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on Experimental Economics |
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Issue of 2018‒04‒23
25 papers chosen by |
| By: | Mamadou Gueye; Nicolas Quérou; Raphael Soubeyran |
| Abstract: | In this paper, we use a laboratory experiment to analyze the relationship between equity and coordination success in a game with Pareto ranked equilibria. Equity is decreased by increasing the coordination payoffs of some subjects while the coordination payoffs of others remain unchanged. Theoretically, in this setting, difference aversion may lead to a positive relationship between equity and coordination success, while social welfare motivations may lead to a negative relationship. Using a within-subject experimental design, we find that less equity unambiguously leads to a higher level of coordination success. Moreover, this result holds even for subjects whose payoffs remain unchanged. Our results suggest that social welfare motivations drives the negative relationship between equity and coordination success found in this experiment. Moreover, our data suggest that the order of treatment matters. Groups facing first the treatment with high inequality in coordination payoffs, then the treatment with low inequality in coordination payoffs, reach the Pareto dominant equilibrium more often in both treatments compared to groups playing first the treatment with low inequality in coordination payoffs, then the treatment with high inequality in coordination payoffs. |
| Keywords: | coordination game, equity, effciency, difference aversion, social welfare motivation |
| JEL: | C70 C72 C92 C91 D63 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpceem:18-07&r=exp |
| By: | Philip Brookins (Max Planck Institute for Research on Collective Goods and Crowd Innovation Lab, Harvard University); Dmitry Ryvkin (Department of Economics,Florida State University); Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University) |
| Abstract: | We experimentally explore indefinitely repeated contests. Theory predicts more cooperation, in the form of lower expenditures, in indefinitely repeated contests with a longer expected time horizon, yet our data do not support this prediction. Theory also predicts more cooperation in indefinitely repeated contests compared to finitely repeated contests of the same expected length, but we find no significant difference empirically. When controlling for risk and gender, we actually find significantly higher long-run expenditure in some indefinite contests relative to finite contests. Finally, theory predicts no difference in cooperation across indefinitely repeated winner-take-all and proportional-prize contests. We find significantly less cooperation in the latter, because female participants expend more on average than their male counterparts in our data. Our paper extends the experimental literature on indefinitely repeated games to contests and, more generally, contributes to an infant empirical literature on behavior in indefinitely repeated games with “large” strategy spaces. |
| Keywords: | contest, repeated game, cooperation, experiment |
| JEL: | C72 C73 C91 D72 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:18-01&r=exp |
| By: | Bernd Irlenbusch; Rainer Michael Rilke; Gari Walkowitz |
| Abstract: | We analyze the effects of limited feedback on beliefs and contributions in a repeated public goods game setting. In a first experiment, we test whether exogenously determined feedback about a good example (i.e., the maximum contribution in a period) in contrast to a bad example (i.e., the minimum contribution in a period) induces higher contributions. We find that when the type of feedback is not transparent to the group members, good examples boost cooperation while bad examples hamper it. There is no difference when the type of feedback is transparent. In a second experiment, feedback is endogenously chosen by a group leader. The results show that a large majority of the group leaders count on the positive effect of providing a good example. This is true regardless whether they choose the feedback type to be transparent or non-transparent. Half of the group leaders make the type of feedback transparent. With endogenously chosen feedback about good examples no difference in contributions can be observed among transparent and non-transparent feedback selection. In both experiments feedback shapes subjects’ beliefs. With exogenously chosen feedback, transparent feedback tends to reduce beliefs when good examples are provided as feedback and tends to increase beliefs in when bad examples are provided as feedback compared to the respective non-transparent cases. Our results shed new light on the design of feedback provision in public goods settings. |
| Keywords: | Feedback Design, Transparency, Public Goods, Imperfect Conditional Cooperation, Experiment |
| JEL: | H41 C92 D82 |
| Date: | 2018–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:whu:wpaper:18-01&r=exp |
| By: | Ritwik Banerjee (Indian Institute of Management Bangalore and IZA); Nabanita Datta Gupta (Department of Economics and Business Economics, Aarhus University, Denmark); Marie Claire Villeval (University of Lyon) |
