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on Experimental Economics |
| By: | Luke Boosey (Department of Economics, Florida State University); Philip Brookins (Max Planck Institute for Research on Collective Goods); Dmitry Ryvkin (Department of Economics, Florida State University) |
| Abstract: | In many contest situations, the number of participants is not observable at the time of investment. We design a laboratory experiment to study individual behavior in Tullock (lottery) contests with group size uncertainty. There is a fixed pool of n potential players, each with independent probability q of participating. As shown by Lim and Matros (2009), the unique symmetric equilibrium investment level in this setting can exhibit non-monotonicity with respect to both n and q. We independently manipulate each of the parameters and test the implied comparative statics predictions. Our results provide considerable support for the theory, both in terms of comparative statics and point predictions. In stark contrast to the experimental literature on contests with certain group size, where overbidding relative to equilibrium is widely documented, we find remarkable agreement between the observed average investment and the equilibrium investment levels in all but one treatment. |
| Keywords: | contest, stochastic number of players, experiment |
| JEL: | C72 C91 D72 D82 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2016_07_01&r=exp |
| By: | Maria De Paola; Francesca Gioia; Vincenzo Scoppa (Dipartimento di Economia, Statistica e Finanza, Università della Calabria) |
| Abstract: | We ran a field experiment to investigate whether competing in rank-order tournaments with different prize spreads affects individual performance. Our experiment involved students from an Italian University who took an intermediate exam that was partly evaluated on the basis of relative performance. Students were matched in pairs on the basis of their high school grades and each pair was randomly assigned to one of three different tournaments. Random assignment neutralizes selection effects and allows us to investigate if larger prize spreads increase individual effort. We do not find any positive effect of larger prizes on students’ performance and in several specifications we do find a negative effect. Furthermore, we show that the effect of prize spreads on students’ performance depends on their degree of risk-aversion: competing in tournaments with large spreads negatively affects the performance of risk-averse students, while it does not produce any effect on students who are more prone to take risks. |
| Keywords: | Rank-Order Tournaments, Incentives, Prize Spread, Risk-Aversion, Randomized Experiment |
| JEL: | J33 J31 J24 D81 D82 C93 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:201607&r=exp |
| By: | Anna Bayona; Jordi Brandts; Xavier Vives |
| Abstract: | In the context of supply function competition with private information, we test in the laboratory whether—as predicted in Bayesian equilibrium—costs that are positively correlated lead to steeper supply functions and less competitive outcomes than do uncorrelated costs. We find that the majority of subjects bid in accordance with the equilibrium prediction when the environment is simple (uncorrelated costs treatment) but fail to do so in a more complex environment (positively correlated costs treatment). Although we find no statistically significant differences between treatments in average behaviour and outcomes, there are significant differences in the distribution of supply functions. Our results are consistent with the presence of sophisticated agents that on average best respond to a large proportion of subjects who ignore the correlation among costs. Experimental welfare losses in both treatments are higher than the equilibrium prediction owing to a substantial degree of productive inefficiency. |
| Keywords: | divisible good auction, generalised winner’s curse, correlation neglect, electricity market |
| JEL: | C92 D43 L13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:916&r=exp |
| By: | Bayona, Anna; Brandts, Jordi; Vives, Xavier |
| Abstract: | In the context of supply function competition with private information, we test in the laboratory whether - as predicted in Bayesian equilibrium - costs that are positively correlated lead to steeper supply functions and less competitive outcomes than do uncorrelated costs. We find that the majority of subjects bid in accordance with the equilibrium prediction when the environment is simple (uncorrelated costs treatment) but fail to do so in a more complex environment (positively correlated costs treatment). Although we find no statistically significant differences between treatments in average behaviour and outcomes, there are significant differences in the distribution of supply functions. Our results are consistent with the presence of sophisticated agents that on average best respond to a large proportion of subjects who ignore the correlation among costs. Experimental welfare losses in both treatments are higher than the equilibrium prediction owing to a substantial degree of productive inefficiency. |
