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on Experimental Economics |
| By: | Drichoutis, Andreas C.; Nayga, Rodolfo |
| Abstract: | Economic analysis assumes that consumer behavior can be rationalized by a utility function. Previous research has shown that some decision-making quality can be captured by permanent cognitive ability but has not examined how a temporary load in subjects' working memory can affect economic rationality. In a controlled laboratory experiment, we exogenously vary cognitive load by asking subjects to memorize a number while they undertake an induced budget allocation task (Choi et al., 2007a,b). Using a number of manipulation checks, we verify that cognitive load has adverse affects on subjects' performance in reasoning tasks. However, we find no effect in any of the goodness-of-fit measures that measure consistency of subjects' choices with the Generalized Axiom of Revealed Preferences (GARP), despite having a sample size large enough to detect even small differences between treatments with 80% power. Our finding suggests that researchers need not worry about economic rationality breaking down when subjects are placed under temporary working memory load. |
| Keywords: | Cognitive load, rationality, revealed preferences, working memory, response times, laboratory experiment |
| JEL: | C91 D03 D11 D12 G11 |
| Date: | 2017–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81111&r=exp |
| By: | Bott, Kristina Maria (Dept. of Economics, Norwegian School of Economics and Business Administration); Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Sørensen, Erik Ø. (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | We report from a large-scale randomized field experiment conducted on a unique sample of more than 15 000 taxpayers in Norway, who were likely to have misreported their foreign income. We find that the inclusion of a moral appeal or a sentence that increases the perceived probability of detection in a letter from the tax authorities almost doubled the average self-reported foreign income. The moral letter mainly works on the intensive margin, while the detection letter mainly works on the extensive margin. We also show that the detection letter has large long-term effects on tax compliance. |
| Keywords: | Taxation; tax evasion; field Experiment. |
| JEL: | C93 D63 H26 |
| Date: | 2017–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2017_010&r=exp |
| By: | Gomez-Martinez, Francisco |
| Abstract: | A usual assumption in the theory of collusion is that cartels are all-inclusive. In contrast, most real-world collusive agreements do not include all firms that are active in the relevant industry. This paper studies both theoretically and experimentally the formation and behavior of partial cartels. The theoretical model is a variation of Bos and Harrington’s (2010) model where firms are heterogeneous in terms of production capacities and where individual cartel participation is endogenized. The experimental study has two main objectives. The first goal is examine whether partial cartels emerge in the lab at all, and if so, which firms are part of it. The second aim of the experiment is to study the coordinated effects of a merger when partial cartels are likely to operate. The experimental results can be summarized as follows. We find that cartels are typically not all-inclusive and that various types of partial cartels emerge. We observe that market prices decrease by 20% on average after a merger. Our findings suggest that merger analysis that is based on the assumption that only full cartels forms produces misleading results. Our analysis also illustrates how merger simulations in the lab can be seen as a useful tool for competition authorities to back up merger decisions. |
| Keywords: | Bertrand oligopoly; Cartels; Mergers; Experiments |
| JEL: | C92 G34 L13 L41 L44 |
| Date: | 2016–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81132&r=exp |
| By: | Sylvain Chareyron (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique); David Gray (University of Ottawa [Ottawa], TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique); Yannick L'Horty (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper is related to the phenomenon puzzling unduly low take-up rate for social assistance benefits in France. In order to investigate this phenomenon, we conduct an experimental evaluation in the form of a randomized control trial involving the influences of informational availability and complexity. We examine the impact of a change in the information set which is sent to these households just after they claim the benefit, seeking a behavioral response to this particular ‘nudge’. Our findings suggest that a costless action on the part of program administrators is able to substantially increase take-up for certain types of beneficiaries. In order to be effective, these actions should target households according to their individual attributes. |
| Keywords: | non-take-up of social insurance benefits, RCT, informational nudge |
| Date: | 2017–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01521963&r=exp |
| By: | Valerio Capraro (CWI - Center for Mathematics and Computer Science - Netherlands Organisation for Scientific Research); Brice Corgnet (EMLYON Business school - EMLYON Business School, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Antonio M. Espin (Middlesex University Business School - Middlesex University Business School); Roberto Hernán-Gonzalez (Nottingham University Business School - UON - University of Nottingham, UK) |
