treatments. Conditioning our data for both consequentiality and ANA resulted in significant improvements in model fit across all treatments. Results indicate that not accounting for ANA has important implications for welfare estimates. While we cannot fully explain the connection, the combination of the consequentiality script, honesty oath, and inferred ANA allowed us to better see the differences between respondents’ attending attributes and those ignoring.
    Keywords: consequentiality, honesty oath, attribute non-attendance, choice experiment, Marketing, Research Methods/ Statistical Methods,
    Date: 2016
  24. By: Berger, Loic; Bosetti, Valentina
    Abstract: The results of an experiment extending Ellsberg's setup demonstrate that attitudes towards ambiguity and compound uncertainty are closely related. However, this association is much stronger when the second layer of uncertainty is subjective than when it is objective. Provided that the compound probabilities are simple enough, we find that most subjects, consisting of both students and policy makers, (1) reduce compound objective probabilities, (2) do not reduce compound subjective probabilities, and (3) are ambiguity non-neutral. By decomposing ambiguity into risk and model uncertainty, and jointly eliciting the attitudes individuals manifest towards these two types of uncertainty, we characterize individuals' degree of ambiguity aversion. Our data provides evidence of decreasing absolute ambiguity aversion and constant relative ambiguity aversion.
    Keywords: Ambiguity Aversion, Model Uncertainty, Reduction of Compound Lotteries, Non-expected Utility, Subjective Probabilities, Decreasing Absolute Ambiguity Aversion, Risk and Uncertainty, D81,
    Date: 2016–05–26
  25. By: Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
    Abstract: When an upstream monopolist supplies several competing downstream firms, it may fail to monopolize the market because it is unable to commit not to behave opportunistically. We build on previous experimental studies of this well-known commitment problem by introducing communication. Allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the Cournot level (observed in the absence of communication) halfway toward the monopoly level. Allowing all three firms to chat together openly results in complete monopolization. Downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them. A simple structural model of Nash bargaining fits the pattern of shifting surpluses well. We conclude with a discussion of the antitrust implications of open communication in vertical markets.
    JEL: C70 C90 K21 L42
    Date: 2016–05
  26. By: Alain Cohn; Michel André Maréchal
    Abstract: Conceptual priming has become an increasingly popular tool in economics. Here, we review the literature that uses priming in incentivized experiments to study economic questions. We mainly focus on the role of social identity, culture, and norms in shaping preferences and behavior. We also discuss recently raised objections to priming research and conclude with promising avenues for future research.
    Keywords: Priming, experiment, identity, endogenous preferences
    JEL: C90 D03
    Date: 2016–04
  27. By: Colella, Florencia; Ortega, David
    Abstract: Traditionally-produced beef from Argentina is recognized and demanded internationally. Locally, consumers are often unable to afford these certified beef products, and may rely on external cues to determine beef quality. Are Argentinean consumers willing to pay for sustainably or organically produced beef? Are these consumers using alternative sources of information, other than product labels? Determining demand for beef attributes may require an understanding of consumers’ product purchasing strategies, which involves retailer choice. We develop a framework utilizing latent class analysis to identify consumer groups with different retailer preferences, and separately estimate their demand for beef product attributes. This framework accounts for the interrelationship between consumers’ choice of retail outlets and beef product preferences. Our analysis identifies two groups of consumers, a convenience- (67%) and a service- (33%) oriented group. We uncover significant differences in demand for beef attributes across these groups, and find that the service oriented group, while unable to pay for credence attributes, relies on a service-providing retailer (butcher) as a source of product quality assurance. We note that failing to account for the interrelationship between retailer and product preferences can lead to an overestimation of preferences and demand for beef attributes.
    Keywords: Latent class analysis, demand heterogeneity, random parameters logit, consumer behavior, butcher, decision modelling, choice experiment, Agribusiness, Consumer/Household Economics, Livestock Production/Industries, Marketing,
    Date: 2016
  28. By: Sandorf, Erlend Dancke; Campbell, Danny
    Abstract: Accumulating evidence suggests that many respondents in stated choice experiments use simplifying strategies and heuristics. Such behavior is a deviation from random utility theory and can lead to biased estimates if not appropriately considered. This paper is a first attempt to systematically explore the use of the satisficing heuristic (Simon, 1955) in the context of a stated choice experiment. We consider 944 possible satisficing rules and allow respondents to revise the rules adopted throughout the choice sequence. While only a small proportion of respondents used the same satisficing rule across the entire sequence, allowing for changes in behavior at different stages reveals evidence that the use of the heuristic follows a learning and fatigue path. Furthermore, considering respondents satisficing leads to improved model fits and different marginal willingness-to-pay estimates.
    Keywords: random utility maximization, satisficing, stated choice experiments., Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics, Research Methods/ Statistical Methods,
    Date: 2016
  29. By: Erdem, Seda; McCarthy, Tony
    Keywords: Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2016–05
  30. By: Olivier l’Haridon (Université de Rennes); Ferdinand Vieider (Department of Economics, University of Reading)
    Abstract: We analyze the risk preferences of 2939 subjects across 30 countries on all continents. Using structural modeling, we explore heterogeneity in risk preferences across three dimensions: i) between individuals; ii) between prospects; and iii) between countries. Preferences in non-Western countries differ systematically from those found inWestern countries, itherto considered universal. Reference-dependence and likelihood-dependence are both found to play a role in describing preferences. While we confirm previous results on individual characteristics explaining little of overall preference heterogeneity, between countries a few macroeconomic indicators can explain a considerable part of the heterogeneity. The heterogeneity explained furthermore differs across decision parameters, being low for pure risk aversion measures, but higher for measures of noise and for rationality parameters.
    Keywords: risk preferences, heterogeneity
    JEL: C93 D03 D80 O12
    Date: 2016–04–18

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