| Keywords: | Correlation Neglect; Divisible good auction; electricity market. |
| JEL: | C92 D43 L13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11378&r=exp |
| By: | Christoph Engel (MPI for Research on Collective Goods, Bonn); Oliver Kirchkamp (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | We provide an example for an errors in variables problem which might be often neglected but which is quite common in lab experimental practice: In one task, attitude towards risk is measured, in another task participants behave in a way that can possibly be explained by their risk attitude. How should we deal with inconsistent behaviour in the risk task? Ignoring these observations entails two biases: An errors in variables bias and a selection bias. We argue that inconsistent observations should be exploited to address the errors in variables problem, which can easily be done within a Bayesian framework. |
| Keywords: | Risk, lab experiment, public good, errors in variables, Bayesian inference |
| JEL: | C91 D43 L41 |
| Date: | 2016–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2016-015&r=exp |
| By: | Rodriguez-Lara, Ismael |
| Abstract: | This paper studies the extent to which offers and demands in ultimatum games are consistent with equity theory when there is a joint endowment to be distributed. Using a within-subject design, we also investigate the importance of the bargaining power by comparing the subjects’ behavior in the ultimatum and the no-veto-cost game, which differ in the possible cost of responders rejecting the proposers’ offer. Our findings suggest that proposers are willing to reward responders for their contribution to the joint endowment in any of the two games. As for responders, their behavior is consistent with equity theory only in the no-veto-cost game (in which a rejection is costless for them) when the game is first played. When the no-veto-cost game is played after the ultimatum game, we observe that the responders’ demands usually exceed their contribution to the endowment. Finally, this paper reports evidence that the ultimatum and the no-veto-cost game differ in terms of efficiency and rejection rates. |
| Keywords: | equity, fairness, bargaining power, ultimatum game, no-veto-cost game, joint production, efficiency, rejection rates. |
| JEL: | C91 D3 D6 D63 |
| Date: | 2016–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72700&r=exp |
| By: | Andrea Morone; Simone Nuzzo |
| Abstract: | We investigate traders’ behaviour in an experimental asset market where uninformed agents cannot be sure about the presence of insiders. In this framework we compare two trading institutions: the continuous double auction and the call market. The purpose of this comparison is to test which of the two trading mechanisms performs better in promoting a convergence towards the efficient equilibrium price. In a framework where the presence of insiders is neither certain nor common knowledge, inspired by Plott and Sunder (1982) and Camerer and Weigelt (1991), we first test whether a discrete time mechanism of trading, like the call market, might be able to prevent the occurrence of information mirages and promote a greater level of efficiency when no inside information is in the market. Second, we also compare the efficiency of the two trading institutions during periods when insiders are present in the market. |
| Keywords: | Experimental Markets, Market Efficiency, Information Mirages, Trading Institutions. |
| JEL: | D61 E02 G12 |
| Date: | 2016–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2016_17&r=exp |
| By: | Dasgupta, Utteeyo (Fordham University); Mani, Subha (Fordham University); Singh, Prakarsh (Amherst College) |
| Abstract: | This paper examines whether, in India, discriminatory practices by government-employed child caregivers along religious lines, lead to differential health outcomes among the care receiving children. Child caregivers participate in a novel allocation game where we incorporate treatments to disentangle statistical and taste-based discrimination. Our findings find no evidence of taste-based discrimination or statistical discrimination among the child caregivers. We also weigh-in on the usefulness of non-incentivized experiments in discrimination experiments. |
| Keywords: | artefactual field experiment, discrimination, health, allocation game, India, religion |
| JEL: | C9 D3 I1 O1 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10048&r=exp |
| By: | Harald Lang; Florian Morath |