| Abstract: | Is success in a task used strategically by individuals to motivate their beliefs prior to taking action in a subsequent, unrelated, task? Also, is the distortion of beliefs reinforced for individuals who have lower status in society? Conducting an artefactual field experiment in India, we show that success when competing in a task increases the performers’ self-confidence and competitiveness in the subsequent task. We also find that such spillovers affect the self-confidence of low-status individuals more than that of high-status individuals. Receiving good news under Affirmative Action, however, boosts confidence across tasks regardless of the caste status. |
| Keywords: | Motivated beliefs, spillovers, self-confidence, competitiveness, Affirmative Action, experiment |
| JEL: | C91 J15 M52 |
| Date: | 2018–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2018-02&r=exp |
| By: | Cortney Rodet (Department of Economics, Ohio University); Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University) |
| Abstract: | We report laboratory experiments investigating the cyclicality of investment. In our setting, optimal investment is counter-cyclical because investment costs fall following market downturns. However, we do not observe counter-cyclical investment. Instead, heuristic investment models where firms invest a fixed percentage of their liquidity, or a fixed percentage of anticipated market demand, better fit our data on average than does optimal investment. We also report a control treatment without cost changes and a treatment with asymmetric investment liquidity. Both of these extensions support our main result. |
| Keywords: | investment, business cycles, heuristics, experimental economics |
| JEL: | C90 D22 E22 E32 L16 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:18-02&r=exp |
| By: | Wang, Jian (Department of Health Management and Health Economics); Iversen, Tor (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (Department of Health Management and Health Economics); Godager, Geir (Department of Health Management and Health Economics) |
| Abstract: | When implementing a payment reform, policy makers face the challenge of assessing the effects on health care providers’ behavior. Empirical evidence most often relies on field studies, register- or survey data characterized by the absence of a control group. In this paper, we conduct a controlled laboratory experiment to assess the effect of a change in the payment system using the parameters of Hennig-Schmidt, Selten, and Wiesen (2011). We focus on the two payment systems fee-forservice (ffs) and capitation (cap). Participants are either practicing medical doctors or medical students. They are confronted with two different payment mechanisms, transitioning either from ffs to cap or vice versa. We also analyze whether the effect of financial incentives is dependent on cultural context by comparing German and Chinese medical students’ provision behavior. In line with previous evidence, both doctors and medical students provide fewer medical services under cap than under ffs. Patient benefit deviates significantly from the patient optimum under both payment systems, even though subjects do not maximize their profits. Whether cap or ffs is beneficial for the patient depends on the patient type. We find that doctors provide less patient benefit and less frequently choose benefit-maximizing treatments. We find that the sequence of payment schemes affects physician provision behavior. Under cap, more benefit is provided when cap follows ffs as compared to the opposite order. Under ffs, we observe no such effect. The interpretation is that provider behavior under a payment schemes can depend not only on the current payment scheme, but also on the payment scheme that was implemented in the past. Comparing medical students from Germany and China, we do not find any difference in behaviour under the same payment scheme. |
| Keywords: | health care providers; payment system; payment mechanisms; fee-forservice; capitation |
| JEL: | C91 H40 I11 J33 |
| Date: | 2017–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oslohe:2017_002&r=exp |
| By: | Alia Gizatulina (Max Planck Institute for Research on Collective Goods); Olga Gorelkina (University of Liverpool) |
| Abstract: | We study the division of trade surplus in a natural field experiment on German eBay. Acting as a seller, we offer Amazon gift cards with face values of up to 500 Euro. A random selection of buyers, the subjects of our experiment, make price offers according to the rules of eBay. Using a novel decomposition method, we infer the offered shares of trade surplus from the data and find that the average share proposed to the seller amounts to about $30 \%$. Additionally, we document: (i) insignificant effects of stake size; (ii) poor use of strategically relevant public information; and (iii) differences between East and West German subjects. |
| Keywords: | Field experiment, surplus division, bargaining, Internet trade, eBay |
| JEL: | C72 C93 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2104&r=exp |
| By: | Leonardo Becchetti (CEIS & DEF, University of Rome Tor Vergata); Luca Corazzini (Università di Venezia “Ca Foscari”); Vittorio Pelligra (Università di Cagliari, CRENoS) |
