nep-exp New Economics Papers
on Experimental Economics
Issue of 2018‒01‒15
twenty-six papers chosen by
Daniel Houser
George Mason University

  1. Taxation, redistribution and observability in social dilemmas By Daniel Brent; Lata Gangadharan; Anca Mihut; Marie Villeval
  2. Communication and Information in Games of Collective Decision: A Survey of Experimental Results By Cesar Martinelli; Thomas R. Palfrey
  3. Collective Experimentation: A Laboratory Study By Mikhail Freer; Cesar Martinelli; Siyu Wang
  4. Player-Compatible Equilibrium By Drew Fudenberg; Kevin He
  5. Transparency is Overrated: Communicating in a Coordination Game with Private Information By Antonio Cabrales; Michalis Drouvelis; Zeynep Gurguy; Indrajit Ray
  6. Maternal Depression, Women’s Empowerment, and Parental Investment: Evidence from a Large Randomized Control Trial By Baranov, Victoria; Bhalotra, Sonia R.; Biroli, Pietro; Maselko, Joanna
  7. Tackling Youth Unemployment: Evidence from a Labour Market Experiment in Uganda By Livia Alfonsi; Oriana Bandiera; Vittorio Bassi; Robin Burgess; Imran Rasul; Munshi Sulaiman; Anna Vitali
  8. Belief adjustment: A double hurdle model and experimental evidence By Timo Henckel; Gordon D. Menzies; Peter G. Moffatt; Daniel J. Zizzo
  9. On the Validity of Cost-Saving Methods in Dictator-Game Experiments: A Systematic Test By Walkowitz, Gari
  10. A study on the hidden virtues of being late: A sociological view of the strategic use of time pressures in organizations By Denis Jeambrun
  11. Robust Synthetic Control By Muhammad Jehangir Amjad; Devavrat Shah; Dennis Shen
  12. A Pigouvian Approach to Congestion in Matching Markets By He, Yinghua; Magnac, Thierry
  13. Spillovers, Persistence and Learning: Institutions and the Dynamics of Cooperation By Emeric Henry; Nicolas Jacquemet; Roberto Galbiati
  14. Optimal data collection for randomized control trials By Pedro Carneiro; Sokbae Lee; Daniel Wilhelm
  15. Disability Discrimination in the Italian Rental Housing Market: A Field Experiment with Blind Tenants By Luca Fumarco
  16. Deadlines and Cognitive Limitations By Altmann, Steffen; Traxler, Christian; Weinschenk, Philipp
  17. Can cognitive skills and risk aversion explain inconsistent choices? An experiment By Hernán Bejarano; Francisco Galarza
  18. Do you want some cash-back? Assessing the demand for a no-claim rebate life-insurance product By Francisco Galarza; Ingo Outes Leonb
  19. Tax Compliance in India: An Experimental Approach. By Tandon, Suranjali; Rao, R. Kavita
  20. Laws and Norms: Experimental Evidence with Liability Rules By Claude-Denys Fluet; Romain Espinosa; Bruno Deffains
  21. Heterogeneous guilt sensitivities and incentive effects By Charles Bellemare; Alexander Sebald; Sigrid Suetens
  22. Physical Disability and Labor Market Discrimination : Evidence from a Field Experiment By Charles Bellemare; Marion Goussé; Guy Lacroix; Steeve Marchand
  23. Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection By Martin Boyer; Philippe De Donder; Claude-Denys Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  24. Ratchet up or down? An experimental investigation of global public good provision in the United Nations Youth Associations Network By Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel
  25. On the neural substrates of the disposition effect and return performance By Dorow, Anderson; Da Costa Jr, Newton; Takase, Emilio; Prates, Wlademir; Da Silva, Sergio
  26. Information redundancy neglect versus overconfidence: a social learning experiment By Marco Angrisani; Antonio Guarino; Philippe Jehiel; Toru Kitagawa

  1. By: Daniel Brent (LSU - Louisiana State University - Louisiana State University [Baton Rouge]); Lata Gangadharan (Department of Economics and Business - Monash University); Anca Mihut (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-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie 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-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
    Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
    Date: 2017–10–04
  2. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Thomas R. Palfrey (Division of the Humanities and Social Sciences, California Institute of Technology)
    Abstract: We survey selectively lab experiments on voting games including pre-play activities such as communication and other forms of information release. We focus on a few areas that have received much attention in the last few decades, including costly voting and other collective action problems, coordination in elections with more than two alternatives, electoral competition and democratic accountability with imperfect Information, and legislative bargaining. We identify three forces that appear to be operating when communication is allowed: equilibrium, efficiency, and (underlying both) coordination.