| Abstract: | Learning that others earn more may reduce individual well-being but it can also be informative about the own income prospects. In an environment of uncertainty over the own income, this paper provides experimental evidence on direct income-comparison effects on well-being and informational effects from observing signals about others' income prospects. We find that individual beliefs about the own income are adjusted downwards when observing that others are likely to earn less, but do not significantly adjust when observing that others are likely to earn more. Individual satisfaction decreases when others are likely to earn more but does not change significantly when others are likely to earn less. Overall, informational effects countervail direct incomecomparison effects if and only if the uncertainty over the own income is sufficiently strong. |
| Keywords: | Tunnel effect, relative income, expectations, belief formation, subjectivewell-being, experiment |
| JEL: | C91 D31 D63 D84 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2015-13&r=exp |
| By: | Blumenstock, Joshua; Callen, Michael; Ghani, Tarek |
| Abstract: | Through a field experiment in Afghanistan, we show that default enrollment in a defined contribution plan increases saving rates by 40 percentage points, and that present-biased preferences mainly drive this effect. Working with Afghanistan's primary mobile phone operator, we designed and deployed a new mobile phone-based automatic payroll deduction system. Each of 967 employees at the firm was randomly assigned a default contribution rate (either 0% or 5%) as well as a matching incentive rate (0%, 25%, or 50%). We find that employees initially assigned a default contribution rate of 5% are 40 percentage points more likely to contribute to the account 6 months later than individuals assigned to a default contribution rate of zero; to achieve this effect through financial incentives alone would require a 50% match from the employer. We also find evidence of habit formation: default enrollment increases the likelihood that employees continue to save after end of the trial, and increases employees' self-reported interest in saving and sense of financial security. To understand the mechanism behind these effects, we conducted several experimental interventions and measured employee time preferences. Ruling out several competing explanations, we find evidence that the default effect is driven largely by present-biased preferences that cause the employee to procrastinate in making a non-default election. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11400&r=exp |
| By: | Chen, Daniel L.; Horton, John |
| Abstract: | In some online labor markets, workers are paid by the task, choose what tasks to work on, and have little or no interaction with their (usually anonymous) buyer/employer. These markets look like true spot markets for tasks rather than markets for employment. Despite appearances, we find via a field experiment that workers act more like parties to an employment contract: workers quickly form wage reference points and react negatively to proposed wage cuts by quitting. However, they can be mollified with “reasonable” justifications for why wages are being cut, highlighting the importance of fairness considerations in their decision making. We find some evidence that “unreasonable” justifications for wage cuts reduce subsequent work quality. We also find that not explicitly presenting the worker with a decision about continuing to work eliminates “quits,” with no apparent reduction in work quality. One interpretation for this finding is that workers have a strong expectation that they are party to a quasi-employment relationship where terms are not changed, and the default behavior is to continue working. |
| Keywords: | Economics of IS; Electronic Commerce; Field Experiments; IT and new organizational form |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30557&r=exp |
| By: | John J. Horton; Richard J. Zeckhauser |
| Abstract: | Workers respond to the output choices of their peers. What explains this well documented phenomenon of peer effects? Do workers value equity, fear punishment from equity-minded peers, or does output from peers teach them about employers’ expectations? We test these alternative explanations in a series of field experiments. We find clear evidence of peer effects, as have others. Workers raise their own output when exposed to high-output peers. They also punish low-output peers, even when that low output has no effect on them. They may be embracing and enforcing the employer’s expectations. (Exposure to employer-provided work samples influences output much the same as exposure to peer-provided work.) However, even when employer expectations are clearly stated, workers increase output beyond those expectations when exposed to workers producing above expectations. Overall, the evidence is strongly consistent with the notion that peer effects are mediated by workers’ sense of fairness related to relative effort. |
| JEL: | J01 J24 J3 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22386&r=exp |
| By: | Amadou Boly; Gillanders |