| Abstract: | We use an original variant of the standard trust game, in order to study the effect of corruption on trust and trustworthiness. In this game, both the trustor and the trustee know that part of the surplus they can generate may be captured by a third “corrupted” player under different expected costs of audit and prosecution. We find slightly higher trustor’s giving in presence of corruption, matched by a significant effect of excess reciprocity from the trustee. Both the trustor and the trustee expect on average corruption acting as a tax, inelastic to changes in the risk of corruptor audit. Expectations are correct for the inelasticity assumption, and for the actual value of the “corruption tax”. Our experimental findings lead to the rejection of four standard hypotheses based on purely self-regarding preferences. We discuss how the apparently paradoxical excess reciprocity effect is consistent with the cultural role of heroes in history where examples of commendable giving were used to stimulate emulation of the ordinary people. Our results suggest that the excess reciprocity component of the trustee makes trustor’s excess giving a rational and effective strategy |
| Keywords: | corruption, extended trust game, lab experiment |
| JEL: | C72 C91 |
| Date: | 2018–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:429&r=exp |
| By: | Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Wichardt, Philipp C. (Kiel Institute for the World Economy) |
| Abstract: | This paper reports results from a classroom dictator game comparing the effects of three different sets of standard instructions. As was shown by Oxoby and Spraggon (2008), inducing a feeling of entitlement – one subject earning the endowment – strongly affects allocations in dictator games towards the owner of the money (both dictator and receiver). The present results show that seemingly small differences in instructions induce fundamentally different perceptions regarding entitlement. Behavior is affected accordingly, i.e. instructions inducing subjects to perceive the task as distributive rather than a task of generosity lead to higher allocations to receivers (average 52% vs. 35%). A theoretical explanation integrating monetary as well as social incentives and emphasizing potential effects of uncertainty about the latter is discussed (cf. Bergh and Wichardt, 2018). |
| Keywords: | Dictator games; Framing effects; Property rights; Social preferences |
| JEL: | C70 C91 D63 |
| Date: | 2018–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1205&r=exp |
| By: | Hennig-Schmidt, Heike (Department of Health Management and Health Economics); Jürges, Hendrik (Schumpeter School of Business and Economics); Wiesen, Daniel (Department of Business Administration and Health Care Management) |
| Abstract: | We introduce a controlled behavioral experiment framed in a neonatal care context to analyze the effect of introducing a random audit and fines on individuals' honesty in a simple reporting task. Our behavioral data provide new evidence on dishonesty and upcoding in health care. We find that introducing audits combined with a fine significantly reduces dishonesty on aggregate. The effect is driven by a significant reduction in upcoding. At the same time, dishonest choices that cannot be detected as fraudulent by an audit (partial dishonesty) increase. We also find evidence that individual characteristics such as gender, medical background, and integrity are related to dishonest behavior. |
| Keywords: | Dishonesty; audits and fines; neonatology; medically framed experiment; reporting of birth weights |
| JEL: | D03 I11 I18 |
| Date: | 2018–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oslohe:2018_003&r=exp |
| By: | Berno Büchel (University of Fribourg, Economics); Stefan Klößner (Saarland University, Statistics and Econometrics); Martin Lochmüller (Saarland University, Statistics and Econometrics); Heiko Rauhut (University of Zurich, Sociology) |
| Abstract: | We investigate how the selection process of a leader affects team performance with respect to social learning. We use a lab experiment in which an incentivized guessing task is repeated in a star network with the leader at the center. Leader selection is either based on competence, on self-confidence, or made at random. Teams with random leaders do not underperform compared to competent leaders, and they even outperform teams whose leader is selected based on self-confidence. The reason is that random leaders are better able to use the knowledge within the team. We can show that it is the declaration of the selection procedure which makes non-random leaders overly influential. We set up a horse race between several rational and naïve models of social learning to investigate the micro-level mechanisms. We find that overconfidence and conservatism contribute to the fact that overly influential leaders mislead their team. |
| Keywords: | Social Networks, Social Influence, Confidence, Overconfidence, Bayesian Updating, Naïve Learning, Sortition, Wisdom of Crowds |
| JEL: | D83 D85 C91 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.02&r=exp |
