nep-exp New Economics Papers
on Experimental Economics
Issue of 2016‒11‒06
twenty papers chosen by

  1. Risk Taking, Intertemporal Choice, and Loss Aversion By William Morrison, Robert Oxoby
  2. The influence of induced care and anger motives on behavior, beliefs and perceptions in a public goods game By Bartke, Simon; Bosworth, Steven J.; Snower, Dennis; Chierchia, Gabriele
  3. Selective Recognition: How to Recognize Donors to Increase Charitable Giving By Samek, Anya; Sheremeta, Roman
  4. Using Goals to Motivate College Students: Theory and Evidence from Field Experiments By Clark, Damon; Gill, David; Prowse, Victoria L.; Rush, Mark
  5. Belief updating: Does the 'good-news, bad-news' asymmetry extend to purely financial domains? By Barron, Kai
  6. The effects of competition on medical service provision By Brosig-Koch, Jeannette; Hehenkamp, Burkhard; Kokot, Johanna
  7. Lifecycle Consumption Under Different Income Profiles: Experimental Evidence By John Duffy; Yue Li
  8. The Industrial Organization of Corruption: Monopoly, Competition and Collusion By Dmitry Ryvkin; Danila Serra
  9. Negotiating with the future: Incorporating imaginary future generations into negotiations By Yoshio Kamijo; Asuka Komiya; Nobuhiro Mifune; Tatsuyoshi Saijo
  10. Understanding the Response to Financial and Non-Financial Incentives in Education: Field Experimental Evidence Using High-Stakes Assessments By Burgess, Simon; Metcalfe, Robert; Sadoff, Sally
  11. Handedness, Ability, Earnings and Risk. Evidence from the Lab By Marcello Sartarelli
  12. Mean Field Game of Controls and An Application To Trade Crowding By Pierre Cardaliaguet; Charles-Albert Lehalle
  13. Solving intergenerational sustainability dilemma through imaginary future generations: A qualitative-deliberative approach By Yoshinori Nakagawa; Koji Kotani; Yoshio Kamijo; Tatsuyoshi Saijo
  14. Racial and Gender Discrimination in Transportation Network Companies By Yanbo Ge; Christopher R. Knittel; Don MacKenzie; Stephen Zoepf
  15. The Pros and Cons of Workplace Tournaments By Roman M. Sheremeta
  16. Disrupting Education? Experimental Evidence on Technology-Aided Instruction in India By Muralidharan, K.; Singh, A.; Ganimian, A. J.
  17. On the Robustness of Higher Order Risk Preferences By Cary Deck; Harris Schlesinger
  18. Good schools or good students? Evidence on school effects from universal random assignment of students to high schools By Paulo Bastos; Julian Cristia; Beomsoo Kim
  19. Modelling Contributions in Public Good Games with Punishment By Alejandro Lee-Penagos
  20. Discrimination as a Self-Fulfilling Prophecy: Evidence from French Grocery Stores By Dylan Glover; Amanda Pallais; William Pariente

  1. By: William Morrison, Robert Oxoby (Wilfrid Laurier University)
    Abstract: We report on two laboratory experiments testing for the presence of loss aversion, separate from risk aversion, in decisions involving risk and intertemporal choice. Both experiments utilize an asset legitimacy protocol to control for ‘house money’ effects. In our first experiment, we augment the Holt-Laury risk preference elicitation protocol to address the effects of loss aversion. In our second experiment, we explore loss aversion using a discount rate elicitation protocol that controls for risk preferences. Our results show that loss aversion can be separated from risk preferences and has a profound effect in decision-making.
    JEL: C91 D91
    Date: 2016–07–01
  2. By: Bartke, Simon; Bosworth, Steven J.; Snower, Dennis; Chierchia, Gabriele
    Abstract: This study analyzes the stability of preferences through the lens of psychological motives. We report the results of a public goods experiment in which subjects were induced with the motives of Care and Anger through autobiographical recall. Subjects' preferences, beliefs, and perceptions under each motive are compared with those of subjects experiencing a neutral autobiographical recall condition. We find that Care elicits significantly higher contributions than Anger, with Control treatment contributions in between. This is primarily driven by changes in conditional contribution schedules (measuring preferences) across treatments, though higher beliefs explain part of the effect that Care has on giving. These results are robust to checking for comprehension of the game's incentives. We also observe concomitant differences in attention to own and other's payoffs (using mouse tracking) as well as perceptions of the game's incentive structure (harmony) - particularly for subjects motivated by Anger. We interpret our findings as suggesting that people have access to multiple preferences that depend on how they perceive the decision context.