| Abstract: | We analyse policy makers. incentives to fight corruption under different institutional qualities. We find that .public officials., even when non-corrupt, significantly distort anticorruption institutions by choosing a lower detection probability when this probability applies to their own actions (legal equality), compared to a setting where it does not (legal inequality). As .public officials. are on average equally corrupt with or without legal equality, an institutional setting with legal equality can be considered worse in reducing corruption. Finally, corruption is significantly lower when the detection probability is exogenously set, suggesting that the institutional power to choose detection can itself be corruptive. |
| Keywords: | anti-corruption, embezzlement, experimental economics, institutions, policy-making |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2016-088&r=exp |
| By: | Benito Arruñada; Marco Casari |
| Abstract: | Contract enforcement does not only affect single transactions but the market as a whole. We compare alternative institutions that allocate enforcement rights to the different parties to a credit transaction: either lenders, borrowers, or judges. Despite all parties having incentives to enforce and transact, the market flourishes or disappears depending on the treatment: paying judges according to lenders' votes maximizes total surplus and equity; and a similar result appears when judges are paid according to average earnings in society. In contrast, paying judges according to borrowers' votes generates the poorest and most unequal society. These results suggest that parties playing the role of borrowers understand poorly the systemic consequences of their decisions, triggering under-enforcement, and hence wasting profitable trade opportunities. |
| Keywords: | impersonal exchange, third-party enforcement, steps of reasoning, other-regarding preferences, judicial independence. |
| JEL: | C91 C92 D53 D63 D72 K40 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:913&r=exp |
| By: | Luisa Herbst |
| Abstract: | In contest experiments, overbidding is a widely observed phenomenon. One common explanation for overbidding is that winning in itself yields utility, termed the joy of winning. However, the joy of winning is difficult to observe and to quantify. This paper develops a novel, incentivized way to measure the individual-specific joy of winning as well as the frustrationof losing in a Tullock lottery contest. We find that the willingness to pay for a restart of the contest differs between winners and losers. Compared to a theoretical benchmark, winners are more satisfied and overbid forrestart of the contest, while losers are less satisfied and underbid. Further, effort levels are higher in the second contest, which can be explained by selection of high effort types with a high joy of winning into the restarted contest. |
| Keywords: | Bidding, contest, desire to win, effort, experiment, emotions, joy of winning, love of winning, overexpenditure |
| JEL: | C78 C91 D72 D74 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2016-06&r=exp |
| By: | Gurven, Michael; Hopfensitz, Astrid; Kaplan, Hillard; Stieglitz, Jonathan |
| Abstract: | Two disparate views of the sexual division of labour have dominated the 53 representation of intra-household resource allocations. These joint and separate interests 54 views differ in their interpretation of the relative roles of men and women, and make different 55 predictions about the extent to which marriage promotes economic efficiency (i.e. maximized 56 household production). Using an experimental “distribution task” stipulating a trade-off 57 between household efficiency and spousal equality in allocating surpluses of meat and 58 money, we examine factors influencing spousal distribution preferences among Tsimane 59 forager-horticulturalists of Bolivia (n=53 couples). Our primary goal is to understand whether 60 and how access to perfectly fungible and liquid resources – which increases with greater 61 participation in market economies – shifts intra-household distribution preferences. We 62 hypothesize that greater fungibility of money compared to meat results in greater squandering 63 of money for individual fitness gain at a cost to the family. Money therefore requires costly 64 strategies to insure against a partner’s claims for consumption. Whereas nearly all Tsimane 65 spouses prefer efficient meat distributions, we find a substantially reduced efficiency 66 preference for money compared to meat controlling for potential confounders (adjusted 67 OR=0.087, 95% CI: 0.02-0.38). Reported marital conflict over paternal disinvestment is 68 associated with a nearly 13-fold increase in odds of revealing a selfish money distribution 69 preference. Selfish husbands are significantly more likely than other husbands to be paired 70 with selfish wives. Lastly, Tsimane husbands and wives are more likely than Western 71 Europeans to prefer an efficient money distribution, but Tsimane wives are more likely than 72 Western European wives to exhibit a selfish preference. In sum, preferences for the 73 distribution of household production surplus support joint and separate interests views of 74 marriage; a hybrid approach best explains how ecological-, family-, and individual-level 75 factors influence spousal preferences through their effects on perceptions of marginal gains 76 within and outside the household. |
