nep-exp New Economics Papers
on Experimental Economics
Issue of 2017‒01‒08
twenty-two papers chosen by

  1. The power of active choice: Field experimental evidence on repeated contribution decisions to a carbon offsetting program By Kesternich, Martin; Römer, Daniel; Flues, Florens
  2. Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests By Andersson, Ola; Holm, Håkan J.; Wengström, Erik
  3. Asymmetric Effects of Non-Pecuniary Signals on Search and Purchase Behavior for Energy-Efficient Durable Goods By J. Scott Holladay; Jacob LaRiviere; David M. Novgorodsky; Michael Price
  4. Differences Attract: An Experimental Study of Focusing in Economic Choice By Andersson, Ola; Ingebretsen Carlson, Jim; Wengström, Erik
  5. Contests at the workplace with and without prize selection: Testing theory in a field experiment By Hakimov, Rustamdjan
  6. Trust the Police? Self-Selection of Motivated Agents into the German Police Force By Friebel, Guido; Kosfeld, Michael; Thielmann, Gerd
  7. Elected Officials’ Opportunistic Behavior on Third-Party Punishment: An experimental Analysis By Natalia Jimenez; Angel Solano-Garcia
  8. Reciprocity under moral wiggle room: is it a preference or a constraint? By Tobias Regner
  9. Prudence, emotional state, personality, and cognitive ability By Breaban, Adriana; Van De Kuilen, Gijs; Noussair, Charles N.
  10. Strategic Decisions: Behavioral Differences Between CEOs and Others By Holm, Håkan J.; Nee, Victor; Opper, Sonja
  11. Reference point heterogeneity By Terzi, Ayse; Koedijk, Kees; Noussair, Charles N.; Pownall, Rachel
  12. Persistence of Power: Repeated Multilateral Bargaining By Marina Agranov; Christopher Cotton; Chloe Tergiman
  13. Does Information Change Attitudes Towards Immigrants? Representative Evidence from Survey Experiments By Grigorieff, Alexis; Roth, Christopher; Ubfal, Diego
  14. Older Peoples’ Willingness to Delay Social Security Claiming By Raimond Maurer; Olivia S. Mitchell
  15. Public versus Secret Voting in Committees By Andrea Mattozzi; Marcos Y. Nakaguma
  16. Knowing When to Ask: The Cost of Leaning In By Christine L. Exley; Muriel Niederle; Lise Vesterlund
  17. Economic Research and Education Policy: Project STAR and Class Size Reduction By Moshe Justman
  18. Rational Decision-Making Under Uncertainty: Observed Betting Patterns on a Biased Coin By Victor Haghani; Richard Dewey
  19. Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment By Jacopo Bonan, Jacopo Bonan; Philippe LeMay-Boucher, Philippe LeMay-Boucher; Douglas Scott, Douglas Scott
  20. Demand for Off-Grid Solar Electricity: Experimental Evidence from Rwanda By Grimm, Michael; Lenz, Luciane; Peters, Jörg; Sievert, Maximiliane
  21. Job security and long-term investment: An experimental analysis By Gary Charness; Ramon Cobo-Reyes; Natalia Jimenez; J. Antonio Lacomba; Francisco Lagos
  22. Event-Related Potential Study of P2 and N2 Components on Fast and Slow Responses in the Auditory Condensation Task By Boris V. Chernyshev; Vladimir A. Medvedev

  1. By: Kesternich, Martin; Römer, Daniel; Flues, Florens
    Abstract: We study the effect of a subtle change in the choice architecture on offsetting behavior. In a large-scale field experiment, we examine repeated voluntary contributions to a carbon offsetting program during the online purchase of long-distance bus tickets. In the control group, travelers had the option to offset their carbon emissions resulting from their bus trip, but they could also simply ignore the offer. In the treatment group, travelers were forced to actively choose whether to offset their carbon emissions or not. This "active choice" requirement immediately increased participation in the offsetting program by almost 50%. Investigating returning customers, we find that this treatment remains effective over time. We report evidence that some customers tend to keep avoiding active contribution decisions in subsequent booking decisions.
    Keywords: voluntary carbon offsets,randomized field experiment,default setting,choice architecture
    JEL: H41 C93 D03 L92
    Date: 2016
  2. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Holm, Håkan J. (Department of Economics, Lund University); Wengström, Erik (Department of Economics, Lund University)
    Abstract: We conduct a contest experiment where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory we observe substantial investments in spread. We find that both types of investments can be controlled with a three level prize scheme. However, the control is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many disadvantages including high spread and heterogeneous behavior. The scheme where only one loser is punished appears superior; it generates high mean, low spread and is most popular.