    Keywords: public goods,motivation,stability of preferences,anger,care,framing
    JEL: C92 H41 D64 D03
    Date: 2016
  3. By: Samek, Anya; Sheremeta, Roman
    Abstract: Recognizing donors by revealing their identities is important for increasing charitable giving. Using a framed field experiment, we show that all forms of recognition that we examine increase donations relative to the baseline treatment, and recognizing only the highest or only the lowest donors has the strongest and significant effect. We argue that selective recognition creates tournament-like incentives. Recognizing the highest donors activates the desire to seek a ‘positive prize’ of prestige, while recognizing the lowest donors activates the desire to avoid a ‘negative prize’ of shame. We discuss how selective recognition can be used by charities to increase donations.
    Keywords: charity donations, recognition, information, experiments
    JEL: C93 D64
    Date: 2015–11–24
  4. By: Clark, Damon (University of California, Irvine); Gill, David (Purdue University); Prowse, Victoria L. (Purdue University); Rush, Mark (University of Florida)
    Abstract: Will college students who set goals for themselves work harder and perform better? In theory, setting goals can help time-inconsistent students to mitigate their self-control problem. In practice, there is little credible evidence on the causal effects of goal setting for college students. We report the results of two field experiments that involved almost four thousand college students in total. One experiment asked treated students to set goals for performance in the course; the other asked treated students to set goals for a particular task (completing online practice exams). We find that performance-based goals had no discernible impact on course performance. In contrast, task-based goals had large and robust positive effects on the level of task completion, and task-based goals also increased course performance. Further empirical analysis indicates that the increase in task completion induced by setting task-based goals caused the increase in course performance. We also find that task-based goals were more effective for male students. We develop new theory that reinforces our empirical results by suggesting two key reasons why task-based goals might be more effective than performance-based goals: overconfidence and uncertainty about performance. Since task-based goal setting is low-cost, scaleable and logistically simple, we conclude that our findings have important implications for educational practice and future research.
    Keywords: goal, goal setting, higher education, field experiment, self-control, present bias, time inconsistency, commitment device, loss aversion, reference point, task-based goal, performance-based goal, self-set goal, performance uncertainty, overconfidence, student effort, student performance, educational attainment, MOOC
    JEL: I23 C93
    Date: 2016–10
  5. By: Barron, Kai
    Abstract: Bayes' statistical rule remains the status quo for modeling belief updating in both normative and descriptive models of behavior under uncertainty. Recent research has questioned the use of Bayes' rule in descriptive models of behavior, presenting evidence that people overweight 'good news' relative to 'bad news' when updating ego-relevant beliefs. In this paper, we present experimental evidence testing whether this 'good-news, bad-news' effect extends to belief updating in the domain of financial decision making, i.e. the domain of most applied economic decision making. We find no evidence of asymmetric updating in this domain. In contrast, the average participant in our experiment is strikingly close to Bayesian in her belief updating. However, we show that this average behavior masks the existence of three distinct types of updating behavior - each of which is distinct from Bayesian, but none of which displays the 'good-news, bad-news' effect.