    Date: 2017–12
  3. By: Mikhail Freer (Department of Economics, University of Leuven (KU Leuven).); Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Siyu Wang (For Motor Company)
    Abstract: We develop a simple model of collective experimentation and take it to the lab. In equilibrium, as in the recent work of Strulovici (2010), majority rule has a bias toward under experimentation, as good news for a minority of voters may lead a majority of voters to abandon a policy when each of them thinks it is likely that the policy will be passed by a future majority excluding them. We compare the behavior in the lab of groups under majority rule and under the optimal voting rule, which precludes voting in intermediate stages of the policy experiment. Surprisingly, performs better than the (theoretically) optimal voting rule. Majority rule seems to be more robust than other forms of voting when players make mistakes.
    Date: 2018–01
  4. By: Drew Fudenberg; Kevin He
    Abstract: We define Player-Compatible Equilibrium or "PCE," which imposes cross-player restrictions on magnitudes of the players' "trembles" onto different actions. These restrictions are inspired by the idea that trembles correspond to deliberate experiments by inexperienced agents who are unsure of the prevailing distribution of strategies in opponent populations. We show that PCE selects the "intuitive" equilibria in a number of examples where trembling-hand perfect equilibrium (Selten, 1975) and proper equilibrium (Myerson, 1978) have no bite. We also provide a learning-based microfoundation for PCE in some easy-to-analyze classes of games. Finally, we conduct a lab experiment based on one of our examples and verify PCE leads to better predictions than other equilibrium concepts.
    Date: 2017–12
  5. By: Antonio Cabrales; Michalis Drouvelis; Zeynep Gurguy; Indrajit Ray
    Abstract: We consider an experiment with a version of the Battle of the Sexes game with two-sided private information, allowing a possible round of either one-way or two-way cheap talk before the game is played. We compare different treatments to study truthful revelation of information and subsequent payoffs from the game. We find that the players are overall truthful about their types in the cheap-talk phase in both one-way or two-way talk. Furthermore, the unique symmetric cheap-talk equilibrium in the two-way cheap talk game is played when they players fully reveal their information; however, they achieve higher payoffs in the game when the talk is one-way as the truthful reports facilitate desired coordination.
    Keywords: battle of the sexes, private information, cheap talk, coordination
    JEL: C72 C92 D83
    Date: 2018
  6. By: Baranov, Victoria (University of Melbourne); Bhalotra, Sonia R. (University of Essex); Biroli, Pietro (University of Zurich); Maselko, Joanna (University of North Carolina, Chapel Hill)
    Abstract: We evaluate the long-term impact of treating maternal depression on women’s financial empowerment and parenting decisions. We leverage experimental variation induced by a cluster-randomized control trial that provided psychotherapy to perinatally depressed mothers in rural Pakistan. It was one the largest psychotherapy interventions in the world, and the treatment was highly successful at reducing depression. We locate mothers seven years after the end of the intervention to evaluate its long-run effects. We find that the intervention increased women’s financial empowerment, increasing their control over household spending. Additionally, the intervention increased both time- and monetary-intensive parental investments, with increases in investments tending to favor girls.
