nep-exp New Economics Papers
on Experimental Economics
Issue of 2017‒11‒26
nineteen papers chosen by

  1. Conditional generosity and uncertain income: Evidence from five experiments By Christian Kellner; David Reinstein; Gerhard Riener
  2. The Evolution of Cooperation: The Role of Costly Strategy Adjustments By Yaroslav Rosokha; Julian Romero
  3. Reasoning about Others’ Reasoning By Larbi Alaoui; Antonio Penta
  4. On the external validity of social preference games: a systematic lab-field study By Galizzi, Matteo M.; Navarro-Martínez, Daniel
  5. Temptation and Commitment in the Laboratory By Daniel Houser; Daniel Schunk; Joachim Winter; Erte Xiao
  6. How do risk attitudes affect pro-social behavior? Theory and experiment By Sean Fahle; Santiago Sautua
  7. When Should You Adjust Standard Errors for Clustering? By Alberto Abadie; Susan Athey; Guido W. Imbens; Jeffrey Wooldridge
  8. Motivating Innovation: The Effect of Loss Aversion on the Willingness to Persist By Yaroslav Rosokha; Kenneth Younge
  9. Hypothetical thinking and the winner's curse: An experimental investigation By Johannes Moser
  10. Hypothetical thinking and the winner's curse: An experimental investigation By Moser, Johannes
  11. Object and Spatial Working Memory in Visual Search for Multiple Targets By Elena S. Gorbunova; Kirill S. Kozlov; Sofia Tkhan Tin Le; Ivan M. Makarov
  12. Uncertainty about Informed Trading in Dealer Markets - An Experiment" By Yaroslav Rosokha; Chi Sheh
  13. Motivated reasoning during recruitment By Kappes, Heather Barry; Balcetis, Emily; De Cremer, David
  14. Optimal response and covariate-adaptive biased-coin designs for clinical trials with continuous multivariate or longitudinal responses By Atkinson, Anthony C.; Biswas, Atanu
  15. Measuring Success in Education: The Role of Effort on the Test Itself By Uri Gneezy; John A. List; Jeffrey A. Livingston; Sally Sadoff; Xiangdong Qin; Yang Xu
  16. The Effects of Visual Information on Baking Course Advertisements - An Empirical Study of Taiwan By Hao Chang; Yu-Hua Christine Sun
  17. Long-Run Consequences of Health Insurance Promotion: Evidence from a Field Experiment in Ghana By Asuming, Patrick Opoku; Kim, Hyuncheol Bryant; Sim, Armand
  18. Motivations for Public Service in Corrupt States: Evidence from Post-Soviet Russia By Jordan Gans-Morse; Alexander S. Kalgin; Andrei V. Klimenko; Andrei A. Yakovlev
  19. Experimental Study on the Differences of Automatic Nervous System and Emotional Response in Color Environment By Jiyoung Oh; Hyun Joo Kwon; Heykyung Park

  1. By: Christian Kellner (University of Southampton); David Reinstein (Department of Economics, University of Exeter); Gerhard Riener (Heinrich Heine University Düsseldorf)
    Abstract: We study how other-regarding behavior extends to environments with income uncertainty and conditional commitments. Should fundraisers ask a banker to donate “if he earns a bonus” or wait and ask after the bonus is known? Standard EU theory predicts these are equivalent; loss-aversion and signaling models predict a larger commitment before the bonus is known; theories of affect predict the reverse. In five experiments incorporating lab and field elements (N=1363), we solicited charitable donations from lottery winnings worth between $10 and $30, varying the conditionality of donations between participants. While the results suggest some heterogeneity across experimental contexts and demographic groups, in each experiment conditional donations (“if you win”) were higher than ex-post donations. Pooling across experiments, this is strongly statistically significant; we find a 23% greater likelihood of donating and a 25% larger average donation commitment in the Before treatment. Our findings add to our understanding of pro-social behavior and have implications for charitable fundraising, for effective altruism giving pledges, and for experimental methodology.
    Keywords: Social preferences, contingent decision-making, signaling, field experiments, charitable giving.
