nep-exp New Economics Papers
on Experimental Economics
Issue of 2017‒01‒22
25 papers chosen by
Daniel Houser
George Mason University

  1. The Origins and Extent of Entrepreneurial Action-Orientedness: An Experimental Study By Ahmad Barirani; Randolph Sloof; Mirjam van Praag
  2. Can occupational norms foster cooperative behavior? An experimental study comparing cooperation by military officers and civilians By Johannemann, Kirsten; Morasch, Karl; Wiens, Marcus
  3. Does Experience Affect Fairness, Reciprocity and Cooperation in Lab Experiments? By V. Pelligra; T. Reggiani; T. Medda
  4. Property rights and loss aversion in contests By Subhasish M. Chowdhury; Joo Young Jeon; Abhijit Ramalingam
  5. Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests By Ander, Ola; Holm, Håkan J.; Wengström, Erik
  6. Goal Setting and Raising the Bar: A Field Experiment By Max van Lent; Michiel Souverijn
  7. Does Uncertainty Deter Provision of Public Goods? By Béatrice Boulu-Reshef; Samuel H. Brott; Adam Zylbersztejn
  8. Do State Laws Protecting Older Workers from Discrimination Reduce Age Discrimination in Hiring? Experimental (and Nonexperimental) Evidence By David Neumark; Ian Burn; Patrick Button; Nanneh Chehras
  9. The market for talent: Competition for resources and self governane in teams By Abhijit Ramalingam; Brock V. Stoddard; James M. Walker
  10. At the root of the North-South cooperation gap in Italy: Preferences or beliefs? By M.Bigoni; S. Bortolotti; M. Casari; D. Gambetta
  11. Knowing When to Stop and Make a Choice, an Experiment on Optimal Sequential Sampling By Ambroise Descamps; S´ebastien Massoni; Lionel Page
  12. Focality and asymmetry in multi-battle contests By Subhasish M. Chowdhury; Dan Kovenock; David Rojo Arjona; Nathaniel T. Wilcox
  13. You Owe Me By Malmendier, Ulrike; Schmidt, Klaus M.
  14. Testing for Heterogeneity of Preferences in Randomized Experiments: A Satisfaction-Based Approach Applied to Multiplayer Prisoners’ Dilemmas By F. Salustri; V. Pelligra; L. Becchetti
  15. Wage Contracts and Workplace Misbehaviors By Jeffery Flory; Andreas Leibbrandt; John List
  16. Risk Sharing and the Demand for Insurance: Theory and Experimental Evidence from Ethiopia By Erlend Berg; Michael Blake; Karlijn Morsink
  17. E-governance, Accountability, and Leakage in Public Programs: Experimental Evidence from a Financial Management Reform in India By Banerjee, Abhijit; Duflo, Esther; Imbert, Clément; Mathew, Santhosh; Pande, Rohini
  18. Behavioural types in public goods games: A re-analysis by hierarchical clutering By Francesco Fallucchi; R. Andrew Luccasen; Theodore L. Turocy
  19. Sophisticated Bidders in Beauty-Contest Auctions By Stefano Galavotti; Luigi Moretti; Paola Valbonesi
  20. Does the usage of TV streaming on the Internet bring about new functions to the public service broadcaster? : Evidence from a randomized field experiment By Kuroda, Toshifumi; Kido, Daido; Ichikawa,Yoshiharu
  21. Wage compression and manager inequality aversion By David B. Johnson; Abhijit Ramalingam
  22. The value of mortality risk reductions. Pure altruism - a confounder? By Gyrd-Hansen, Dorte; Kjær, Trine; Nielsen, Jytte Seested
  23. Can Enhancing the Benefits of Formalization Induce Informal Firms to Become Formal? Experimental Evidence from Benin By Benhassine, Najy; McKenzie, David J.; Pouliquen, Victor; Santini, Massimiliano
  24. Responding to (Un)Reasonable Requests By V. Pelligra; T. Reggiani; D.J. Zizzo
  25. Eliciting strategies in indefinitely repeated games of strategic substitutes and complements By Matthew Embrey; Friederike Mengel; Ronald Peeters

  1. By: Ahmad Barirani (Copenhagen Business School, Denmark); Randolph Sloof (Amsterdam School of Economics, University of Amsterdam, The Netherlands); Mirjam van Praag (Copenhagen Business School in Denmark, Tinbergen Institute in The Netherlands)
    Abstract: We test the hypothesis, based on popular and theoretical perspectives, that entrepreneurs are more action-oriented than other occupational groups. We compare their playing strategies in an optimal stopping game using a randomized online experiment among 100s of entrepreneurs, managers and employees. Our experimental results show that entrepreneurs are indeed more action-oriented than others. We theorize that this is driven by their lower levels of loss aversion and higher levels of curiosity. Our empirical test results show that (i) entrepreneurs score indeed higher, on average, than managers and employees on curiosity and lower on loss aversion; (ii) the di fference in action-orientedness between entrepreneurs and others vanishes when controlling for individual curiosity levels and (iii) an alternative treatment that provides subjects with counterfactual information (about what would have happened in case of stopping) increases their willingness to stop. Under some assumptions, the combination of these results leads to the conclusion that the higher action-orientedness of entrepreneurs can be linked to their greater curiosity, but not to their lower level of loss aversion. Hence, we find support for the intuitive idea that (curiosity driven) action-orientedness enhances the identi fication and/or exploitation of opportunities.