| Keywords: | Intra-household distribution, sexual division of labour, family, marriage, bargaining, Tsimane |
| JEL: | C90 D13 F |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30550&r=exp |
| By: | Chen, Daniel L. |
| Abstract: | Some theories about the positive impact of markets on morality suggest that competition increases empathy, not between competitors, but between them and third parties. However, empathy may be a necessary evolutionary antecedent to guile, which is when someone knows what the other person wants and intentionally deceives him or her, and deception may have evolved as a means of exploiting empathy. This paper examines how individuals primed for empathy behave towards third parties in a simple economic game of deception. It reports the results of a data entry experiment in an online labor market. Individuals enter data randomized to be a prime for empathy, for guile, or a control. Empathy is then measured using a Reading the Mind in the Eyes Test and guile is measured using a simple economic game. Individuals primed for empathy become less deceptive towards third parties. Individuals primed for guile become less likely to perceive that deceiving an individual is unfair in a vignette. These results are robust to a variety of controls and to restricting to workers who entered the prime accurately. These findings are inconsistent with the hypothesis that empathy causes guile and suggests that empathy may cause those who are making judgements to become less deceptive. |
| Keywords: | Normative Commitments, Other-Regarding Preferences, Empathy, Deception, Guile |
| JEL: | D03 D64 K00 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30579&r=exp |
| By: | Jason A. Aimone; Sheryl Ball; Brooks King-Casas |
| Abstract: | Recent studies have suggested that there may be a correlation between the order in which decision-makers collect information about risky gambles and their tendency to make expected value maximizing decisions. In this work we present results from an experiment designed to establish causality by exogenously manipulating the order in which participants view information about probabilities and payoffs. We find that there is a relationship between information presentation and the amount of risk participants take. This suggests that the choice architecture for real world risky decision making may have both intended and unintended consequences. |
| Keywords: | Risky Decision Making, Expected Value Maximization, Nudging |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:vpi:wpaper:e07-52&r=exp |
| By: | Hwang, Sung-Ha; Lim, Wooyoung; Neary, Philip; Newton, Jonathan |
| Abstract: | When coordination games are played under the logit choice rule and there is intentional bias in agents’ non-best response behavior, the Egalitarian bargaining solution emerges as the long run social norm. Without intentional bias, a new solution, the Logit bargaining solution emerges as the long run norm. These results contrast with results under non-payoff dependent deviations from best response behavior, where it has previously been shown that the Kalai-Smorodinsky and Nash bargaining solutions emerge as long run norms. Experiments on human subjects suggest that non-best response play is payoff dependent and displays intentional bias. This suggests the Egalitarian solution as the most likely candidate for a long run bargaining norm. |
| Keywords: | Evolution; Nash program; Logit choice; Egalitarianism |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2016-13&r=exp |
| By: | Eble,Alex; Boone,Peter; Elbourne,Diana |
| Abstract: | Estimation of empirical relationships is prone to bias. Economists have carefully studied sources of bias in structural and quasi-experimental approaches, but the randomized control trial (RCT) has only begun to receive such scrutiny. This paper argues that several lessons from medicine, derived from analysis of thousands of RCTs establishing a clear link between certain practices and biased estimates, can be used to reduce the risk of bias in economics RCTs. It identifies the subset of these lessons applicable to economics and uses them to assess risk of bias in estimates from economics RCTs published between 2001 and 2011. In comparison to medical studies, most economics studies examined do not report important details on study design necessary to assess risk of bias. Many report practices that suggest risk of bias, though this does not necessarily mean bias resulted. The paper concludes with suggestions on how to remedy these issues. |
| Date: | 2016–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7746&r=exp |