    JEL: D64 C91 C93 L30 D01 D03 D84
    Date: 2017
  2. By: Yaroslav Rosokha; Julian Romero
    Abstract: We study the evolution of cooperation in the inde nitely repeated prisoner's dilemma when it is costly for players to adjust their strategy. Our experimental interface allows subjects to design a comprehensive strategy that then selects ac- tions for them in every period. We conduct lab experiments in which subjects can adjust their strategies during a repeated game but may incur a cost for doing so. We nd three main results. First, subjects learn to cooperate more when adjustments are costless than when they are costly. Second, subjects make more adjustments to their strategies when adjustments are costless, but they still make adjustments even when they are costly. Finally, we nd that cooperative strategies emerge over time when adjustments are costless but not when adjustments are costly. These results highlight that within-game experimentation and learning are critical to the rise of cooperative behavior. We provide simulations based on an evolutionary algorithm to support these results.
    Keywords: Inde nitely Repeated Games, Prisoner's Dilemma, Experiments, Co- operation, Strategies
    Date: 2017–07
  3. By: Larbi Alaoui; Antonio Penta
    Abstract: Recent experiments suggest that level-k behavior is often driven by subjects' beliefs, rather than their binding cognitive bounds. But the extent to which this is true in general is not completely understood, mainly because disentangling 'cognitive' and 'behavioral' levels is challenging experimentally and theoretically. In this paper we provide a simple experimental design strategy (the 'tutorial method') to disentangle the two concepts purely based on subjects' choices. We also provide a 'replacement method' to assess whether the increased sophistication observed when stakes are higher is due to an increase in subjects' own understanding or their beliefs over others' increased incentives to reason. We find evidence that, in some of our treatments, the cognitive bound is indeed binding for a large fraction of subjects. Furthermore, a significant fraction of subjects do take into account others' incentives to reason. Our findings also suggest that in general, level-k behavior should not be taken as driven either by cognitive limits alone or beliefs alone. Rather, there is an interaction between own cognitive bound and reasoning about the opponent's reasoning process. From a methodological viewpoint, the tutorial and replacement methods have broader applicability, and can be used to study the beliefs-cognition dichotomy and higher order beliefs e ects in non level-k settings as well.
    Keywords: cognitive bound, depth of reasoning, higher-order beliefs. level-k reasoning, replacement method, tutorial method
    JEL: C72 C92 D80
    Date: 2017–11
  4. By: Galizzi, Matteo M.; Navarro-Martínez, Daniel
    Abstract: We present a lab-field experiment designed to systematically assess the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with several behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social preference games do a poor job explaining both social behaviors in the field and social behaviors from the past. We also include a systematic review and meta-analysis of previous literature on the external validity of social preference games.
    JEL: J50
    Date: 2017–07–28
  5. By: Daniel Houser (George Mason University); Daniel Schunk (Johannes Gutenberg-University Mainz, Germany); Joachim Winter (Ludwig-Maximilians-Universität München); Erte Xiao (Monash University, Australia)
    Abstract: We report data from a novel laboratory experiment on economic decisions under persistent temptations. This type of temptation is ubiquitous, as it refers to any temptation that is present until one either gives in or makes a costly commitment decision to have it removed. Subjects in our experiment are repeatedly offered an option with instantaneous benefit that also entails a substantial reduction to overall earnings. We show that this option is tempting in the sense that a substantial fraction of our subjects incur pecuniary costs to eliminate the choice, and thus commit not to choose this alternative. We find that commitment and giving in to temptation generally occur at the first opportunity, though a non-negligible fraction of subjects delay either making the commitment decision or giving in to temptation. This delay is consistent with the costs of self-control increasing with its use.
    Keywords: self-control; willpower; temptation; commitment; laboratory experiment
    JEL: D11 C91
    Date: 2017–11
  6. By: Sean Fahle; Santiago Sautua
    Abstract: We explore how risk preferences affect pro-social behavior in risky environments. We analyze a modified dictator game in which the dictator could, by reducing her own sure payoff, increase the odds that an unknown recipient wins a lottery. We first augment a standard social preferences model with reference-dependent risk attitudes and then test the model’s predictions for the dictator’s giving behavior using a laboratory experiment. As predicted by the model, giving behavior in the experiment is affected by the baseline risk faced by the recipient, the effectiveness of transfers in reducing baseline risk, and the dictator’s degree of loss aversion
    Keywords: other-regarding preferences; pro-social behavior; reference-dependent preferences; risk
    JEL: C91 D81 D91
    Date: 2017–11–02
  7. By: Alberto Abadie; Susan Athey; Guido W. Imbens; Jeffrey Wooldridge
    Abstract: In empirical work in economics it is common to report standard errors that account for clustering of units. Typically, the motivation given for the clustering adjustments is that unobserved components in outcomes for units within clusters are correlated. However, because correlation may occur across more than one dimension, this motivation makes it difficult to justify why researchers use clustering in some dimensions, such as geographic, but not others, such as age cohorts or gender. This motivation also makes it difficult to explain why one should not cluster with data from a randomized experiment. In this paper, we argue that clustering is in essence a design problem, either a sampling design or an experimental design issue. It is a sampling design issue if sampling follows a two stage process where in the first stage, a subset of clusters were sampled randomly from a population of clusters, and in the second stage, units were sampled randomly from the sampled clusters. In this case the clustering adjustment is justified by the fact that there are clusters in the population that we do not see in the sample. Clustering is an experimental design issue if the assignment is correlated within the clusters. We take the view that this second perspective best fits the typical setting in economics where clustering adjustments are used. This perspective allows us to shed new light on three questions: (i) when should one adjust the standard errors for clustering, (ii) when is the conventional adjustment for clustering appropriate, and (iii) when does the conventional adjustment of the standard errors matter.