    Keywords: economic experiments,Bayes' rule,asymmetric belief updating,belief measurement,proper scoring rules,subjective probability,motivated beliefs
    JEL: C11 C91 D83
    Date: 2016
  6. By: Brosig-Koch, Jeannette; Hehenkamp, Burkhard; Kokot, Johanna
    Abstract: We explore how competition between physicians affects medical service provision. Previous research has shown that, without competition, physicians deviate from patient-optimal treatment under payment systems like capitation and fee-for-service. While competition might reduce these distortions, physicians usually interact with each other repeatedly over time and only a fraction of patients switches providers at all. Both patterns might prevent competition to work in the desired direction. To analyze the behavioral effects of competition, we develop a theoretical benchmark which is then tested in a controlled laboratory experiment. Experimental conditions vary physician payment and patient characteristics. Real patients benefit from treatment decisions made in the experiment. Our results reveal that, in line with the theoretical prediction, introducing competition can reduce overprovision and underprovision, respectively. The observed effects depend on patient characteristics and the payment system, though. Tacit collusion is observed and particularly pronounced with fee-for-service payment, but it appears to be less frequent than in related experimental research on price competition.
    Abstract: In der vorliegenden Studie untersuchen wir, wie sich Wettbewerb zwischen Ärzten auf deren Behandlungsentscheidungen auswirkt. Bisherige Forschungsergebnisse zeigen, dass ohne Wettbewerb die Behandlungsentscheidungen von Ärzten bei klassischen Vergütungssystemen wie der Einzelleistungsvergütung oder der Kopfpauschale von den patientenoptimalen Entscheidungen abweichen. Während diese Abweichungen grundsätzlich durch Wettbewerb reduziert werden könnten, ist davon auszugehen, dass Ärzte typischerweise wiederholt miteinander interagieren und dass nur ein Teil der Patienten den Arzt wechselt. Beides könnte die positiven Effekte des Wettbewerbs verringern. Um die Verhaltenswirkungen von Wettbewerb zu analysieren, entwickeln wir ein spieltheoretisches Modell, das wir mit Hilfe kontrollierter Laborexperimente testen. Die experimentellen Anordnungen variieren bezüglich der Arztvergütung und der Charakteristika der Patienten. Reale Patienten profitieren von den im Experiment getroffenen Behandlungsentscheidungen. Unsere Ergebnisse zeigen, dass Wettbewerb im Einklang mit der theoretischen Prognose Überbehandlung und Unterbehandlung reduzieren kann. Die beobachteten Effekte hängen jedoch von den Charakteristika der Patienten und der Arztvergütung ab. Wir finden auch stillschweigende Kollusion, insbesondere bei der Einzelleistungsvergütung. Diese tritt jedoch in geringerem Ausmaß auf als in vergleichbaren experimentellen Studien zum Preiswettbewerb.
    Keywords: physician competition,fee-for-service,capitation,laboratory experiment
    JEL: I11 D43 C91 C72
    Date: 2016
  7. By: John Duffy (Department of Economics, University of California-Irvine); Yue Li (SUNY-Albany)
    Abstract: We report on a series of economic decision-making experiments exploring how individuals make lifecycle consumption and saving plans when they face different income profiles. We find that for every income profile we consider, subjects on average over- consume in the early periods of life and under-consume in later periods of life relative to the conditional optimum and any sudden drop in income reduces their lifetime utility. We conduct a specification search for a model to explain our data and find that a two-type model with one type consuming the conditional optimum and the other type consuming endowments best fits our data.
    Keywords: Bond markets; Lifecycle model; Consumption and savings; Retirement planning; Behavioral and experimental economics
    JEL: C92 C91 D91 E21 H55
    Date: 2016–10
  8. By: Dmitry Ryvkin (Department of Economics, Florida State University); Danila Serra (Department of Economics, Southern Methodist University)
    Abstract: We study how the introduction of competition between public officials for the provision of a given license affects extortionary corruption, i.e., the demands of harassment bribes. We conduct a laboratory experiment where citizens need to obtain licenses from public officials, and officials can demand a bribe on top of the license official fee. We first provide officials with monopoly power by giving citizens no choice but to pay the bribe to their assigned official. We then introduce competition among officials by allowing citizens to engage in costly search and get the license from any of the available offices. We examine transactions that are likely to be one-shot, such as the delivery of a drivers' license, and transactions that require frequent interactions between the parties and therefore allow for reputation building, such as yearly renewals of building permits. Finally, we examine officials' ability to collude by communicating before setting their bribe demands. We find that introducing competition significantly reduces corruption both in settings characterized by one-shot and by repeated interactions between citizens and officials. While the possibility to collusion lowers the effectiveness of competition, officials are unable to sustain collusion in the long run.