    Keywords: parenting, early life, empowerment, women’s labor supply, maternal depression, mental health, child development, randomized controlled trial, Pakistan
    JEL: I15 I30 O15
    Date: 2017–11
  7. By: Livia Alfonsi; Oriana Bandiera; Vittorio Bassi; Robin Burgess; Imran Rasul; Munshi Sulaiman; Anna Vitali
    Abstract: We design a labour market experiment to compare demand-side and supply-side policies to tackle youth unemployment, a key issue in low-income countries. The experiment tracks 1700 workers and 1500 firms over four years to contrast the effects of offering workers vocational training (VT) to offering firms wage subsidies to train workers on-the-job (FT). Both treatments lead to skill accumulation but whilst VT workers learn sector-specific skills, FT workers learn more firm-specific skills. This is associated with higher employment rates for each type of worker but the effect is 50% larger for VT (21% vs 14%) and their total earnings increase by more (34% vs 20%). Structurally estimating a job ladder model reveals the mechanisms: VT workers receive higher rates of unemployment-to-job offers and higher rates of job-to-job offers. This greater labour market mobility stems from the certifiability and transferability of their skills, and causes the wage pro…les of VT workers to diverge away from FT workers. Evidence from the firm-side of the experiment complements these findings: we find that some of the higher returns to VT are driven by workers matching to higher productivity firms. Our evidence shows both …rms and workers are constrained in this setting and that subsidies to either side of the labour market would increase workers' employment and earnings. However, VT workers are better o¤ than FT workers as the greater certifiability and transferability of their skills allows them to climb the job ladder more quickly.
    JEL: J2 M5
    Date: 2017–12
  8. By: Timo Henckel; Gordon D. Menzies; Peter G. Moffatt; Daniel J. Zizzo
    Abstract: We present an experiment where subjects sequentially receive signals about the true state of the world and need to form beliefs about which one is true, with payoffs related to reported beliefs. We control for risk aversion using the Offerman et al. (2009) technique. Against the baseline of Bayesian updating, we test for belief adjustment under-reaction and over-reaction and model the decision making process of the agent as a double hurdle model where agents first decide whether to adjust their beliefs and then, if so, decide by how much. We find evidence for periods of belief inertia interspersed with belief adjustment. This is due to a combination of: random belief adjustment; state dependent belief adjustment, with many subjects requiring considerable evidence to change their beliefs; and Quasi-Bayesian belief adjustment, with insufficient belief adjustment when a belief change does occur.
    Keywords: belief revision, double hurdle model, expectations, overreaction, under re-action
    JEL: C34 C91 D03 D84
    Date: 2018–01
  9. By: Walkowitz, Gari
    Abstract: Motivated by methodological concerns, theoretical considerations, and evidence from previous studies, this paper makes a contribution to conducting dictator-game experiments under resource constraints. Using a holistic and strictly controlled approach, we systematically assess the validity of common cost-saving dictator-game variants. We include five common approaches and compare them to a standard dictator game: involving fewer receivers than dictators; paying only some subjects or decisions; role uncertainty at the time of the transfer decision; a combination of random decision payment and role uncertainty. To test the validity of subjects’ dictator-game decisions, we relate them to complementary individual difference measures of generosity: social value orientation, personal values, and a donation to charity. In line with previous evidence, our data show that dictator behavior is quite sensitive to the applied methods. The standard version of the dictator game has the highest validity. Involving fewer receivers than dictators and not paying for all decisions yields comparably valid results. These methods may, therefore, represent feasible alternatives for the conduct of dictator games under contraints. By contrast, in the dictator-game variants where only some subjects are paid or where subjects face uncertainty about their final player role, the expected associations with other measures of generosity are distorted. Under role uncertainty, generosity is also biased upwards. We conclude that these methods are inappropriate when the researchers are interested in valid individual measures of generosity.
    Keywords: Dictator Game, Costs, Incentives, Unbalanced Matching, Random Payment, Role Uncertainty, Social Value Orientation, Personal Values, Donation, Methodology, Experiment
    JEL: C72 C91 D3
    Date: 2017–11–09
  10. By: Denis Jeambrun (Airbus [France] - AIRBUS)
    Abstract: Are delays regularly experimented by major state programmes synonymous with failure or, paradoxically, would they be a strategy for success? Through the appearance of delays in the context of a programme of drones, this article puts forward the emergence of a strategy using these delays. The constraints and interests of the players push them to tolerate, accept and even implement this strategy despite the disadvantages associated with the situation.