    JEL: C21
    Date: 2017–11
  8. By: Yaroslav Rosokha; Kenneth Younge
    Abstract: We investigate the willingness of individuals to persist at exploration in the face of failure. Prior research suggests that the organization's \tolerance for failure" may motivate greater exploration by the individual. Little is known, however, about how individuals persist at exploration in an uncertain environment when confronted by prolonged periods of negative feedback. To examine this question, we design a two-dimensional maze game and run a series of randomized experiments with human subjects in the game. We develop predictions for the game using computational models of reinforcement learning. Our methods extend beyond two-period models of decision-making under uncertainty to account for repeated behavior in longer-running, dynamic contexts. Our results suggest that individuals explore more when they are reminded of the incremental cost of their actions, a result that extends prior research on loss aversion and prospect theory to environments characterized by model uncertainty. We discuss implications for future research and for managers.
    Keywords: Experiments, Innovation, Persistence, Loss Aversion, Model Uncertainty
    Date: 2017–08
  9. By: Johannes Moser
    Abstract: There is evidence that bidders fall prey to the winner's curse because they fail to extract information from hypothetical events - like winning an auction. This paper investigates experimentally whether bidders in a common value auction perform better when the requirements for this cognitive issue - also denoted by contingent reasoning - are relaxed, leaving all other parameters unchanged. The overall pattern of the data suggests that the problem of irrational over- and underbidding can be weakened by giving the subjects ex ante feedback about their bid, but unlike related studies I also find negative effects of additional information.
    Keywords: Hypothetical thinking, cursed equilibrium, winner's curse
    JEL: D03 D44 D82 D83 C91
    Date: 2017–11
  10. By: Moser, Johannes
    Abstract: There is evidence that bidders fall prey to the winner's curse because they fail to extract information from hypothetical events - like winning an auction. This paper investigates experimentally whether bidders in a common value auction perform better when the requirements for this cognitive issue - also denoted by contingent reasoning - are relaxed, leaving all other parameters unchanged. The overall pattern of the data suggests that the problem of irrational over- and underbidding can be weakened by giving the subjects ex ante feedback about their bid, but unlike related studies I also find negative effects of additional information.
    Keywords: Hypothetical thinking; cursed equilibrium; winner's curse
    JEL: D03 D44 D82 D83 C91
    Date: 2017–11–03
  11. By: Elena S. Gorbunova (National Research University Higher School of Economics); Kirill S. Kozlov (National Research University Higher School of Economics); Sofia Tkhan Tin Le (National Research University Higher School of Economics); Ivan M. Makarov (National Research University Higher School of Economics)
    Abstract: Visual search for multiple targets is especially error prone. One of these errors is called subsequent search misses (SSM) and represents a decrease in accuracy at detecting a second target after a first target has been found. One of the possible explanations of SSM errors is working memory resource depletion. Four experiments investigated the role of different kinds of working memory in SSM errors. The first experiment investigated the role of object working memory using a classical color change detection task. In the second and the third experiments, a modified change detection task was applied, using shape as the relevant feature. In the fourth experiment, a spatial working memory task was used to reveal the role of spatial working memory in SSM. The second and the third experiments revealed interference between working memory and visual search tasks, whereas in the first and the fourth experiments interference was not found. The results are discussed in terms of specific working memory deficit in SSM errors
    Keywords: visual attention, visual search, multiple targets, working memory, subsequent search misses
    JEL: Z
    Date: 2017
  12. By: Yaroslav Rosokha; Chi Sheh
    Abstract: We use an economic experiment to examine the impact of an uncertain level of asymmetric information on the behavior of security dealers. Speci cally, we distinguish three types of uncertainty with respect to informed trading { risk, compound risk, and ambiguity { for both a monopoly and a duopoly market setting. We nd no di erence in dealers' bidding behavior between compound risk and ambiguity. At the same time, we nd that bidding behavior is more aggressive under risk than under compound risk or ambiguity. In addition, we nd that stochastic models of choice does well in explaining the observed di erences in market outcomes for both individual (monopoly) and strategic (duopoly) settings..
