nep-exp New Economics Papers
on Experimental Economics
Issue of 2017‒01‒15
eighteen papers chosen by

  1. Cognitive Hierarchies in the Minimizer Game By Berger, Ulrich; De Silva, Hannelore; Fellner-Röhling, Gerlinde
  2. Honesty or Dishonesty of Taxpayer Communications in an Enforcement Regime By James Alm; David M. Bruner; Michael McKee
  3. Discrete Adjustment to a Changing Environment: Experimental Evidence By Khaw, Mel Win; Stevens, Luminita; Woodford, Michael
  4. The Strength of the Symbol: Are we Willing to Punish Evaders ? By Aurélie Bonein; Cécile Bazart
  5. Labor Drops: Experimental Evidence on the Return to Additional Labor in Microenterprises By Suresh De Mel; David McKenzie; Christopher Woodruff
  6. An experimental investigation of rating-market regulation By Keser, Claudia; Özgümüs, Asri; Peterlé, Emmanuel; Schmidt, Martin
  7. Gender Differences in Academic Performance: The Role of Negative Marking in Multiple-Choice Exams By Funk, Patricia; Perrone, Helena
  8. Affirmative Action and Team Performance By Felix Koelle
  9. When You Know Your Neighbour Pays Taxes: Information, Peer Effects, and Tax Compliance By James Alm; Kim M. Bloomquist; Michael McKee
  10. Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment By Jacopo Bonan; Philippe LeMay-Boucher; Douglas Scott
  11. Evaluating replicability of laboratory experiments in Economics By Camerer, Colin; Dreber, Anna; Forsell, Eskil; Ho, Teck-Hua; Huber, Jurgen; Johannesson, Magnus; Kirchler, Michael; Almenberg, Johan; Altmejd, Adam; Chan, Taizan; Heikensten, Emma; Holzmeister, Felix; Imai, Taisuke; Isaksson, Siri; Nave, Gideon; Pfeiffer, Thomas; Razen, Michael; Wu, Hang
  12. What Drives Destruction? On the Malleability of Anti-Social Behavior By Müller, Julia; Schwieren, Christiane; Spitzer, Florian
  13. Social Image and Economic Behavior in the Field: Identifying, Understanding and Shaping Social Pressure By Leonardo Bursztyn; Robert Jensen
  14. Cool to be Smart or Smart to be Cool? Understanding Peer Pressure in Education By Leonardo Bursztyn; Georgy Egorov; Robert Jensen
  15. Do women respond less to performance pay? Building evidence from multiple experiments By Bandiera, Oriana; Fischer, Greg; Prat, Andrea; Ytsma, Erina
  16. Do anti-poverty programs sway voters? Experimental evidence from Uganda By Blattman, Christopher; Emeriau, Mathilde; Fiala, Nathan
  17. The Impact of NuVal Shelf Nutrition Labels on Consumption: Evidence from Cold Cereal Purchases By Melo, Grace; Zhen, Chen
  18. Linking Risk Aversion, Time Preference andFertilizer Use in Burkina Faso By Tristan Le Cotty; Elodie Maitre d'Hotel; Raphael Soubeyran; Julie Subervie

  1. By: Berger, Ulrich; De Silva, Hannelore; Fellner-Röhling, Gerlinde
    Abstract: Experimental tests of choice predictions in one-shot games show only little support for Nash equilibrium (NE). Poisson Cognitive Hierarchy (PCH) and level-k (LK) are behavioral models of the thinking-steps variety where subjects differ in the number of levels of iterated reasoning they perform. Camerer et al. (2004) claim that substituting the Poisson parameter tau = 1.5 yields a parameter-free PCH model (pfPCH) which predicts experimental data considerably better than NE. We design a new multi-person game, the Minimizer Game, as a testbed to compare initial choice predictions of NE, pfPCH and LK. Data obtained from two large-scale online experiments strongly reject NE and LK, but are well in line with the point prediction of pfPCH. (authors' abstract)
    Keywords: behavioral game theory; experimental games; Poisson cognitive hierarchy; level-k model; minimizer game
    Date: 2016–01
  2. By: James Alm (Department of Economics, Tulane University); David M. Bruner (Department of Economics, Appalachian State University); Michael McKee (Department of Economics, Appalachian State University)
    Abstract: In many settings the true likelihood of capture when engaging in an illegal activity, such as tax evasion, is not well known to an individual. "Official" statements from the tax administration regarding enforcement effort provide some information. In addition, "informal", or "unofficial", communication among taxpayers can supplement these official announcements, but individuals do not know with certainty whether such unofficial information is honest (or accurate) versus dishonest (or inaccurate). We examine the truthfulness of an individual's revelation of unofficial information to other individuals, along with the factors that affect any revelation, focusing on the intrinsic motivations for revelations. Our experimental design allows us to examine the type and the honesty of messages that an individual chooses to send to other individuals regarding their own audit outcome and their own compliance behavior. Our results indicate that most individuals send accurate messages about their own audit outcomes and their own compliance behaviors. Nevertheless, many individuals are also systematically dishonest about being audited; that is, we observe a significant tendency for individuals to claim that they were audited when they were not. We also observe a strong interaction between individuals' audit outcomes and their compliance behaviors, so that individuals who engaged in tax evasion and who were audited were more truthful in their communications than those whose tax evasion went undetected.