| Abstract: | Groups make decisions on both the production and the distribution of resources. These decisions typically involve a tension between increasing the total level of group resources (i.e. social efficiency) and distributing these resources among group members (i.e. individuals’ relative shares). This is the case because the redistribution process may destroy part of the resources, thus resulting in socially inefficient allocations. Here we apply a dual-process approach to understand the cognitive underpinnings of this fundamental tension. We conducted a set of experiments to examine the extent to which different allocation decisions respond to intuition or deliberation. In a newly developed approach, we assess intuition and deliberation at both the trait level (using the Cognitive Reflection Test, henceforth CRT) and the state level (through the experimental manipulation of response times). To test for robustness, experiments were conducted in two countries: the USA and India. Despite absolute-level differences across countries, in both locations we show that: (i) time pressure and low CRT scores are associated with individuals’ concerns for their relative shares and (ii) time delay and high CRT scores are associated with individuals’ concerns for social efficiency. These findings demonstrate that deliberation favours social efficiency by overriding individuals’ intuitive tendency to focus on relative shares. |
| Keywords: | efficiency, dual process models, equality, intuition, deliberation |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01439121&r=exp |
| By: | Doll, Monika; Seebauer, Michael; Tonn, Maren |
| Abstract: | We implement waiting time as a currency in an ultimatum game in an experimental laboratory study. Subjects had to split 60 minutes of waiting time. We analyze bargaining behavior in varying situations connected to waiting time as well as gain and loss framing. Different situations that follow waiting time have no influence on bargaining behavior. Regarding gain and loss framing, we do not find differences in proposers' behavior. Responders show less willingness to wait when the bargaining outcome is framed as a loss compared to being framed as a gain of time. Displaying less willingness to wait, responders show a higher propensity to risk a rejection of the proposers' offers. |
| Keywords: | Ultimatum Game,Waiting Time,Experimental Currency,Leaving the Laboratory,Framing |
| JEL: | C91 C70 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:152017&r=exp |
| By: | Christine L. Exley (Harvard Business School); Judd Kessler (University of Pennsylvania) |
| Abstract: | In standard economic theory, information helps agents optimize. But providing agents with information about the benefits of an action often fails to encourage that action. This paper proposes a far-reaching behavioral explanation: information may make salient that the benefits of taking an action could be improved and agents may see the potential for improvement as a reason to avoid the action. In an experiment, making more salient how a donation could be improved significantly decreases giving. Self-serving motives dramatically magnify the effect, suggesting why information may be particularly ineffective at encouraging privately costly actions with social or future benefits. |
| Keywords: | experiment, information acquisition, philanthropy |
| JEL: | D83 C91 D64 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-068&r=exp |
| By: | March, Christoph; Sahm, Marco |
| Abstract: | We investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two-player Tullock contest. Our theoretical model yields two main predictions: First, an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage. Second, if the prize money is sufficiently large, a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent. In a laboratory experiment we confirm both, the non-monotonic impact and the compensating effect of risk aversion on winning probabilities. Our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests. |
| Keywords: | Selection Contest,Risk Aversion,Competitive Balance,Gender Gap |
| JEL: | C72 D72 J31 K41 M51 M52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:127&r=exp |
| By: | Haoran He (School of Economics and Business Administration - Beijing Normal University); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We compare inequality aversion in individuals and teams by means of both within- and between-subject experimental designs, and we investigate how teams aggregate individual preferences. We find that team decisions reveal less inequality aversion than individual initial proposals in team decision-making. However, teams are no more selfish than individuals who decide in isolation. Individuals express strategically more inequality aversion in their initial proposals in team decision-making because they anticipate the selfishness of other members. Members with median social preferences drive team decisions. Finally, we show that social image has little influence because guilt and envy are almost similar in anonymous and non-anonymous interactions. |
| Keywords: | social image,experiment,Team,inequity aversion,preference aggregation |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00996545&r=exp |
| By: | Brocas, Isabelle; Carrillo, Juan D; Kendall, Ryan |
| Abstract: | In this paper, we study how stress affects risk taking in three tasks: individual lotteries, Stag Hunt (coordination) games and Hawk-Dove (anti-coordination) games. Both control and stressed subjects take more risks in all three tasks when the value of the safe option is decreased and in lotteries when the expected gain is increased. Also, subjects take longer to take decisions when stakes are high, when the safe option is less attractive and in the conceptually more difficult Hawk-Dove game. Stress (weakly) increases reaction times in those cases. Finally, our main result is that the behavior of stressed subjects in lotteries, Stag Hunt and Hawk-Dove are all highly predictive of each other (p-value |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12254&r=exp |