    Keywords: Experiments, Uncertainty, Dealer Markets, Stochastic Choice
    Date: 2017–07
  13. By: Kappes, Heather Barry; Balcetis, Emily; De Cremer, David
    Abstract: This research shows how job postings can lead job candidates to see themselves as particularly deserving of hiring and high salary. We propose that these entitlement beliefs entail both personal motivations to see oneself as deserving and the ability to justify those motivated judgments. Accordingly, we predict that people feel more deserving when qualifications for a job are vague and thus amenable to motivated reasoning, whereby people use information selectively to reach a desired conclusion. We tested this hypothesis with a two-phase experiment (N = 892) using materials drawn from real online job postings. In the first phase of the experiment, participants believed themselves to be more deserving of hiring and deserving of higher pay after reading postings composed of vaguer types of qualifications. In the second phase, yoked observers believed that participants were less entitled overall, but did not selectively discount endorsement of vaguer qualifications, suggesting they were unaware of this effect. A follow-up pre-registered experiment (N = 905) using postings with mixed qualification types replicated the effect of including more vague qualifications on participants’ entitlement beliefs. Entitlement beliefs are widely seen as problematic for recruitment and retention, and these results suggest that reducing the inclusion of vague qualifications in job postings would dampen the emergence of these beliefs in applicants, albeit at the cost of decreasing application rates and lowering applicants’ confidence.
    Keywords: entitlement; deservingness; motivated reasoning; recruitment practice; selection
    JEL: R14 J01 J50
    Date: 2017–08–15
  14. By: Atkinson, Anthony C.; Biswas, Atanu
    Abstract: Adaptive randomization of the sequential construction of optimum experimental designs is used to derive biased-coin designs for longitudinal clinical trials with continuous responses. The designs, coming from a very general rule, target pre-specified allocation proportions for the ranked treatment effects. Many of the properties of the designs are similar to those of well understood designs for univariate responses. A numerical study illustrates this similarity in a comparison of four designs for longitudinal trials. Designs for multivariate responses can likewise be found, requiring only the appropriate information matrix. Some new results in the theory of optimum experimental design for multivariate responses are presented.
    Keywords: biased-coin design; covariate balance; effective number of observations; ethical allocation; equivalence theorem; multivariate DA-optimality; multivariate loss; power skewed allocation
    JEL: C1
    Date: 2017–09–01
  15. By: Uri Gneezy; John A. List; Jeffrey A. Livingston; Sally Sadoff; Xiangdong Qin; Yang Xu
    Abstract: Tests measuring and comparing educational achievement are an important policy tool. We experimentally show that offering students extrinsic incentives to put forth effort on such achievement tests has differential effects across cultures. Offering incentives to U.S. students, who generally perform poorly on assessments, improved performance substantially. In contrast, Shanghai students, who are top performers on assessments, were not affected by incentives. Our findings suggest that in the absence of extrinsic incentives, ranking countries based on low-stakes assessments is problematic because test scores reflect differences in intrinsic motivation to perform well on the test itself, and not just differences in ability.
    JEL: C93 I24
    Date: 2017–11
  16. By: Hao Chang (National Taiwan Normal University); Yu-Hua Christine Sun (National Taiwan Normal University)
    Abstract: Purpose ? The purpose of this research is to investigate the influence of visual information such as a baking product photo vs a product in action photo on consumers? perceived value and purchase intention.Design/methodology/approach ? This between-subjects design experiment tested the effects of visual information in baking course advertisements and the mediating role of consumers? perceived value. A questionnaire providing a baking course advertisement was implemented to collect responses from the participants.Findings ? This research shows that visual information plays a significant role in baking course advertisements. The results indicated a baking product photo was more persuasive than a product in action photo on consumers? purchase intention. The relationship between visual information and purchase intention is fully mediated by consumers? perceived value. Originality/value ? Advertisement effect has been an issue of great concern to marketers. Therefore, designing a message that can enhance consumers? perceived value and purchase intention is an important task. According to the results above, we suggest marketers use a baking product photo that not only enhance the effect of advertisements, but also increase consumers? perceived value and purchase intention.