    Keywords: Tax compliance, Tax audits, Information, Honesty, Experimental economics.
    JEL: H2 H26 C91
    Date: 2016–12
  3. By: Khaw, Mel Win; Stevens, Luminita; Woodford, Michael
    Abstract: We conduct a laboratory experiment to shed light on the cognitive limitations that may affect the way decision makers respond to changes in their economic environment. The subjects solve a tracking problem: they estimate the probability of a binary event, which changes stochastically. The subjects observe draws and indicate their draw-by-draw estimate. Our subjects depart from the optimal Bayesian benchmark in systematic ways, but these deviations are not simply the result of some boundedly rational, but deterministic rule. Rather, there is a random element in the subjects' response to any given history of evidence. Moreover, subjects adjust their forecast in discrete jumps rather than after each new ring draw, even though there are no explicit adjustment costs. They adjust by both large and small amounts, contrary to the predictions of a simple Ss model of optimal adjustment subject to a fixed cost. Finally, subjects prefer to report "round number" probabilities, even though that requires exerting additional effort. Each of these regularities resembles the behavior of firms setting prices for their products. We develop a model of inattentive adjustment and compare its quantitative fit with alternative models of stochastic discrete adjustment used in the literature on price adjustment.
    Keywords: adjustment hazard; generalized Ss model; menu costs; rational inattention
    JEL: C91 D84 E03
    Date: 2016–12
  4. By: Aurélie Bonein; Cécile Bazart
    Abstract: Starting from the observation of taxpayers’ heterogeneity in terms of honesty andof the existence of a perverse social dynamic leading the most honest to evade, wepropose a simple mechanism to restore honesty. In a laboratory experiment, we testthe willingness of subjects to voluntarily contribute to a fund dedicated to financethe fight against tax evasion. This voluntary contribution mechanism, without redis-tribution, is analyzed thanks to several treatments that differ depending on the typeand the level of the required contribution. We show: (i) that a substantial numberof subjects contribute and that the frequency of contribution decreases with the in-crease in the level of contribution; (ii) that the most honest taxpayers are those whocontribute and (iii) that risk aversion deters subjects to contribute, while inequalityaversion encourages them. Finally, in line with the literature on tax evasion, we con-firm that the increase in the audit probability, which is observed only in groups wherethe collective contribution is sufficient, reduces evasion in these groups..
    Date: 2017–01
  5. By: Suresh De Mel; David McKenzie; Christopher Woodruff
    Abstract: The majority of enterprises in developing countries have no paid workers. Is this optimal, or the result of frictions in labor markets? We conduct an experiment providing wage subsidies to randomly chosen microenterprises in Sri Lanka. In the presence of frictions, a short-term subsidy could have a lasting impact on employment. We find the subsidy induced firms to hire, but there was no lasting impact on employment, profitability, or sales. Analysis rules out several theoretical mechanisms that could result in sub-optimally low employment. We conclude that labor market frictions are not the reason own-account workers do not become employers.
    JEL: C93 D22 L26 O12 O17
    Date: 2016–12
  6. By: Keser, Claudia; Özgümüs, Asri; Peterlé, Emmanuel; Schmidt, Martin
    Abstract: We introduce a simple game-theoretical model that captures the main aspects of the repeated interaction between an issuer and a credit-rating agency. It involves up-front payments of issuer-fees and direct publication of requested ratings. Due to pecuniary injuries for untruthful ratings, the creditrating agency should always report truthfully in the subgame perfect equilibrium. Knowing this, the issuer should never request a rating. Conducting laboratory experiments, we find that behavior significantly deviates from the equilibrium prediction in favor of a cooperative solution: issuers frequently do request ratings, which is often reciprocated with untruthful good ratings.