    Keywords: Contest; Risk; Spread; Incentives; Institutional Choice; Experiment
    JEL: C70 D02 D03 D80
    Date: 2016–12–30
  3. By: J. Scott Holladay; Jacob LaRiviere; David M. Novgorodsky; Michael Price
    Abstract: We report the results of a field experiment where we exogenously vary the use of social comparisons "nudges" and subsidies for participation in an in-home energy audit program, and follow subjects through to the subsequent purchase of durable goods. We therefore can compare the causal effect of financial incentives and nudges along two margins, audits, which we liken to search, and purchase of durables. Using data on nearly 100,000 households, we document an asymmetry; nudges increase audits, but lead to lower rates of purchase. We find no evidence of a differential response for those offered a financial incentive. These differences suggest heterogeneity in the motives of the marginal consumer induced by nudges versus prices.
    JEL: C93 D01 D83 Q41
    Date: 2016–12
  4. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Ingebretsen Carlson, Jim (Department of Economics); Wengström, Erik (Department of Economics)
    Abstract: Several recent behavioral models of choice build on the idea that decision makers put more weight on attributes in which the available options differ more. We test this assumption in a controlled experiment where such biases will generate choice inconsistencies. As hypothesized, we find that subjects make more inconsistent choices when we add new options that affect the maximal difference in attributes among the options. Our findings suggest that the decision maker's focus is drawn to attributes that stand out. We also test the focusing effect against theories of decoy effects (asymmetric dominance), but we find that the focus effect dominates.
    Keywords: Individual decision making; Focus; Attention; Salience; Decoy; Experiments
    JEL: C91 D03 D12
    Date: 2016–12–14
  5. By: Hakimov, Rustamdjan
    Abstract: We conduct a field experiment with 302 workers of the microcredit company in Russia to study the effects of the different designs of a contest for monetary prizes at the workplace. We consider a standard all-pay auction design with two and four prizes of different size and compare it to "parallel" contests with the same prizes, but where participants have to choose the prize prior to the start of the competition and then the winner is selected only among the players who chose the same prize. Despite the theoretical predictions, the parallel contests lead to higher efforts for all players, but mainly by lower-ability players. Division of prizes leads to the predicted effects. In parallel contests, too many players choose the higher prize than equilibrium suggests. Overall, the parallel version of contests appeared to be more profitable for the firm.
    Keywords: contests,incomplete information,all-pay auctions,field experiment
    JEL: C78 I21
    Date: 2016
  6. By: Friebel, Guido (Goethe University Frankfurt); Kosfeld, Michael (Goethe University Frankfurt); Thielmann, Gerd (Deutsche Hochschule der Polizei)
    Abstract: We conduct experimental games with police applicants in Germany to investigate whether intrinsically motivated agents self-select into public service. Our focus is on trustworthiness and the willingness to enforce norms as key dimensions of intrinsic motivation in the police context. We find that police applicants are more trustworthy than non-applicants, i.e., they return higher shares as second-movers in a trust game. Furthermore, they invest more in rewards and punishment when they can enforce cooperation as a third party. Our results provide clear evidence for advantageous self-selection into the German police force, documenting an important mechanism by which the match between jobs and agents in public service can be improved.
    Keywords: self-selection, intrinsic motivation, public service, trustworthiness, norm enforcement
    JEL: C9 D64 D73 J45
    Date: 2016–12
  7. By: Natalia Jimenez (Department of Economics, Universidad Pablo de Olavide & Middlesex University); Angel Solano-Garcia (Departamento de Teoria e Historia Economica, University of Granada & Globe)
    Abstract: In this paper, we analyze how the punishment behavior of a democratically elected official varies when facing an electoral process (opportunism). To this aim, we conduct an economic experiment in which officials are third party punishers in a public goods game. We consider two different scenarios which differ in the degree of cooperation within the society. We find that officials increase their punishment when they face elections in both scenarios. Contrary to candidates’ expectations, voters always vote for the least severe candidate.
    Keywords: Opportunism, Punishment, Public Goods Games, Voting, Experiments.
    JEL: C92 D72 H4
    Date: 2016
  8. By: Tobias Regner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze reciprocal behavior when moral wiggle room exists. Dana et al. (2007) show that giving in a dictator game is only partly due to distributional preferences as the giving rate drops when situational excuses for selfish behavior are provided. Our binary trust game closely follows their design. Only a preceding stage (safe outside option vs. enter the game) is added in order to introduce reciprocity. We find significantly higher rates of selfish choices in our treatments that feature moral wiggle room manipulations (between 37.5% and 45%) in comparison to the baseline (6.25%). It seems that reciprocal behavior is not only due to people liking to reciprocate but also because they feel obliged to do so.