    Keywords: Visual information, Advertisement Effect, Perceived Value, Purchase Intention
    Date: 2017–10
  17. By: Asuming, Patrick Opoku (University of Ghana); Kim, Hyuncheol Bryant (Cornell University); Sim, Armand (Cornell University)
    Abstract: We study the long-run impacts of health insurance promotion in Northern Ghana. We randomly provide three overlapping interventions to promote enrollment: subsidy, information campaign, and convenient sign-up option, with follow-up surveys seven months and three years after the initial intervention. Our interventions, especially the subsidy, promote enrollment and healthcare service utilization in the short and long runs. We also find short-run health status improvements, which disappear in the long run. We find suggestive evidence on decreased investment in disease prevention and selection that may help explain this pattern of health status changes.
    Keywords: health insurance, sustainability, moral hazard, selection, screening effect, randomized experiments
    JEL: I1 O12
    Date: 2017–10
  18. By: Jordan Gans-Morse (Northwestern University); Alexander S. Kalgin (National Research University Higher School of Economics); Andrei V. Klimenko (National Research University Higher School of Economics); Andrei A. Yakovlev (National Research University Higher School of Economics)
    Abstract: Throughout much of the world, corruption in the civil service undermines state capacity, impedes economic development, and saps citizens’ morale. But while its pernicious effects are widely recognized, the roots of corruption remain poorly understood. Whereas most studies on corruption’s origins focus on the incentives bureaucrats face once in office, this study contributes to a line of recently emerging research that considers the role of self-selection of citizens with a propensity for corruption into bureaucracies where corruption is known to be widespread. Drawing on a survey and experimental games conducted with students at an elite university in Moscow, Russia, we compare the attitudinal, behavioral, and demographic traits of students seeking public sector employment to the traits of their peers seeking jobs in the private sector. Contrary to studies conducted in other high-corruption contexts, such as India, we find surprising evidence that students who prefer a public sector career display lss willingness to cheat or bribe in experimental games as well as higher levels of altruism. One interpretation of these findings is that corruption in Russia results from the transformation of bureaucrats’ behavior and attitudes after entering the civil service, rather than through a process of corrupt self-selection
    Keywords: corruption, Russia, motivation, civil service, experimental games.
    JEL: D73 H83
    Date: 2017
  19. By: Jiyoung Oh (Inje University); Hyun Joo Kwon (Purdue University); Heykyung Park (Inje University)
    Abstract: The purpose of this study is to examine the differences between the automatic nervous system and the emotional response according to the tone changes in the color environment through experiment. It also identified color plan establishment conditions considering the differences between user's physiological response and psychological reaction in the environment. An experimental environment set up with pale, bright and vivid R and G color tone that selected from NCS color system. Five males and Five females took the color experiment with the heart rate variability device that measuring their heart bit and autonomic nervous system for determining the human body physiology response. After completing the experiment, the response of psychological from the change of the color environment was investigated by conducting the one-on-one in-depth interview. The result of the investigation is as follows. First, the response of the autonomic nervous system showed that there was a significant difference between male and female. Male tend to have a decreasing pulse while changing pale G color to vivid G color environment. Bright tone increases the LF index of females. There is an opposite result between the male and female for the LF/HF index in the G color tone environment. The noteworthy difference between male and female was shown in the LF and LF/HF of R color tone environment and LF/HF of G color tone environment.Second, female increased LF, LF/HF index in the bright R color. It was found that stress such as anxiety and frustration were observed in the bright tone rather than the vivid and pale tone. Also, most female?s responded that they had a nervous feeling and frustration in the interview after the experiment. Therefore, it is expected that the use of bright tone color should be considered in spaces that are used mostly by female. Third, the emotional response to the R color was consistent with that of the female, whereas the psychological response to the G color did not match with that of both the male and female. The psychological response was different according to the individual experience, preference, and taste. In particular, there were cases that the emotional response to vivid G color appears to be opposite, so it is expected that users' preference will be greatly changed when vivid tone color is used.
    Keywords: Automatic nervous system response, Emotional response, Color environment
    JEL: Q51
    Date: 2017–10

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