| By: | Alice Solda (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France) |
| Abstract: | The existing literature on ostracism in social dilemma games has focused on the impact of the threat of exclusion on cooperation within groups but so far, little attention has been paid to the behavior of the excluded members after their reintegration. This paper studies the effect of exclusion by peers followed by reintegration on cooperation once excluded individuals are readmitted in their group. Using a negatively framed public good game, we manipulate the length of exclusion and whether this length is imposed ex-ogenously or results from a vote. We show that people are willing to exclude the least cooperators although it is not an equilibrium strategy. Exclusion has a positive impact on cooperation and compliance to the group norm of withdrawal after reintegration when exclusion is followed by a quick rather than a slow reintegration and that the length of exclusion is chosen by the group. In this environment, a quicker reintegration also limits retaliation. Post-exclusion cooperation and forgiveness de end not only on the length of exclusion but also on the perceived intentions of others when they punish. |
| Keywords: | Ostracism, exclusion, reintegration, social dilemma, cooperation, experiment |
| JEL: | C92 H41 D23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1720&r=exp |
| By: | Fabio Galeotti (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Reuben Kline (Stony Brook University, Department of Political Science Social and Behavioral Sciences, N735 Stony Brook, NY 11794); Raimondello Orsini (University of Bologna, Dipartimento di Scienze Economiche, Strada Maggiore 45, 40125 Bologna, Italy) |
| Abstract: | The distributive justice norm of “just deserts” — i.e. the notion that one gets what one deserves — is an essential norm in a market society, and honesty is an important factor in economic and social exchange. We experimentally investigate the effect of violations of the distributive justice norm of “just deserts” on honesty in a setting where behaving dishonestly entails income redistribution. We find that the violation of the just deserts norm results in a greater propensity toward dishonesty. We then test a more general proposition that violations of just deserts induce dishonesty, even in cases where dishonesty does not have redistributive consequences. Our results confirm this proposition but only for cases in which the v iolation of just deserts also entails income inequality. |
| Keywords: | Meritocracy, Equity, Dishonesty, Just Deserts, Experiment |
| JEL: | C91 D03 D31 D63 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1719&r=exp |
| By: | Christine L. Exley (Harvard Business School, Negotiation, Organizations & Markets Unit); Judd B. Kessler (The Wharton School, University of Pennsylvania.) |
| Abstract: | In standard economic theory, information helps agents optimize. But providing agents with information about the benefits of an action often fails to encourage that action. This paper proposes a far-reaching behavioral explanation: information may make salient that the benefits of taking an action could be improved and agents may see the potential for improvement as a reason to avoid the action. In an experiment, making more salient how a donation could be improved significantly decreases giving. Self-serving motives dramatically magnify the effect, suggesting why information may be particularly ineffective at encouraging privately costly actions with social or future benefits. |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:18-017&r=exp |
| By: | Emma Riley |
| Abstract: | This paper presents experimental evidence on the impact of a role model on secondary school student exam performance in Uganda. Students preparing to take their national exams (classes S4 and S6) were individually randomised to see either an aspirational movie featuring a potential role model, Queen of Katwe, or to see a placebo movie. I find that treatment with the aspirational movie leads to a 0.11 standard deviation increase in maths performance for S4 students, with the effect coming from students being 11 percentage points less likely to fail the exam. This effect is being driven by the lowest ability and students at lower ranked schools. For S6 students, their total score on their exams increase by 0.13 standard deviations. This study highlights the power of a role model as a cost-effective way to improve secondary school students' educational attainment, particularly of the worst performing students. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2017-13&r=exp |
| By: | Vernon L. Smith (Economic Science Institute and Smith Institute for Political Economy and Philosophy); Bart J. Wilson (Economic Science Institute and Smith Institute for Political Economy and Philosophy) |
| Abstract: | One robust result in experimental economics is the failure to observe equilibrium play in the ultimatum game. A heretofore unnoticed feature of the game is that neither player voluntarily chooses to play the game. Motivated by Adam Smith’s proposition that beneficence—like that of non- equilibrium play in the ultimatum game—cannot be extorted by force, we offer the responder the opportunity to opt out of the game for a mere $1 payoff for both players. We observe high rates of equilibrium play with highly unequal splits when responders choose to play such ultimatum games with both fixed and variable sums. |
| Keywords: | ultimatum games, voluntary play, Adam Smith, experimental economics |