    Keywords: game theory,laboratory experiments,rating agencies,regulation
    JEL: C70 C9 G0
    Date: 2017
  7. By: Funk, Patricia; Perrone, Helena
    Abstract: We investigate whether penalizing wrong answers on multiple-choice tests ("negative marking") makes females relatively worse off compared to males (the comparison being no penalties for wrong answers). With a cohort of more than 500 undergraduate students at a major Spanish university, we conducted a field experiment in the Microeconomics course. We created a final exam, which was composed of two parts: one with penalties for wrong answers and one without. Students were randomly allocated to different exam permutations, which differed in the questions that carried penalties for wrong answers. We find that the penalties did not harm female students. Females performed better than males on both parts of the exam and did so to a greater extent on the part with penalties. Whereas risk aversion did not affect overall scores (despite affecting answering behavior), ability did. High-ability students performed relatively better with negative marking, and these were more likely to be women.
    Date: 2016–12
  8. By: Felix Koelle (Faculty of Management, Economics and Social Sciences, University of Cologne)
    Abstract: We experimentally investigate spillover effects of affirmative action policies in tournaments on subsequent team performance and the willingness to work in teams. In three different team environments, we find that such policies in form of gender quotas do not harm performance and cooperation within teams, and do not weaken people’s willingness to work in teams. Our results, thus, provide further evidence that gender quotas can have the desired effect of promoting women without harming efficiency.
    Keywords: Affirmative action; teams; gender; performance; cooperation; selection; experiment
    Date: 2016
  9. By: James Alm (Department of Economics, Tulane University); Kim M. Bloomquist (Taxpayer Advocate Service, U.S. Internal Revenue Service); Michael McKee (Department of Economics, Appalachian State University)
    Abstract: In this paper, we suggest that individuals' tax compliance behaviours are affected by the behaviour of their "neighbours", or those about whom they may have information, whom they may know, or with whom they may interact on a regular basis. Individuals are more likely to file and to report their taxes when they believe that other individuals are also filing and reporting their taxes; conversely, when individuals believe that others are cheating on their taxes, they may well become cheaters themselves. We use experimental methods to test the role of such information about peer effects on compliance behaviour. In one treatment setting, we inform individuals about the frequency that their neighbours submit a tax return. In a second treatment setting, we inform them about the number of their neighbours who are audited, together with the penalties that they pay. In both cases, we examine the impact of information on filing behaviour and also on subsequent reporting behaviour. We find that providing information on whether one's neighbours are filing returns and/or reporting income has a statistically significant and economically large impact on individual filing and reporting decisions. However, this "neighbour" information does not always improve compliance, depending on the exact content of the information.
    Keywords: Tax evasion, Tax compliance, Behavioural economics, Experimental economics.
    JEL: H26 C91
    Date: 2016–12
  10. By: Jacopo Bonan (Fondazione Eni Enrico Mattei (FEEM)); Philippe LeMay-Boucher (Heriot-Watt University); Douglas Scott (The University of Nottingham)
    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
    JEL: D01 D91 C93 O1
    Date: 2016–12
  11. By: Camerer, Colin; Dreber, Anna; Forsell, Eskil; Ho, Teck-Hua; Huber, Jurgen; Johannesson, Magnus; Kirchler, Michael; Almenberg, Johan; Altmejd, Adam; Chan, Taizan; Heikensten, Emma; Holzmeister, Felix; Imai, Taisuke; Isaksson, Siri; Nave, Gideon; Pfeiffer, Thomas; Razen, Michael; Wu, Hang
    Abstract: The reproducibility of scientific findings has been called into question. To contribute data about reproducibility in economics, we replicate 18 studies published in the American Economic Review and the Quarterly Journal of Economics in 2011-2014. All replications follow predefined analysis plans publicly posted prior to the replications, and have a statistical power of at least 90% to detect the original effect size at the 5% significance level. We find a significant effect in the same direction as the original study for 11 replications (61%); on average the replicated effect size is 66% of the original. The reproducibility rate varies between 67% and 78% for four additional reproducibility indicators, including a prediction market measure of peer beliefs.
    Keywords: replication, economics, experiment
    JEL: A12 B41 C9
    Date: 2016–03–03
  12. By: Müller, Julia; Schwieren, Christiane; Spitzer, Florian
    Abstract: Many recent experimental studies have shown that some subjects destroy other subjects' incomes without receiving any material benefit, and that they even incur costs to do so. In this paper, we study the boundary conditions of this phenomenon, which is referred to as anti-social behavior. We introduce a four-player destruction game, in which we vary the framing and the presence of another activity, running in parallel to the destruction game. We observe a substantial amount of destruction in the baseline condition without the parallel activity, and with a framing in the spirit of previous destruction experiments. Our results indicate that a parallel activity as well as a framing emphasizing joint ownership of the item that can be destroyed reduces destruction almost to zero. We therefore argue that the emergence of anti-social behavior is highly contingent on the contextual environment.