    Keywords: social preferences, pro-social behavior, experiments, reciprocity, moral wiggle room, self-image concerns, trust game
    JEL: C72 C91 D03 D80
    Date: 2017–01–02
  9. By: Breaban, Adriana (Tilburg University, School of Economics and Management); Van De Kuilen, Gijs (Tilburg University, School of Economics and Management); Noussair, Charles N. (Tilburg University, School of Economics and Management)
    Abstract: We report an experiment to consider the emotional correlates of prudent decision making. In the experiment, we present subjects with lotteries and measure their emotional response with facial recognition software. They then make binary choices between risky lotteries that distinguish prudent from imprudent individuals. They also perform tasks to measure their cognitive ability and a number of personality characteristics. We find that a more negative emotional state correlates with greater prudence. Higher cognitive ability and less conscientiousness is also associated with greater prudence.
    Date: 2016
  10. By: Holm, Håkan J. (Department of Economics, Lund University); Nee, Victor (Department of Sociology, Cornell University); Opper, Sonja (Department of Economics, Lund University)
    Abstract: Differences in strategic decision making between CEOs and other people are interesting since CEOs make important economic decisions and impact values and norms in society. Our study combines a large stratified random sample of 199 CEOs of medium-size firms with a carefully selected control group of 200 comparable people. All subjects participated in three different incentivized strategic games — Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The CEOs are closer to the socially optimal strategy profile in all games. Hence, as a group the CEOs out-competes the control-group members and thereby receives higher average earnings, but not by being smarter (in the narrow “rationalistic” sense) or more selfish, but by being more cooperative and less aggressive.
    Keywords: Strategies; Efficiency; Nash equilibrium; Incentivized behavior; CEOs
    JEL: C70 C93 D22 L26
    Date: 2016–12–13
  11. By: Terzi, Ayse (Tilburg University, School of Economics and Management); Koedijk, Kees (Tilburg University, School of Economics and Management); Noussair, Charles N. (Tilburg University, School of Economics and Management); Pownall, Rachel (Tilburg University, School of Economics and Management)
    Abstract: It is well-established that, when confronted with a decision to be taken under risk, individuals use reference payoff levels as important inputs. The purpose of this paper is to study which reference points characterize decisions in a setting in which there are several plausible reference levels of payoff. We report an experiment, in which we investigate which of four potential reference points: (1) a population average payoff level, (2) the announced expected payoff of peers in a similar decision situation, (3) a historical average level of earnings that others have received in the same task, and (4) an announced anticipated individual payoff level, best describes decisions in a decontextualized risky decision making task. We find heterogeneity among individuals in the reference points they employ. The population average payoff level is the modal reference point, followed by experimenter's stated expectation of a participant's individual earnings, followed in turn by the average earnings of other participants in previous sessions of the same experiment. A sizeable share of individuals show multiple reference points simultaneously. The reference point that best fits the choices of the individual is not affected by a shock to her income.
    Date: 2016
  12. By: Marina Agranov (California Institute of Technology); Christopher Cotton (Queen's University); Chloe Tergiman (Penn State University)
    Abstract: We develop a model of repeated multilateral bargaining that links cycles via the identity of the agenda setter. In sharp contrast to the standard history-independent equilibrium predictions, in an experiment, we observe stable and persistent coalitions in terms of member identity, allocations to coalition partners, and agenda-setter identity. Our results call into question the validity of restricting attention to static, history-independent strategies in dynamic bargaining games. We show that weakening the standard equilibria concepts to allow players to condition on a single piece of history is enough to generate equilibria which are consistent with observed laboratory outcomes.
    Keywords: experiment, legislative bargaining, vote of confidence, legislative decision making, political institutions, dynamic bargaining
    JEL: C78 C92 D02 C73 D72
    Date: 2016–12
  13. By: Grigorieff, Alexis (University of Oxford); Roth, Christopher (University of Oxford); Ubfal, Diego (Bocconi University)
    Abstract: We study whether providing information about immigrants affects people's attitude towards them. First, we use a large representative cross-country experiment to show that, when people are told the share of immigrants in their country, they become less likely to state that there are too many of them. Then, we conduct two online experiments in the U.S., where we provide half of the participants with five statistics about immigration, before evaluating their attitude towards immigrants with self-reported and behavioral measures. This more comprehensive intervention improves people's attitude towards existing immigrants, although it does not change people's policy preferences regarding immigration. Republicans become more willing to increase legal immigration after receiving the information treatment. Finally, we also measure the same self-reported policy preferences, attitudes, and beliefs in a four-week follow-up, and we show that the treatment effects persist.