    Keywords: Entrepreneurs; Managers; Employees; Inaction; Curiosity; Loss aversion; Lab-in-the field experiment.
    JEL: L26 C93 D03
    Date: 2017–01–13
  2. By: Johannemann, Kirsten; Morasch, Karl; Wiens, Marcus
    Abstract: In this experimental study we examine the behavior of Bundeswehr officers and officer candidates regarding their willingness to cooperate. Due to the military training which focuses on comradeship and reliable teamwork even under extreme conditions, we expect a strong bond between soldiers and therefore more cooperation among them. Furthermore there are additional norms for soldiers that explicitly call for social responsibility and an appropriate behavior relative to civilians. For that reason we also expect more altruism and trust of soldiers compared to pure civilian groups. To explore these issues in an experimental setting, the subjects had to play the dictator game, the ultimatum game, and the trust game. These three established experiments allow us to measure and distinguish between different aspects of social and cooperative motivation. We find that soldiers are on average more altruistic, more cooperative, and more trusting as well as more trustworthy. These results do not only hold for the interaction among soldiers but in most cases also with regard to the behavior of soldiers towards civilians.
    Keywords: Experiment,Dictator Game,Ultimatum Game,Trust Game,Cooperative Behavior,Professional Norms,Military
    JEL: C72 C78 C91 D01 D63 D64
    Date: 2016
  3. By: V. Pelligra; T. Reggiani; T. Medda
    Abstract: One of the most common criticisms about the external validity of lab experiments in economics concerns the representativeness of participants usually considered in these studies. The ever-increasing number of experiments and the prevalent location of research centers in university campuses produced a peculiar category of subjects - Students with high level of laboratory experience built through repeated participations in experimental sessions. We investigate whether the experience accumulated in this way biases subjects’ behaviour in a set of simple games widely used to study social preferences (Dictator Game, Ultimatum Game, Trust Game, and Prisoner’s Dilemma Game). Our main finding shows that subjects with a high level of experience in lab experiments do not behave in a significantly different way from novices.
    Keywords: lab experiment,External Validity,Experimental Methodology,Experience
    Date: 2016
  4. By: Subhasish M. Chowdhury (University of East Anglia); Joo Young Jeon (University of East Anglia); Abhijit Ramalingam (University of East Anglia)
    Abstract: We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three treatments: in ‘gain’ two players start with no prize and make sunk bids to win a prize; whereas in ‘loss’ both the subjects start with prizes and whoever loses the contest loses their prize. Finally, in ‘mixed’ one player starts with a prize, which stays with him if he wins but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility or the standard loss aversion models predict no difference in bids across treatments. We introduce a new model with loss aversion in which the property rights are made salient. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. In the laboratory, no significant difference is found in bids in the loss (gain) treatment versus bids by property rights holder (non-holder) in the mixed treatment. A model incorporating both loss aversion and social preference explains this result.
    Keywords: contest, experiment, framing, property rights, loss aversion
    JEL: C91 C72 D23 D74
    Date: 2016–09–23
  5. By: Ander, Ola (Uppsala University); Holm, Håkan J. (Lund University); Wengström, Erik (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: 2017–01–11
  6. By: Max van Lent (Erasmus University Rotterdam, The Netherlands); Michiel Souverijn (Erasmus University Rotterdam, The Netherlands)
    Abstract: We study goal setting using a randomized field experiment involving 1092 first-year undergraduate students. Students have private mentor-student meetings during the year. We instructed a random subset of mentors to encourage students to set a course-specific grade goal during one of the mentor-student meetings (goal treatment). A random subset of those mentors was further instructed to challenge students to set more ambitious goals if deemed appropriate (raise treatment). We find that students in the goal treatment perform significantly better as compared to students in the control group, and more so when they performed poorly prior to the experiment. Next, we find that students in the raise treatment do not perform significantly different from the control group. Finally, students who set a goal and are challenged to set a more ambitious goal perform significantly worse than comparable students in the goal treatment.