| By: | Annarita Colasante (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | In this paper we present the results of a Learning-to-Forecast Experiment (LtFE) eliciting short-run as well as long-run expectations about the future price dynamics in markets with positive and negative expectations feedback. Comparing our results on short-run expectations to the LtFE literature, we prove that eliciting long-run expectations neither has an impact on the price dynamics nor on short-run expectations formation. In particular, we confirm that the Rational Expectation Equilibrium (REE) is a good benchmark only for the markets with negative feedback. Interestingly, our data show that the term structure of the cross-sectional dispersion of expectations is convex in positive feedback markets and concave in negative feedback markets. Differences in the slope of the term structure stem from diverse degrees of uncertainty on the evolution of prices in the two feedback systems; (i) in the negative feedback system, the convergence of the price to the REE mirrors into a tendency for coordination of long-run expectations around the fundamental value; (ii) conversely, the instability of the REE in the positive feedback system and the resulting oscillatory price dynamics are responsible for the diverging pattern of long-run expectations. Finally, we propose a new measure of heterogeneity of expectations based on the scaling of the dispersion of expectations over the forecasting horizon. |
| Keywords: | Long-Run Expectations, Heterogeneous Expectations, Experiment, Coordination, Convergence, Learning-to-Forecast Experiment |
| JEL: | D03 G12 C91 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2018/02&r=exp |
| By: | Victoria Baranov (University of Melbourne); Sonia Bhalotra (University of Essex); Pietro Biroli (University of Zurich); Joanna Maselko (University of North Carolina) |
| Abstract: | We evaluate the medium-term impacts 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 of the largest psychotherapy interventions in the world and highly successful at reducing depression. We locate mothers seven years after the end of the intervention to evaluate its longer run effects. We find that the intervention improved women’s financial empowerment, increasing their control over household spending. Additionally, the intervention increased both time- and monetary-intensive parental investments. |
| Keywords: | mental health, maternal depression, women's labor supply, empowerment, early life, parenting, Child Development, randomized control trials, Pakistan |
| JEL: | I15 I30 O15 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-021&r=exp |
| By: | Appel, Franziska; Balmann, Alfons; Dong, Changxing; Rommel, Jens |
| Abstract: | Business management games have been used for decades, primarily for educational purposes, training, and entertainment. More recently, the use of such games has expanded to an experimental platform. Usually business management games are directly designed and developed for one or more of these purposes; however, this paper discusses another possibility: the development of a business management game based on an existing agent-based model. We encourage this use and describe the extension of the agent-based model AgriPoliS, which has been widely used to analyze structural change in agriculture. We document the resulting software FarmAgriPoliS and provide a systematic classification of FarmAgriPoliS into the framework of business management games with agricultural background. Furthermore, we evaluate the suitability of FarmAgriPoliS for teaching, experimental use, and online gaming. |
| Keywords: | Business Management Game,Agent-Based Model,Behavioral Experiments,Agriculture,Teaching |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iamodp:173&r=exp |
| By: | Giovanna d’Adda (University of Milano, Department of Economics); Yu Gao (Politecnico di Milano, Department of Management and Economics); Russell Golman (Carnegie Mellon University, Department of Social and Decision Sciences); Massimo Tavoni (Politecnico di Milano, Department of Management and Economics and FEEM) |
| Abstract: | Environmental policies based on information provision are widespread, but have often proven ineffective. One possible explanation for information’s low effectiveness is that people actively avoid it. We conduct an online field experiment on air conditioning usage to test the theory of moral wiggle room, according to which people avoid information that would compel them to act morally, against the standard theory of information acquisition, and identify conditions under which each theory applies. In the experiment, we observe how exogenously imposing a feeling of moral obligation to reduce air conditioning usage and exploiting natural variation in the cost of doing so, given by outside temperature, influences subjects’ avoidance of information about their energy use impacts on the environment. Moral obligation increases information avoidance when it is hot outside, consistent with the moral wiggle room theory, but decreases it when outside temperature is low. Avoiding information positively correlates with air conditioning usage. These findings provide guidance about tailoring the use of nudges and informational tools to the decision environment. |
| Keywords: | Information Avoidance, Energy Efficiency, Moral Wiggle Room |
| JEL: | D4 Q4 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.07&r=exp |
| By: | HIGASHIDA Keisaku; TANAKA Kenta; MANAGI Shunsuke |