    Abstract: Los retrasos sufridos regularmente por los grandes programas estatales, ¿son sinónimo de fracaso o, paradójicamente, son una estrategia para alcanzar el éxito? Analizando la aparición de retrasos en la realización de un proyecto de drones, el artículo trata de resaltar la aparición de una estrategia que se beneficia de estos retrasos. Las restricciones y los intereses de los actores los llevan a tolerar, aceptar, e incluso implementar esta estrategia a pesar de los inconvenientes relacionados con esta situación.
    Abstract: Les retards régulièrement subis par les grands programmes étatiques sont-ils synonymes d’échecs, ou constitueraient-ils, paradoxalement, une stratégie vers la réussite ? À travers l’apparition de retards dans la conduite d’un programme de drones, nous nous proposons dans cet article de mettre en évidence l’émergence d’une stratégie tirant profit de ces retards. Les contraintes et les intérêts des acteurs les poussent à tolérer, à accepter, voire à implémenter cette stratégie malgré les inconvénients afférents.
    Keywords: symbol, time, transaction, work, value, project, bounded rationality, rationality, human relations, success, social, society, sociology, strategy, programme, process, planning, organisation, objective, negotiation, military, management, social tie, power, game, interface, industrial, uncertainty, human, informal group, governance, future, state-controlled, state, company, firm, issue, failure, UAV, delays, defence, decision, culture, Crozier, belief, crisis, costs, control, context, complex, business, collective, workload, budget, weapons, analysis,player,groupe informel,humain,incertitude,étatique,futur,gestion,enjeu,entreprise,état,échec,drone,délais,défense,décision,culture,Crozier,charge de travail,collectif,commercial,complexe,contexte,contrôle,coûts,crise,croyance,acteur,analyse,armement,budget,industriel,interface,jeux,pouvoir,lien social,Loi de Programmation Militaire,management,militaire,négociation,objectif,organisation,planification,processus,programme,projet,rationalité limitée,rationalité,relations humaines,retards,réussir,sociale,société,sociologie,stratégie,symbole,temps,transaction,travail,valeur
    Date: 2017–12
  11. By: Muhammad Jehangir Amjad; Devavrat Shah; Dennis Shen
    Abstract: We present a robust generalization of the synthetic control method for comparative case studies. Like the classical method, we present an algorithm to estimate the unobservable counterfactual of a treatment unit. A distinguishing feature of our algorithm is that of de-noising the data matrix via singular value thresholding, which renders our approach robust in multiple facets: it automatically identifies a good subset of donors, overcomes the challenges of missing data, and continues to work well in settings where covariate information may not be provided. To begin, we establish the condition under which the fundamental assumption in synthetic control-like approaches holds, i.e. when the linear relationship between the treatment unit and the donor pool prevails in both the pre- and post-intervention periods. We provide the first finite sample analysis for a broader class of models, the Latent Variable Model, in contrast to Factor Models previously considered in the literature. Further, we show that our de-noising procedure accurately imputes missing entries, producing a consistent estimator of the underlying signal matrix provided $p = \Omega( T^{-1 + \zeta})$ for some $\zeta > 0$; here, $p$ is the fraction of observed data and $T$ is the time interval of interest. Under the same setting, we prove that the mean-squared-error (MSE) in our prediction estimation scales as $O(\sigma^2/p + 1/\sqrt{T})$, where $\sigma^2$ is the noise variance. Using a data aggregation method, we show that the MSE can be made as small as $O(T^{-1/2+\gamma})$ for any $\gamma \in (0, 1/2)$, leading to a consistent estimator. We also introduce a Bayesian framework to quantify the model uncertainty through posterior probabilities. Our experiments, using both real-world and synthetic datasets, demonstrate that our robust generalization yields an improvement over the classical synthetic control method.
    Date: 2017–11
  12. By: He, Yinghua; Magnac, Thierry
    Abstract: Matching markets often require recruiting agents "programs" to conduct a costly screening of "applicants", who are agents on the other side. A market becomes congested if programs must screen too many applicants. The cost associated with application submission is a Pigouvian tax that mitigates the negative externality that applicants impose on programs. A higher cost reduces congestion by discouraging applicants from applying to certain programs; however, match quality may be in jeopardy. We measure the effects of such Pigouvian taxes by studying variants of the Gale-Shapley Deferred-Acceptance mechanism with differential application costs. Using data collected in a multiple-elicitation experiment conducted in a real-life matching market, we show that a (low) application cost effectively reduces congestion without sacrificing matching quality.