| JEL: | C91 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:17-17&r=exp |
| By: | Aufenanger, Tobias |
| Abstract: | This paper proposes a way of using observational pretest data for the design of experiments. In particular, this paper suggests to train a random forest on the pretest data and to stratify the allocation of treatments to experimental units on the predicted dependent variables. This approach reduces much of the arbitrariness involved in defining strata directly on the basis of covariates. A simulation on 300 random samples drawn from six data sets shows that this algorithm is extremely effective in increasing power compared to random allocation and to traditional ways of stratification. In more than 80% of all samples the estimated variance of the treatment estimator is lower and the estimated power is higher than for standard designs such as complete randomization, conventional stratification or Mahalanobis matching. |
| Keywords: | experiment design,treatment allocation |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:162017&r=exp |
| By: | Anastasia Nedelko (National Research University Higher School of Economics); Olga Lupova (National Research University Higher School of Economics); Alexey Gorin (National Research University Higher School of Economics); Alexandra Kuznetsova (National Research University Higher School of Economics); Vasily Klucharev (National Research University Higher School of Economics); Anna Shestakova (National Research University Higher School of Economics) |
| Abstract: | In this paper, a novel application of the event-related potential (ERP) method is proposed. The authors applied an N400 evoked potential for brand perception analysis, particularly for brand associations. Traditionally, N400 has been used as a marker of semantic incongruence of a word to a context. The N400 activity is manifested in a more negative deflection of ERP response to incongruent stimuli. We recorded N400 in response to congruent and incongruent sentence endings in marketing and non-marketing contexts, respectively. In the main experimental condition, congruent and incongruent brand associations (nouns) presented before brand names were selected from real marketing campaigns building brand communities. In the control semantic memory N400 condition, the incongruent sentence endings evoked significant fronto-centrally distributed N400 brain response at 300–500 ms. The N400 response in the brand association condition was delayed for 250 ms compared to incongruent words in the context of short sentences and appeared in the central brain area. In this study, we showed for the first time the possibility of applying the N400 method to identify the strength of brand associations using ecologically valid stimuli. |
| Keywords: | event-related potential method, N400, electroencephalography, neuromarketing, brand associations |
| JEL: | Z |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:77psy2017&r=exp |
| By: | Felipe A. Dunsch; David K. Evans; Ezinne Eze-Ajoku; Mario Macis |
| Abstract: | If health service delivery is poorly managed, then increases in inputs or ability may not translate into gains in quality. However, little is known about how to increase managerial capital to generate persistent improvements in quality. We present results from a randomized field experiment in 80 primary health care centers (PHCs) in Nigeria to evaluate the effects of a health care management consulting intervention. One set of PHCs received a detailed improvement plan and nine months of implementation support (full intervention), another set received only a general training session, an overall assessment and a report with improvement advice (light intervention), and a third set of facilities served as a control group. In the short term, the full intervention had large and significant effects on the adoption of several practices under the direct control of the PHC staff, as well as some intermediate outcomes. Virtually no effects remained one year after the intervention concluded. The light intervention showed no consistent effects at either point. We conclude that sustained supervision is crucial for achieving persistent improvements in contexts where the lack of external competition fails to create incentives for the adoption of effective managerial practices. |
| JEL: | I15 M10 O15 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23749&r=exp |
| By: | Fabio Galeotti (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Reuben Kline (SBU - Stony Brook University [The State University of New York]); Raimondello Orsini (DAIS - Computer Science - Universita di Venezia - Ca' Foscari) |
| Abstract: | The distributive justice norm of " just deserts " — i.e. the notion that one gets what one deserves — is an essential norm in a market society, and honesty is an important factor in economic and social exchange. We experimentally investigate the effect of violations of the distributive justice norm of " just deserts " on honesty in a setting where behaving dishonestly entails income redistribution. We find that the violation of the just deserts norm results in a greater propensity toward dishonesty. We then test a more general proposition that violations of just deserts induce dishonesty, even in cases where dishonesty does not have redistributive consequences. Our results confirm this proposition but only for cases in which the v iolation of just deserts also entails income inequality. Abstract The distributive justice norm of " just deserts " —i.e. the notion that one gets what |
| Keywords: | Meritocracy, Equity, Dishonesty, Just Deserts, Experiment |
| Date: | 2017–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01579214&r=exp |