    Keywords: anti-social behavior, joy of destruction, experiment, framing, boredom
    Date: 2016–12
  13. By: Leonardo Bursztyn; Robert Jensen
    Abstract: Many people care about how they are perceived by those around them. A number of recent field experiments in economics have found that such social image concerns can have powerful effects on a range of behaviors. In this paper, we first review this recent literature aimed at identifying social image concerns or social pressure. We then highlight and discuss two important areas that have been comparatively less well-explored in this literature: understanding social pressure, including the underlying mechanisms, and whether such pressure can be shaped or influenced.
    JEL: D1 I31 Z13
    Date: 2016–12
  14. By: Leonardo Bursztyn; Georgy Egorov; Robert Jensen
    Abstract: Concerns about social image may negatively affect schooling behavior. We identify two potentially important peer cultures: one that stigmatizes effort (thus, where it is “smart to be cool”) and one that rewards ability (where it is “cool to be smart”). We build a model showing that either may lower the takeup of educational activities when takeup and performance are potentially observable to peers. We design a field experiment allowing us to test whether students are influenced by these concerns at all, and then which they are more influenced by. We examine high schools in two settings: a low-income, high minority share area and a higher-income, lower minority share area. In both settings, peer pressure reduces takeup of an SAT prep package. We show that this is consistent with a greater concern for hiding effort in the lower-income school, and a greater concern with hiding low ability in the higher-income schools.
    JEL: C93 D83 I21 I24
    Date: 2017–01
  15. By: Bandiera, Oriana; Fischer, Greg; Prat, Andrea; Ytsma, Erina
    Abstract: Performance pay increases productivity but also earnings inequality. Can it widen the gender gap because women are less responsive? We provide answers by aggregating evidence from existing experiments on performance pay that have both male and female subjects, regardless of whether they test for gender differences. We develop a Bayesian hierarchical model (BHM) that allows us to estimate both the average effect and the heterogeneity across studies. We find that the gender response difference is close to zero and heterogeneity across studies is small. We also find that the average effect of performance pay is positive, increasing output by 0.28 standard deviations. The data are thus strongly supportive of agency theory for men and women alike.
    Keywords: econometrics; Gender; meta-analysis; wage differentials
    JEL: C11 J16 J31
    Date: 2016–12
  16. By: Blattman, Christopher; Emeriau, Mathilde; Fiala, Nathan
    Abstract: A Ugandan government program allowed groups of young people to submit proposals to start skilled enterprises. Among 535 eligible proposals, the government randomly selected 265 to receive grants of nearly $400 per person. Blattman et al. (2014) showed that, after four years, the program raised employment by 17% and earnings 38%. This paper shows that, rather than rewarding the government in elections, beneficiaries increased opposition party membership, campaigning, and voting. Higher incomes are associated with opposition support, and we hypothesize that financial independence frees the poor to express political preferences publicly, being less reliant on patronage and other political transfers.
    Keywords: cash transfers; employment; field experiment; labor market programs; partisanship; Political behavior; poverty; Uganda; voting
    Date: 2016–12
  17. By: Melo, Grace; Zhen, Chen
    Abstract: Research examining the effect of summary shelf nutrition labels on consumers’ behavior in real market settings is scarce. Using a supermarket’s voluntary adoption of NuVal―a 1 to 100 numeric summary shelf label system―as a natural experiment, we estimate a Two-Part Model (TPM) to identify the effect of the NuVal label on consumer purchasing decisions for cold cereal. Our results show that posting the NuVal score not only increases the purchase volume of healthier cold cereal products but also increases households’ likelihood to purchase cold cereal products with higher nutrition scores. Tests for heterogeneous treatment effects reveal that lower-income households experience a large improvement in their food choices when the NuVal scores are posted.
    Keywords: Shelf Nutrition Labels, NuVal, Two-Part Model, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, Marketing, Q18, D12,
    Date: 2017
  18. By: Tristan Le Cotty; Elodie Maitre d'Hotel; Raphael Soubeyran; Julie Subervie
    Abstract: This paper investigates whether Burkinabe maize farmers’ fertilizer-use decisionsare correlated with their risk and time preferences. We conducted a survey and a se-ries of hypothetical experiments on a sample of 1,500 farmers. We find that morepatient farmers do use more fertilizer, but it is only because they plant more maize (afertilizer-intensive crop) rather than because they use more fertilizer per hectare ofmaize planted. Conversely, we find no statistically significant link between risk aver-sion and fertilizer use. We use a simple two-period model, which suggests that riskaversion may indeed have an ambiguous effect on fertilizer use.
    Date: 2017–01

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