    Keywords: Gale-Shapley Deferred Acceptance Mechanism; Costly Preference Formation; Screening; Stable Matching; Congestion; Matching Market Design
    JEL: C78 D50 D61 I21
    Date: 2017–12
  13. By: Emeric Henry (ECON - Département d'économie - Sciences Po); Nicolas Jacquemet (PSE - Paris School of Economics); Roberto Galbiati (ECON - Département d'économie - Sciences Po)
    Abstract: We study how cooperation-enforcing institutions dynamically affect values and behavior using a lab experiment designed to create individual specific histories of past institutional exposure. We show that the effect of past institutions is mostly due to " indirect " behavioral spillovers: facing penalties in the past increases partners' cooperation in the past, which in turn positively affects ones' own current behavior. We demonstrate that such indirect spillovers induce persistent effects of institutions. However, for interactions that occur early on, we find a negative effect of past enforcement due to differential learning under different enforcement institutions.
    Keywords: Laws,social values,cooperation,learning,spillovers,persistence of institutions,repeated games,experiments
    Date: 2017–07–01
  14. By: Pedro Carneiro (Institute for Fiscal Studies and University College London); Sokbae Lee (Institute for Fiscal Studies and Columbia University and IFS); Daniel Wilhelm (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: In a randomized control trial, the precision of an average treatment effect estimator and the power of the corresponding t-test can be improved either by collecting data on additional individuals, or by collecting additional covariates that predict the outcome variable. We propose the use of pre-experimental data such as other similar studies, a census, or a household survey, to inform the choice of both the sample size and the covariates to be collected. Our procedure seeks to minimize the resulting average treatment effect estimator's mean squared error and/or maximize the corresponding t-test's power, subject to the researcher's budget constraint. We rely on a modi cation of an orthogonal greedy algorithm that is conceptually simple and easy to implement in the presence of a large number of potential covariates, and does not require any tuning parameters. In two empirical applications, we show that our procedure can lead to reductions of up to 58% in the costs of data collection, or improvements of the same magnitude in the precision of the treatment effect estimator.
    Keywords: randomized control trials, big data, data collection, optimal survey design, orthogonal greedy algorithm, survey costs
    Date: 2017–10–23
  15. By: Luca Fumarco
    Abstract: I test discrimination against blind tenants assisted by guide dogs in the Italian rental housing market by using fake application letters. I compare three fictitious household tenants: married couples, married couples where the wife is blind and owns a guide dog, and married couples where the normal-sighted wife owns a normal dog. I find that the households with a blind wife are invited less often to visit apartments they applied for, because of the presence of their guide dog; using the language of Italian and E.U. laws, this behavior is called indirect discrimination against disabled people. This result is robust.
    Date: 2017
  16. By: Altmann, Steffen (University of Copenhagen); Traxler, Christian (Hertie School of Governance); Weinschenk, Philipp (University of Kaiserslautern)
    Abstract: This paper studies the interplay between deadlines and cognitive limitations. We analyze an agent's decision to complete a one-off task under a deadline. Postponing the task can be beneficial for the agent; missing the deadline, however, leads to a drop in the agent's rewards. If the agent exhibits cognitive limitations, postponing increases the risk of becoming inattentive and failing to complete the task in time. Our framework provides a rich set of predictions on the behavioral implications of deadlines. We test these predictions in a field experiment at a dental clinic, in which we exogenously vary deadlines and rewards for arranging check-up appointments. The empirical results underline the behavioral relevance of cognitive limitations. Imposing relatively tight deadlines induces patients to act earlier and at a persistently higher frequency than without a deadline. Evidence from a follow-up experiment and complementary surveys supports the notion that deadlines may serve as a powerful instrument when individuals' cognitive capacity is limited.