| Abstract: | A large number of studies have tackled the question of asset bubbles, in which whether or not market participants are able to calculate fundamental values is considered to play a key role in reducing bubbles. Contrary to the existing literature on uncertainty, this study conducts a series of laboratory experiments, wherein subjects cannot calculate objective expected returns with certainty. In such cases, gaps between objective and subjective expected returns (perception gaps) arise. The purpose of this study is to clarify (i) how asset prices fluctuate and (ii) if perception gaps lead to inefficient transactions. Moreover, (iii) we estimate the losses caused by perception gaps. Our estimation results indicate that perception gaps linger across rounds, and, accordingly, these gaps may generate earnings losses. Moreover, we find that the greater a perception gap of a subject, the greater is the inefficiency from his/her transactions. Traders now are using artificial intelligence (AI) for decision making. We also discuss policy implications on the introduction of AI into asset markets. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:18008&r=exp |
| By: | Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University) |
| Abstract: | Price conspiracies appear endemic in many markets. This paper conjectures that low expected returns from product innovation can affect price collusion in certain markets. This conjecture is tested—and supported—by both archival and experimental data. In particular, average market prices in low innovation experiments are significantly greater than those in high innovation, but otherwise identical experiments, because price collusion is more successful in the low innovation experiments. |
| Keywords: | price collusion, product innovation, antitrust, experimental economics |
| JEL: | L41 L10 O33 C92 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:17-26&r=exp |
| By: | Felix Koelle (University of Cologne); Lukas Wenner (University of Cologne) |
| Keywords: | Present bias; altruism; stability; real effort; dictator game; intertemporal choice |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2018-02&r=exp |
| By: | Brañas-Garza, Pablo; Capraro, Valerio; Rascon-Ramirez, Ericka |
| Abstract: | Whether or not there are gender differences in altruistic behaviour in Dictator Game experiments has attracted considerable attention in recent years. Earlier studies found women to be more altruistic than men. However, this conclusion has been challenged by more recent accounts, which have argued that gender differences in altruistic behaviour may be a peculiarity of student samples and may not extend to random samples. Here we study gender differences in altruistic behaviour and, additionally, in expectations of altruistic behaviour, in a sample of Amazon Mechanical Turk crowdworkers living in the US. In Study 1, we report a mega-analysis of more than 3,500 observations and we show that women are significantly more altruistic than men. In Study 2, we show that both women and men expect women to be more altruistic than men. |
| Keywords: | dictator game, gender differences, altruism, expectations. |
| JEL: | C93 C99 J7 J71 |
| Date: | 2018–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86238&r=exp |
| By: | Sarah Abraham; Liyang Sun |
| Abstract: | Event studies are frequently used to estimate average treatment effects on the treated (ATT). In estimating the ATT, researchers commonly use fixed effects models that implicitly assume constant treatment effects across cohorts. We show that this is not an innocuous assumption. In fixed effect models where the sole regressor is treatment status, the OLS coefficient is a non-convex average of the heterogeneous cohort-specific ATTs. When regressors containing lags and leads of treatment are added, the OLS coefficient corresponding to a given lead or lag picks up spurious terms consisting of treatment effects from other periods. Therefore, estimates from these commonly used models are not causally interpretable. We propose alternative estimators that identify certain convex averages of the cohort-specific ATTs, hence allowing for causal interpretation even under heterogeneous treatment effects. To illustrate the empirical content of our results, we show that the fixed effects estimators and our proposed estimators differ substantially in an application to the economic consequences of hospitalization. |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1804.05785&r=exp |
| By: | Lefebvre, Germain; Nioche, Aurélien; Bourgeois-Gironde, Sacha; Palminteri, Stefano |
| Abstract: | Money is a fundamental and ubiquitous institution in modern economies. However, the question of its emergence remains a central one for economists. The monetary search-theoretic approach studies the conditions under which commodity money emerges as a solution to override frictions inherent to inter-individual exchanges in a decentralized economy. Although among these conditions, agents' rationality is classically essential and a prerequisite to any theoretical monetary equilibrium, human subjects often fail to adopt optimal strategies in tasks implementing a search-theoretic paradigm when these strategies are speculative, i.e., involve the use of a costly medium of exchange to increase the probability of subsequent and successful trades. In the present work, we hypothesize that implementing such speculative behaviors relies on reinforcement learning instead of lifetime utility calculations, as