    Keywords: Extortionary Corruption, Monopoly, Competition, Collusion
    JEL: D73 D49 C92
    Date: 2016–10
  9. By: Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Asuka Komiya (Hiroshima University); Nobuhiro Mifune (School of Economics and Management, Kochi University of Technology); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology)
    Abstract: People to be born in the future have no direct influence on current affairs. Given the disconnect between people who are currently living and those that will inherit the planet left for them, individuals who are currently alive tend to be more oriented toward the present, posing a fundamental problem related to sustainability. In this study, we propose a new framework for reconciling the disconnect between the present and the future whereby some individuals in the current generation serve as an imaginary future generation that negotiates with individuals in the real-world present. Through a laboratory-controlled intergenerational sustainability dilemma game (ISDG), we show how the presence of negotiators for a future generation increases the benefits of future generations. More specifically, we found that when faced with members of an imaginary future generation, 60% of participants selected an option that promoted sustainability. In contrast, when the imaginary future generation was not salient, only 28% of participants chose the sustainable option.
    Keywords: ntergenerational Sustainability Dilemma Game, Imaginary Future Generation, Negotiation
    Date: 2016–10
  10. By: Burgess, Simon (University of Bristol); Metcalfe, Robert (University of Chicago); Sadoff, Sally (University of California, San Diego)
    Abstract: We analyze the impact of incentivizing students' effort during the school year on performance on high-stakes assessments in a field experiment with 63 low-income high schools and over 10,000 students. We contribute to the literature on education incentives by incentivising inputs rather than output, by focusing on high stakes outcomes, and by comparing financial and non-financial rewards. We take advantage of our large sample and rich data to explore heterogeneity in the effects of incentives, and identify a "right tail" of underperforming students who experience a significant impact on high stakes assessments. Among students in the upper half of the distribution of incentive effectiveness, exam scores improve by 10% to 20% of a standard deviation, equal to about half the attainment gap between poor and non-poor students.
    Keywords: test scores, pupil incentives, pupil behaviour
    JEL: I21 I28
    Date: 2016–10
  11. By: Marcello Sartarelli (Dpto. Fundamentos del Análisis Económico)
    Abstract: The relationship between handedness, ability and, in addition, their joint role in explaining earnings and decisions under risk is studied experimentally to shed new light on the mechanisms behind the mixed evidence in survey data. Data on 432 under graduate students show that left-handed (L) do not obtain a significantly different Cognitive Reflection Test score relative to others nor different payoffs in a stylized labour market with agents working for principals and being paid for exerting costly effort, a proxy for earnings. In addition, they are not significantly more risk averse. In partial contrast, their self-reported achievement at university tends to be significantly higher and driven by females although weakly for some specifications. Finally, when looking at personality traits, measured using the Big Five test, L are significantly more agreeable, showing higher preferences for cooperation, and also tend to be more extroverted, in particular more sociable.
    Keywords: Ability, Big Five, CRT, earnings, gender, handedness, leftie, left-handed, personality traits, risk.
    JEL: C91 D81 D87
    Date: 2016–10
  12. By: Pierre Cardaliaguet (CEREMADE); Charles-Albert Lehalle
    Abstract: In this paper we formulate the now classical problem of optimal liquidation (or optimal trading) inside a Mean Field Game (MFG). This is a noticeable change since usually mathematical frameworks focus on one large trader in front of a " background noise " (or " mean field "). In standard frameworks, the interactions between the large trader and the price are a temporary and a permanent market impact terms, the latter influencing the public price. In this paper the trader faces the uncertainty of fair price changes too but not only. He has to deal with price changes generated by other similar market participants, impacting the prices permanently too, and acting strategically. Our MFG formulation of this problem belongs to the class of " extended MFG ", we hence provide generic results to address these " MFG of controls ", before solving the one generated by the cost function of optimal trading. We provide a closed form formula of its solution, and address the case of " heterogenous preferences " (when each participant has a different risk aversion). Last but not least we give conditions under which participants do not need to instantaneously know the state of the whole system, but can " learn " it day after day, observing others' behaviors.