    Keywords: limited memory, cognitive limitations, deadlines, field experiment
    JEL: C93 D03 D91
    Date: 2017–11
  17. By: Hernán Bejarano (CIDE, Mexico; Chapman University, Orange, CA); Francisco Galarza (Universidad del Pacífico)
    Abstract: We study the consistency of risk preferences among undergraduate students in a developing country. Our design allow us to elicit consistency at the individual level in which each subject selects his or her most preferred lotteries under two different (but related) risk elicitation tasks. In the first task, subjects choose one lottery out of six alternatives, thus ruling out inconsistency. Our second task is a transformation of the first task into a multiple price-list lottery, intended to examine whether the choice in the first task is also revealed as preferred. Using these choices, we construct our measures of preferences inconsistency, and analyze their correlation with cognitive skills (as measured by Frederick (2005)'s Cognitive Reflection Test—CRT scores and students' GPAs) and risk preferences. We find that a low CRT score and a poor academic performance are, in general, good predictors of inconsistent choices. Results are mixed in terms of the role of risk aversion.
    Keywords: Inconsistent choices, risk aversion, cognitive skills, experimental economics
    JEL: C91 D81
    Date: 2016–05
  18. By: Francisco Galarza (Universidad del Pacífico); Ingo Outes Leonb (University of Oxford)
    Abstract: We designed and implemented a field experiment in rural Peru, in order to examine the sensitivity of the demand for micro life-insurance products to the introduction of rebates (cash-backs), which are partial refunds of the insurance premium when no insured event occurs. We find that cash-backs do appear to create higher levels of trust between the insurer and the insurance policy holder, thus offering the promise to increase the demand for insurance. This result suggests that cash-backs can be an attractive product innovation in developing countries.
    Keywords: Cash-back, life micro-insurance, experimental economics
    Date: 2016–06
  19. By: Tandon, Suranjali (National Institute of Public Finance and Policy); Rao, R. Kavita (National Institute of Public Finance and Policy)
    Abstract: The study presents an analysis of results of a laboratory experiment, conducted in 2015 to assess compliance behaviour in India. The experiment evaluates responses of 133 participants, to changes in key policy instruments like tax rate, penalty rate and audit probability. We find that changes in policy parameters generate varied responses across taxpayers. Audit probability is the only policy instrument that generates relatively consistent response. Further, the results show that individuals can be divided into those who respond to change in audit probability and those who respond to other policy variables, suggesting that no single policy would be adequate to induce suitable behavioural changes in all taxpayers.
    Keywords: tax compliance ; laboratory experiment ; audit probability ; tax rate ; penalty ; exemption threshold ; stigma
    JEL: H26 H3 C91
    Date: 2017–11
  20. By: Claude-Denys Fluet; Romain Espinosa; Bruno Deffains
    Abstract: We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on strangers. Three legal environments are compared: no law, strict liability for the harm caused to others, and an efficiently designed negligence rule where damages are paid only when the harmful action causes a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., material incentives are then nondeterrent. We investigate how legal obligations and social norms interact. Our results show that liability rules strengthen pro-social behavior and suggest that strict liability has a greater effect than the negligence rule.
    Keywords: Behavioral law and economics, liability rules, Social norms, social preferences, legal norms
    JEL: C91 K13 D03
    Date: 2017
  21. By: Charles Bellemare; Alexander Sebald; Sigrid Suetens
    Abstract: Psychological games of guilt aversion assume that preferences depend on (beliefs about) beliefs and on the guilt sensitivity of the decision-maker. We present an experiment designed to measure guilt sensitivities at the individual level for various stake sizes. We use the data to estimate a structural choice model that allows for heterogeneity, and permits that guilt sensitivities depend on stake size. We find substantial heterogeneity of guilt sensitivities in our population, with 60% of decision makers displaying stake-dependent guilt sensitivity. For these decision makers, we find that average guilt sensitivities are significantly different from zero for all stakes considered, while significantly decreasing with the level of stakes.