    Keywords: Goal setting; motivation; education; field experiments
    JEL: C93 I23
    Date: 2017–01–13
  7. By: Béatrice Boulu-Reshef (Centre d'Economie de la Sorbonne); Samuel H. Brott (Berkeley Research Group, LLC, Washington); Adam Zylbersztejn (GATE L-SE, Université Lumière Lyon 2)
    Abstract: We study a finitely repeated public goods game (based on the voluntary contribution mechanism) played under complete uncertainty about the marginal benefit of the public good relative to the private consumption (commonly known as the marginal per capita return: neither one's marginal per capita return nor other players' marginal per capita returns are known at the time of decision-making. We show that contributions are equivalent when the rate of return is predetermined and when it is uncertain, and display a similar decay over time. Combined with the previous experimental findings, our results suggest that the cooperation in public goods games is sensitive to the source of uncertainty about marginal per capita return
    Keywords: Cooperation; uncertainty; voluntary contribution mechanism; public good; expected return
    JEL: H41 D81 C91 C92
    Date: 2017–01
  8. By: David Neumark (University of California-Irvine); Ian Burn (University of California-Irvine); Patrick Button (Tulane University); Nanneh Chehras (University of California-Irvine)
    Abstract: We provide evidence from a field experiment — a correspondence study — on age discrimination in hiring for retail sales jobs. We collect experimental data in all 50 states and then relate measured age discrimination — the difference in callback rates between old and young applicants — to variation across states in antidiscrimination laws offering protections to older workers that are stronger than the federal age and disability discrimination laws. We do a similar analysis for nonexperimental data on differences across states in hiring rates of older versus younger workers. The experimental evidence points consistently to evidence of hiring discrimination against older men and more so against older women. However, the evidence on the relationship between hiring discrimination against older workers and state variation in age and disability discrimination laws is not so clear; at a minimum, there is not a compelling case that stronger state protections reduce hiring discrimination against older workers. In contrast, the nonexperimental evidence suggests that stronger disability discrimination protections increase the relative hiring of older workers.
    Date: 2016–09
  9. By: Abhijit Ramalingam (University of East Anglia); Brock V. Stoddard (University of South Dakota); James M. Walker (Indiana University)
    Abstract: We experimentally investigate the effect of naturally occurring competition for the resources of team members with ‘divided loyalties’ on the ability of teams to overcome the free-rider problem associated with the provision of public goods. We find that such competition alone creates ‘winners’ and ‘losers’. However, if groups are able to determine their membership, they are able to attract the ‘loyalties’ of all team members. By eschewing the study of additional mechanisms that require external intervention or alterations of payoff functions, our work highlights the role played by implicit market competition and endogenous self-governance of membership in promoting cooperation.
    Keywords: public goods, experiment, divided loyalties, competition, resources, endogenous membership
    JEL: C72 C91 C92 H41
    Date: 2016–10–05
  10. By: M.Bigoni; S. Bortolotti; M. Casari; D. Gambetta
    Abstract: The marked difference in the development of the North and the South of Italy represents a prototypical case of seemingly intractable within-country disparities. Recent research found that a plausible determinant of this socio-economic gap would be a difference in the ability to cooperate. Through a laboratory experiment we investigate whence this difference derives, whether from different preferences or from different beliefs. Our findings indicate that Northerners and Southerners share the same individual pro-social preferences, and that the cooperation gap lies rather in the pessimistic beliefs that Southerners have about their cooperativeness. Southerners, furthermore, manifest a stronger aversion to social risk, as compared to the risk of nature. A policy implication is that an intervention or an event that reduced pessimistic beliefs would directly boost cooperation levels.
    JEL: C72 C93 Z13
    Date: 2017–01
  11. By: Ambroise Descamps; S´ebastien Massoni; Lionel Page
    Abstract: We investigate how people make choices when they are unsure about the value of the options they face, and can invest in the acquisition of more information. The optimal sequential sampling solution to this problem identifies when, and at what level of risk, a decision maker should stop gathering costly information. We design a laboratory experiment to test our predictions. While participants choose a level of risk close to theoretical one, they deviate from the optimal strategy in a systematic manner: information is over-sampled when expensive and under-sampled when cheap. With time, participants tend to learn, without converging towards equilibrium.