    Date: 2016–10
  13. By: Yoshinori Nakagawa (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology); Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology)
    Abstract: The current generation affects future generations, but not vice versa. This one-way nature of dependence over generations is known to be a main cause for many important problems such as climate change and accumulation of government debts. The occurrence of these problems is characterized by the fact that the current generation tends to choose an action in favor of their benefit without considering future generations, which we call "intergenerational sustainability dilemma (ISD)." This paper designs and implements deliberation experiments of the ISD with a single generation of three people, and examine how the dilemma can be solved. A treatment, "cap of future generations" (capped player), is suggested in which one person in the current generation is asked to be a representative from future without any obligation. We conduct a novel qualitative-deliberative analysis of recorded discussions for 10 minutes of each generation’s decision, contributing to the two points. First, we find the conditions under which intergenerational sustainability is enhanced through deliberations. That is, one member in a group voluntarily plays a role of icebreakers for deliberation and/or a capped player is present in a group. We demonstrate that when an icebreaker and/or a capped player are present during deliberation, the group brings more varieties of ideas and viewpoints for the ISD, leading to higher intergenerational sustainability. Second, this research illustrates how a qualitative-deliberative analysis can be usefully amalgamated with economic experiments as a new methodology to reveal human behaviors and preferences in collective-decision making.
    Keywords: Intergenerational sustainability, cap of future generations, qualitative-deliberative approach, economic experiments
    Date: 2016–10
  14. By: Yanbo Ge; Christopher R. Knittel; Don MacKenzie; Stephen Zoepf
    Abstract: Passengers have faced a history of discrimination in transportation systems. Peer transportation companies such as Uber and Lyft present the opportunity to rectify long-standing discrimination or worsen it. We sent passengers in Seattle, WA and Boston, MA to hail nearly 1,500 rides on controlled routes and recorded key performance metrics. Results indicated a pattern of discrimination, which we observed in Seattle through longer waiting times for African American passengers—as much as a 35 percent increase. In Boston, we observed discrimination by Uber drivers via more frequent cancellations against passengers when they used African American-sounding names. Across all trips, the cancellation rate for African American sounding names was more than twice as frequent compared to white sounding names. Male passengers requesting a ride in low-density areas were more than three times as likely to have their trip canceled when they used a African American-sounding name than when they used a white-sounding name. We also find evidence that drivers took female passengers for longer, more expensive, rides in Boston. We observe that removing names from trip booking may alleviate the immediate problem but could introduce other pathways for unequal treatment of passengers.
    JEL: J15 J16 R4
    Date: 2016–10
  15. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Tournaments are commonly used in the workplace to determine promotion, assign bonuses, and motivate personal development. Tournament-based contracts can be very effective in eliciting high effort, often outperforming other compensation contracts, but they can also have negative consequences for both managers and workers. The benefits and disadvantages of workplace tournaments have been identified in theoretical, empirical, and experimental research over the past several decades. Based on these findings, I provide suggestions and guidelines for when it might be beneficial to use tournaments in the workplace.
    Keywords: tournaments, contests, competition, contracts, workplace
    JEL: C7 C8 C9 J4 J7 L1 L2 M1 M5
    Date: 2016
  16. By: Muralidharan, K.; Singh, A.; Ganimian, A. J.
    Abstract: Technology-aided instruction has the potential to sharply increase productivity in delivering education, but its promise has yet to be realized. This paper presents experimental evidence on the impact of a technology-aided after-school instruction program on secondary school learning outcomes in urban India. We report five main findings. First, students in this setting are several grade-levels behind their enrolled grade, and this gap grows with every grade. Second, the offer of the program led to large increases in student test scores of 0.36? in math and 0.22? in Hindi over a 4.5-month period, which represent a two-fold increase in math and a 2.5 times increase in Hindi test score value-added relative to non-participants. IV estimates suggest that attending the program for 90 days increases math and Hindi test scores by of 0.59? and 0.36? respectively. Third, absolute treatment effects are large and similar at all levels of baseline scores, but the relative gain is much greater for academically weaker students because their ?business as usual? rate of learning is close to zero. Fourth, we show that the program precisely targets instruction to students? preparation level, thus catering to wide variation within a single grade. Fifth, the program is highly cost-effective, both in terms of productivity per dollar and unit of time. Our results suggest that well-designed technology-aided instruction programs can sharply improve productivity in education by relaxing multiple constraints to effective teaching and learning.