    Keywords: attitudes towards immigrants, biased beliefs, survey experiment, immigration, policy preferences, persistence
    JEL: C9 J15 Z1 Z13
    Date: 2016–12
  14. By: Raimond Maurer; Olivia S. Mitchell
    Abstract: We have designed and fielded an experimental module in the 2014 HRS which seeks to measure older persons’ willingness to voluntarily defer claiming of Social Security benefits. In addition, we evaluate the stated willingness of older individuals to work longer, depending on the Social Security incentives offered to delay claiming their benefits. Our project extends previous work by analyzing the results from our HRS module and comparing findings from other data sources which included very much smaller samples of older persons. We show that half of the respondents would delay claiming if no work requirement were in place under the status quo, and only slightly fewer, 46%, with a work requirement. We also asked respondents how large a lump sum they would need with or without a work requirement. In the former case, the average amount needed to induce delayed claiming was about $60,400, while when part-time work was required, the average was $66,700. This implies a low utility value of leisure foregone of only $6,300, or under 20% of average household income.
    JEL: D03 D91 G11 H55
    Date: 2016–12
  15. By: Andrea Mattozzi; Marcos Y. Nakaguma
    Abstract: This paper studies a committee decision-making problem. Committee members are heterogeneous in their competence, they are biased towards one of the alternatives and career oriented, and they can choose whether to vote or abstain. The interaction between career concern and bias affects the voting behavior of members depending on transparency of individual votes. We show that transparency attenuates the pre-existing biases of competent members and exacerbates the biases of incompetent members. Public voting leads to better decisions when the magnitude of the bias is large, while secret voting performs better otherwise. We provide experimental evidence supporting our theoretical conclusions.
    Keywords: Committees; Voting, Career Concern; Transparency
    JEL: D72 C92 D71
    Date: 2016–11–28
  16. By: Christine L. Exley; Muriel Niederle; Lise Vesterlund
    Abstract: Gender differences in the propensity to negotiate are often used to explain the gender wage gap, popularizing the push for women to “lean-in.” We use a laboratory experiment to examine the effect of leaning-in. Despite men and women achieving similar and positive returns when they must negotiate, we find that women avoid negotiations more often than men. While this suggests that women would benefit from leaning-in, a direct test of the counterfactual proves otherwise. Women appear to positively select into negotiations and to know when to ask. By contrast, we find no significant evidence of a positive selection for men.
    JEL: C9 J01 J16
    Date: 2016–12
  17. By: Moshe Justman (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and Department of Economics, Ben Gurion University of the Negev)
    Abstract: The use of randomized controlled trials (RCTs) and related randomization strategies to eliminate selection biases in establishing causality is a key element of the “modern experimentalist paradigm” (MEP). Yet, its emphasis on precisely identifying causal factors often limits its capacity to provide an evidence base for policy. We illustrate this through a detailed look at Project STAR, an extensively analyzed, well-funded, large-scale, rigorous RCT commissioned by the Tennessee legislature to help it decide whether to mandate statewide class-size reductions (CSR) from kindergarten to the third grade. Project STAR randomly assigned students to classes of different size and compared test results across these classes, to obtain an unbiased answer to the research question, “Does reducing class size improve test scores?” However, this shed little light on whether reducing class size was a good use of increased education financing. Analyses of Project STAR ignored general equilibrium effects of CSR on both the demand for teachers and the value of test scores. Moreover, its emphasis on estimating average class-size effects in a particular setting diverted attention from their heterogeneity, and the need to understand how class size affects learning, and how its effect is moderated by circumstances. Rather than considering the full chain of evidence necessary for shaping class-size policy, Project STAR concentrated its effort on maximizing the accuracy of a single link in that chain; internal validity trumped policy relevance.
    Keywords: Class size, Project STAR, randomized controlled trials, field experiments, internal validity, external validity, modern experimentalist paradigm
    JEL: C54 I28
    Date: 2016–12
  18. By: Victor Haghani; Richard Dewey
    Abstract: What would you do if you were invited to play a game where you were given \$25 and allowed to place bets for 30 minutes on a coin that you were told was biased to come up heads 60% of the time? This is exactly what we did, gathering 61 young, quantitatively trained men and women to play this game. The results, in a nutshell, were that the majority of these 61 players did not place their bets very well, displaying a broad panoply of behaviorial and cognitive biases. About 30% of the subjects actually went bust, losing their full \$25 stake. We also discuss optimal betting strategies, valuation of the opportunity to play the game and its similarities to investing in the stock market. The main implication of our study is that people need to be better educated and trained in how to approach decision making under uncertainty. If these quantitatively trained players, playing the simplest game we can think of involving uncertainty and favourable odds, did not play well, what hope is there for the rest of us when it comes to playing the biggest and most important game of all: investing our savings? In the words of Ed Thorp, who gave us helpful feedback on our research: "This is a great experiment for many reasons. It ought to become part of the basic education of anyone interested in finance or gambling."