    Keywords: guilt sensitivity, psychological game theory, Heterogeneity, stakes, dictator game
    JEL: A13 C91
    Date: 2017
  22. By: Charles Bellemare; Marion Goussé; Guy Lacroix; Steeve Marchand
    Abstract: We investigate the determinants and extent of labor market discrimination toward people with acute physical disabilities (wheelchair users) using data from a large scale field experiment conducted in the province of Quebec (Canada). Applications (cover letters and CVs) were randomly sent to 1477 private firms operating in two urban regions (Montréal and Québec City) advertising open positions requiring various skill levels. The applications were randomly generated to cover a broad spectrum of potential determinants of discrimination (gender, skill level, work history, workplace adjustment costs, etc.). We find that average callback rates of disabled and non-disabled applicants is 14.4% and 31%, respectively, yielding a differential callback rate of 46%. We also investigate whether the differential may result from accessibility constraints related to the physical infrastructures where firms are located (poor and access to an elevator, availability of wheelchair, etc.). The latter are found to have no explanatory power. In addition, applications which explicitly mention that the candidate is eligible to a government subsidy to cover the cost of workplace adaptations and assistive technology do not yield higher callback rates.
    Keywords: Discrimination, Disabilities
    JEL: J71 J68
    Date: 2017
  23. By: Martin Boyer; Philippe De Donder; Claude-Denys Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developped by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insurance while overall 31% report no knowledge of the product. Although we finnd evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demand side, once respondents have been made aware of the risks, we finnd that demand remains low, in part because of misperceptions of risk, lack of bequest motive and home ownership which may act as a substitute.
    Keywords: Long-term care insurance, adverse selection, stated-preference, Health, Insurance
    Date: 2017
  24. By: Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel
    Abstract: From a current perspective the Paris Agreement is not sufficient to limit the global mean temperature below 2êC above pre-industrial level as intended. The Agreement stipulates that parties review, compare and ratchet up efforts to combat climate change over time. Within this process, commitments heavily depend on what has been already achieved and this status-quo reflects an important reference point serving either as commitment advice or potential threat. We present an experimental study that is specifically designed to incorporate the effect of a status-quo via pre-existing contribution levels under endowment heterogeneity in a game in which participants make voluntary contributions to a public good. Our participants are sampled from the United Nations Youth Associations Network, representing participants from 51 countries. Members from developed and developing countries take decisions against the background of different initial levels of endowments and pre-existing contributions. Our analysis indicates that starting with ambitious pre-existing contribution levels can foster aggregate mitigation levels. Falling behind this status-quo contribution levels by reducing the public good appears to be a strong behavioral barrier. These observations might provide support for the basic structure of the Paris Agreement with Nationally Determined Contributions and the possibility to adjust them, even if a downward revision of national targets may not be precluded.
    Keywords: Paris Agreement,Nationally Determined Contributions,Ratched-up mechanism,International public goods,Online experiment
    JEL: H41 C91 F53 Q58
    Date: 2017
  25. By: Dorow, Anderson; Da Costa Jr, Newton; Takase, Emilio; Prates, Wlademir; Da Silva, Sergio
    Abstract: We experimentally assess the disposition effect and return performance, using electroencephalogram to measure the brain activity of the participants. The design of the experiment follows a previous protocol (Frydman et al., 2014). Our sample was made up of 12 undergraduates (all male, age range 18 to 29, mean age 22.2) and five professional stock traders (all male, age range 21 to 37, mean age 30.2). We find neural support for the finding that professionals are more likely to escape the disposition effect (Da Costa Jr et al., 2013). We also find higher heart rate variability and brainwave activation are positively related to stock returns. Electrical activity tends to increase with returns, mainly for the beta waves that are activated in conscious states.
    Keywords: disposition effect, neurofinance, beta electric brain wave, psychophysiology
    JEL: D87 G02
    Date: 2017
  26. By: Marco Angrisani (Institute for Fiscal Studies); Antonio Guarino (Institute for Fiscal Studies); Philippe Jehiel (Institute for Fiscal Studies); Toru Kitagawa (Institute for Fiscal Studies and cemmap and University College London)
    Abstract: We study social learning in a continuous action space experiment. Subjects, acting in sequence, state their belief about the value of a good, after observing their predecessors' statements and a private signal. We compare the behavior in the laboratory with the Perfect Bayesian Equilibrium prediction and the predictions of bounded rationality models of decision making: the redundancy of information neglect model and the overconfidence model. The results of our experiment are in line with the predictions of the overconfidence model and at odds with the others'.
    Date: 2017–06–22

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