    Date: 2017–01–12
  12. By: Subhasish M. Chowdhury (University of East Anglia); Dan Kovenock (Chapman University); David Rojo Arjona (University of Leicester); Nathaniel T. Wilcox (Chapman University)
    Abstract: This article examines behavior in two-person constant-sum Colonel Blotto games in which each player maximizes the expected total value of the battlefields won. A lottery contest success function is employed in each battlefield. Recent experimental research on such games provides only partial support for Nash equilibrium behavior. We hypothesize that the salience of battlefields affects strategic behavior (the salient target hypothesis). We present a controlled test of this hypothesis – against Nash predictions – when the sources of salience come from certain asymmetries in either battlefield values or labels (as in Schelling (1960)). In both cases, subjects over- allocate the resource to the salient battlefields relative to the Nash prediction. However, the effect is stronger with salient values. In the absence of salience, we replicate previous results in the literature supporting the Nash prediction.
    Keywords: conflict, experiment, Colonel Blotto, focal point, asymmetry
    JEL: C72 C91 D72 D74
    Date: 2016–08–16
  13. By: Malmendier, Ulrike (University of California at Berkeley); Schmidt, Klaus M. (University of Munich)
    Abstract: In business and politics, gifts are often aimed at influencing the recipient at the expense of third parties. In an experimental study, which removes informational and incentive confounds, subjects strongly respond to small gifts even though they understand the gift giver’s intention. Our findings question existing models of social preferences. They point to anthropological and sociological theories about gifts creating an obligation to reciprocate. We capture these effects in a simple extension of existing models. We show that common policy responses (disclosure, size limits) may be ineffective, consistent with our model. Financial incentives are effective but can backfire.
    Keywords: gift exchange; externalities; lobbyism; corruption; reciprocity; social preferences
    JEL: C91 D62 D73 I11
    Date: 2017–01
  14. By: F. Salustri; V. Pelligra; L. Becchetti
    Abstract: We use experimental data from the “vote with the wallet” multiplayer prisoner’s dilemma to investigate with a finite mixture approach the effect of a responsible purchase on players’ satisfaction. We find clear-cut evidence of heterogeneity of preferences with two groups of players that differ significantly in terms of effects of the responsible choice on satisfaction.
    Keywords: satisfaction,randomized experiment,multiplayer prisoners’ dilemma,mixture models
    Date: 2016
  15. By: Jeffery Flory; Andreas Leibbrandt; John List
    Abstract: Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehavior-bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers' propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.
    Date: 2016
  16. By: Erlend Berg; Michael Blake; Karlijn Morsink
    Abstract: Households, organisations and governments commonly engage in risk sharing. However, residual risk often remains considerable, especially in low-income countries. In response, many policy makers have considered the introduction of insurance. But this raises the question of how demand for insurance depends on the extent of pre-existing risk sharing. We contribute, first, by showing in a simple model that risk sharing is a substitute for indemnity insurance but a complement to index insurance. Second, in an artefactual field experiment with Ethiopian farmers, we are the first to vary the extent of risk sharing exogenously. The predictions from theory are confirmed.
    Date: 2017
  17. By: Banerjee, Abhijit; Duflo, Esther; Imbert, Clément; Mathew, Santhosh; Pande, Rohini
    Abstract: In collaboration with the Government of Bihar, India, we conducted a large-scale experiment to evaluate whether transparency in fiscal transfer systems can increase accountability and reduce corruption in the implementation of a workfare program. The reforms introduced electronic fund-flow, cut out administrative tiers, and switched the basis of transfer amounts from forecasts to documented expenditures. Treatment reduced leakages along three measures: expenditures and hours claimed dropped while an independent household survey found no impact on actual employment and wages received; a matching exercise reveals a reduction in fake households on payrolls; and local program officials' self-reported median personal assets fell.
    Keywords: audits; financial reform; leakage; transparency; workfare
    JEL: H11 O2
    Date: 2017–01
  18. By: Francesco Fallucchi (University of East Anglia); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (University of East Anglia)
    Abstract: We re-analyse participant behaviour in standard economics experiments studying voluntary contributions to a public good. Previous approaches were based in part on a priori models of decision-making, such as maximising personal earnings, or reciprocating the behaviour of others. Many participants however do not conform to one of these models exactly, requiring ad hoc adjustments to the theoretical baselines to identify them as belonging to a given behavioural type. We construct a typology of behaviour based on a similarity measure between strategies using hierarchical clustering analysis. We identify four clearly distinct behavioural types which together account for over 90% of participants in six experimental studies. The resulting type classification distinguishes behaviour across groups more consistently than previous approaches.