    Date: 2017–01
  19. By: Jacopo Bonan, Jacopo Bonan; Philippe LeMay-Boucher, Philippe LeMay-Boucher; Douglas Scott, Douglas Scott
    Abstract: This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual’s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements.
    Keywords: Time Preferences, Randomized Experiment, Senegal, Research Methods/ Statistical Methods, D01, D91, C93, O1,
    Date: 2016–12–15
  20. By: Grimm, Michael (University of Passau); Lenz, Luciane (RWI); Peters, Jörg (RWI); Sievert, Maximiliane (RWI)
    Abstract: Providing electricity to the unconnected 1.1 billion people in developing countries is one of the top political priorities of the international community, yet the costs of reaching this objective are very high. The present paper examines whether the objective and the associated costs are justified by the value that target beneficiaries assign to electricity. We provide experimental evidence on the revealed willingness-to-pay (WTP) for three types of off-grid solar electricity devices. Our findings show that households are willing to dedicate a substantial part of their expenditures to electricity. In absolute terms, though, the WTP does not suffice to reach cost-covering prices. Different payment schemes, which we randomized across our sample, do not alter the WTP significantly. If universal electricity access is to be achieved, direct subsidies might be necessary. We argue that from a public policy perspective it is more rationale to promote off-grid solar than grid-based electrification because of its better cost-benefit performance.
    Keywords: technology adoption, electrification, willingness-to-pay, real-purchase offer game, energy access
    JEL: D12 O12 O13 Q28 Q41
    Date: 2016–12
  21. By: Gary Charness (Department of Economics, University of California, Santa Barbara); Ramon Cobo-Reyes (Department of Economics, University of Granada & University of Exeter Business School); Natalia Jimenez (Department of Economics, Universidad Pablo de Olavide & Middlesex University); J. Antonio Lacomba (Departamento de Teoria e Historia Economica, University of Granada & Globe); Francisco Lagos (Departamento de Teoria e Historia Economica, University of Granada & Globe)
    Abstract: This article considers three different types of experimental labor contracts. A novel aspect of our experimental design is that workers have the chance of investing money in a long-term project in order to increase their income. We find a strong relationship between what happens inside the labor market (worker’s performance) and what happens outside the labor market (long-term investment). Long-term labor relationships seem to provide a safer environment for undertaking successful long-term projects. In the other direction, investing in long-term projects leads workers to improve their performance inside the labor market. We also introduce a new type of performance-based dismissal-barrier contract, whereby firms are required to retain workers if they have satisfied the effort level required by the firms. We find that performance-based dismissal barriers in the labor market leads to more long-term employment relationships and higher overall productivity.
    Keywords: Incomplete contracts, long-term relationships, renewable dismissal barriers, workers’ stability, investment and experiments.
    JEL: J41 J3 C91 D01
    Date: 2016
  22. By: Boris V. Chernyshev (National Research University Higher School of Economics); Vladimir A. Medvedev (National Research University Higher School of Economics)
    Abstract: In tasks involving response choice based on certain stimulus-to-response mappings, at least two stages of information processing may be involved: (1) formation of sensory stimulus object representations leading to stimulus identification, and (2) application of stimulus-to-response mappings (i.e. “task rules”) to these representations leading to response selection. Most of the research done in this area involved simple reflex-like stimulus-to-response mappings, thus addressing mostly the perceptual aspect of decision making. Here we used the condensation task, which involves more complex stimulus-to-response mappings. Within each subject, we divided participants’ responses into four conditions depending upon performance speed and accuracy: fast correct, fast erroneous, slow correct and slow erroneous responses. We compared event-related potentials between these conditions. We found that P2 amplitude was related to performance accuracy, the effect being evident for fast but not for slow responses. N2 amplitude was increased for slow responses – both correct and erroneous. We suggest that fast errors result mostly from erroneous sensory representations that immediately become translated into actions in conditions of low motor threshold. On the contrary, slow responses happen in conditions of low executive attention, through reevaluation of sensory representations and invocation of cognitive control process via the mechanisms of response conflict detection.
    Keywords: auditory perception, cognitive control, attention, response time, event-related potentials, P2, N2.
    JEL: Z
    Date: 2016

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