    Date: 2016–01
  17. By: Cary Deck (University of Arkansas and Economic Science Institute, Chapman University,); Harris Schlesinger (University of Alabama)
    Abstract: Economists have begun to recognize the role that higher order risk preferences play in a variety of settings. As such, several experiments have documented the degree of prudence, temperance, and to a lesser extent, edginess and bentness that laboratory subjects exhibit. More recently, researchers have argued that higher order risk preferences generally conform to mixed risk averse and mixed risk loving patterns that arise from a preference for disaggregating or aggregating harms, respectively. This paper examines the robustness of this pattern in three ways. First, it attempts to directly replicate previous results with compound lotteries over monetary outcomes. Second, it compares behavior in compound lotteries with behavior in reduced form lotteries. And third, it evaluates choices over monetary and non-monetary risks. While previous results are replicated for compound lotteries over monetary outcomes and aggregate behavior with reduced form lotteries has a similar pattern, individuals clearly treat compound and reduced form lotteries differently. Further, behavior differs between monetary and non-monetary outcomes.
    Keywords: Risk apportionment, mixed risk aversion, prudence, temperance, edginess, experiments
    JEL: C9 D8
    Date: 2016
  18. By: Paulo Bastos; Julian Cristia (Research Department, Inter-American Development Bank, United States); Beomsoo Kim (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: How much do schools differ in their effectiveness? Answering this question has been complicated by the selection of heterogeneous students into schools, which has made it difficult to distinguish between the influence of school inputs, student selection and peer effects. We exploit universal random assignment of students to high schools in certain areas of South Korea to provide clean estimates of the influence of school inputs. We find statistically significant differences across schools in the effects they have on scores in college entrance exams. However, school effects explain only 0.5% of the variation in learning outcomes in areas where students are randomized to schools. These results suggest that school inputs play a limited role in explaining variation in learning outcomes.
    JEL: D44 H75 I21 I23 J16
    Date: 2016
  19. By: Alejandro Lee-Penagos (School of Economics, University of Nottingham)
    Abstract: Theoretical models have had difficulties to account, at the same time, for the most important stylized facts observed in experiments of the Voluntary Contribution Mechanism. A recent approach tackling that gap is Arifovic and Ledyard (2012), which implements social preferences in tandem with an evolutionary learning algorithm. However, the stylized facts have evolved. The model was not built to explain some of the most important findings in the public good games recent literature: that altruistic punishment can sustain cooperation. This paper extends their model in order to explain such recent findings. It focuses on fear of punishment, not punishment itself, as the key mechanism to sustain contributions to the public good. Results show that our model can replicate both qualitatively and quantitatively the main facts. Data generated by our model differs, on average, in less than 5% compared to relevant experiments with punishment in the lab.
    Keywords: Public Good Games, Punishment, Agent Based Modelling, Learning Algorithms, Other Regarding Preferences, Bounded Rationality.
    Date: 2016
  20. By: Dylan Glover; Amanda Pallais; William Pariente
    Abstract: Examining the performance of cashiers in a French grocery store chain, we find that manager bias negatively affects minority job performance. In the stores studied, cashiers work with different managers on different days and their schedules are determined quasi-randomly. When minority cashiers, but not majority cashiers, are scheduled to work with managers who are biased (as determined by an Implicit Association Test), they are absent more often, spend less time at work, scan items more slowly, and take more time between customers. Manager bias has consequences for the average performance of minority workers: while on average minority and majority workers perform equivalently, on days where managers are unbiased, minorities perform significantly better than do majority workers. This appears to be because biased managers interact less with minorities, leading minorities to exert less effort.
    JEL: J24 J71 J78 M50
    Date: 2016–10

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