    JEL: C65 C71 H41
    Date: 2017–01–12
  19. By: Stefano Galavotti (Department of Economics and Management, University of Padova); Luigi Moretti (Centre d'Economie de la Sorbonne); Paola Valbonesi (Department of Economics and Management, University of Padova)
    Abstract: We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closet to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' accumulated capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience
    Keywords: cognitive hierarchy; auctions; beauty-contest; public procurement
    JEL: C70 D01 D44 D83 H57
    Date: 2017–01
  20. By: Kuroda, Toshifumi; Kido, Daido; Ichikawa,Yoshiharu
    Keywords: Public service media,Internet,Field experiment
    JEL: D12 D72 D83 L86
    Date: 2016
  21. By: David B. Johnson (University of Central Missouri); Abhijit Ramalingam (University of East Anglia)
    Abstract: Literature exploring pay finds that highly(less) productive workers often earn less (more) than they would if compensation perfectly reflected productivity, indicating "wage compression". Using a laboratory experiment, we show that such wage compression may partially be due to managers' own preference for equality.
    Keywords: experiment, inequality, managers, promotions, wages
    JEL: C91 M51 M52
    Date: 2016–08–25
  22. By: Gyrd-Hansen, Dorte (COHERE); Kjær, Trine (COHERE); Nielsen, Jytte Seested (Newcastle University Business School)
    Abstract: This paper examines public valuations of mortality risk reductions. We set up a theoretical framework that allows for altruistic preferences, and subsequently test theoretical predictions through the design of a discrete choice experiment. By varying the tax scenario (uniform versus individual tax), the experimental design allows us to verify whether pure altruistic preferences are present and the underlying causes. We find evidence of negative pure altruism. Under a coercive uniform tax system respondents lower their willingness to pay possibly to ensure that they are not forcing others to pay at a level that corresponds to their own – higher – valuations. This hypothesis is supported by the observation that respondents perceive other individuals’ valuations to be lower than their own. Our results suggest that public valuations of mortality risk reductions may underestimate the true societal value because respondents are considering other individuals’ welfare, and wrongfully perceive other people’s valuations to be low.
    Keywords: Altruism; Risk reduction; Willingness-to-pay; Stated preferences
    JEL: D60 D70 I10
    Date: 2016–05–01
  23. By: Benhassine, Najy; McKenzie, David J.; Pouliquen, Victor; Santini, Massimiliano
    Abstract: A randomized experiment based around the introduction of the entreprenant legal status in Benin is used to test the effectiveness of supplementary efforts to enhance the presumed benefits of formalization by facilitating its links to government training programs, support to open bank accounts, and tax mediation services. Few firms register when just given information about the new regime, but the full package of supplementary efforts boosts formalization by 16.3 percentage points. Firms that are larger, and that look more like formal firms to begin with, are more likely to formalize, providing guidance for better targeting of such policies
    Keywords: Informality; Regulatory Simplification; Small Enterprises
    JEL: D21 H25 L26 O12 O17
    Date: 2017–01
  24. By: V. Pelligra; T. Reggiani; D.J. Zizzo
    Abstract: We consider the notions of static and dynamic reasonableness of requests in a trust game experiment. We vary systematically the experimental norm of what is expected from trustees to return to trustors, both in terms of level of each request and in terms of sequence of the requests. Static reasonableness matters in a self-biased way, in the sense that low requests justify returning less but high requests tend to be ignored. Dynamic reasonableness also matters, in the sense that, if requests keep increasing, trustees return less than if requests of different size are presented in random or decreasing order. Requests never systematically increase trustworthiness, but may decrease it.
    Keywords: trust,trustworthiness,norms,reasonableness,moral wiggle room,moral licensing
    Date: 2016
  25. By: Matthew Embrey (Department of Economics, University of Sussex); Friederike Mengel (Department of Economics, University of Essex); Ronald Peeters (Department of Economics, Maastricht University)
    Abstract: We introduce a novel method to elicit strategies in indefinitely repeated games and apply it to games of strategic substitutes and complements. We find that out of 256 possible unit recall machines (and 1024 full strategies) participants could use, only five machines are used more than 5 percent of the time. Those are “static Nash”, “myopic best response”, “Tit-for-Tat” and two “Nash reversion” strategies. We compare outcome data with “hot” treatments and find that the fact that we elicit strategies did not affect the path of play. We also discuss applications to IO literature and compare insights to previous literature on strategy elicitation mostly focused on the prisoner's dilemma.
    Keywords: indefinitely repeated games; strategy elicitation; experiments
    JEL: C7 C9
    Date: 2017–01

This nep-exp issue is ©2017 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.