supposed by classical economic theory. To test this hypothesis, we operationalized the Kiyotaki and Wright paradigm of money emergence in a multi-step exchange task and fitted behavioral data regarding human subjects performing this task with two reinforcement learning models. Each of them implements a distinct cognitive hypothesis regarding the weight of future or counterfactual rewards in current decisions. We found that both models outperformed theoretical predictions about subjects' behaviors regarding the implementation of speculative strategies and that the latter relies on the degree of the opportunity costs consideration in the learning process. Speculating about the marketability advantage of money thus seems to depend on mental simulations of counterfactual events that agents are performing in exchange situations. |
| Keywords: | Money, Speculative Behaviours, Reinforcement Learning |
| JEL: | C91 D83 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85586&r=exp |
| By: | Shakun Mago (University of Richmond); Roman Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University) |
| Abstract: | Sequential multi-battle contests are predicted to induce lower expenditure than simultaneous contests. This prediction is a result of a “New Hampshire Effect” – a strategic advantage created by the winner of the first battle. Although our laboratory study provides evidence for the New Hampshire Effect, we find that sequential contests generate significantly higher (not lower) expenditure than simultaneous contests. This is mainly because in sequential contests, there is significant over-expenditure in all battles. We suggest sunk cost fallacy and utility of winning as two complementary explanations for this behavior and provide supporting evidence. |
| Keywords: | election, sequential contests, simultaneous contests, experiments |
| JEL: | C72 C73 C91 D72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:17-25&r=exp |
| By: | Daniel W. Elfenbein; Raymond Fisman; Brian McManus |
| Abstract: | We study the use of and response to cheap talk by firms and their consumers, focusing on unverifiable promises of charitable donations on eBay. For transactions during March 2005 – May 2006, cheap talk listings have lower sales probabilities but sell at higher prices when they are successful. The negative relationship between cheap talk and sales is concentrated in the months following Hurricane Katrina, a time when both verifiable and unverifiable charity-related listings increased dramatically. Finally, we show that cheap talk sellers have significantly lower quality ratings than sellers who make verifiable donations. Collectively, our results suggest that most buyers (justifiably) avoid cheap talk listings when credible quality signals are available, thus limiting the extent of cheap talk under these conditions. |
| JEL: | D83 K2 L15 M37 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24437&r=exp |
| By: | Lise Vesterlund |
| Abstract: | Women's reluctance to negotiate is often used to explain the gender wage gap, popularizingthe push for women to "lean-in" and negotiate more. Examining an environmentwhere women achieve positive pro ts when they choose to negotiate, we fi nd that increasednegotiations are not helpful. Women know when to ask: they enter negotiations resultingin positive profi ts and avoid negotiations resulting in negative profi ts. While the findingsare similar for men, we fi nd no evidence that men are more adept than women at knowingwhen to ask. Thus, our results do not justify a greater push for women to negotiate. |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:6382&r=exp |
| By: | Dayana Zhappassova (Department of Economics, University of Wyoming); Ben Gilbert (Division of Economics and Business, Colorado School of Mines); Linda Thunstrom (Department of Economics, University of Wyoming) |
| Abstract: | It is well-known from the mental accounting literature that consumers would rather pay up-front for a luxury good like a vacation, but pay later for a durable good like a dishwasher. This occurs because the hedonic benefits and monetary costs enter differently in the mental accounts. But how does the mental accounting process change if the durable good saves money over time, as with an energy efficiency upgrade, or signals wealth and ``green status'', like a rooftop solar panel or an electric car? In this paper, we derive a mental accounting model of energy efficient and green durable investment that incorporates the consumer heterogeneity in the psychological ``pain of paying''. The model predicts that pain of paying attenuates the willingness to pay for status signaling and environmental protection, but increases the willingness to pay more up front in order to reduce long run energy bills. Consumers with a high pain of paying may therefore act as if they have a low discount rate when they are more accurately described as being conflicted about their intertemporal preferences. We test these predictions using a survey-based discrete choice experiment with solar and energy efficient homes, in which we measured individual subjects' susceptibility to pain of paying. |
| Keywords: | mental accounting, pain of paying, solar, energy efficiency, green durables |
| JEL: | Q40 Q42 D91 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201803&r=exp |