nep-exp New Economics Papers
on Experimental Economics
Issue of 2018‒05‒14
thirty papers chosen by

  1. Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market By David Dickinson; David Masclet; Emmanuel Péterlé
  2. The Persistent Power of Promises By Florian Ederer; Frédéric Schneider
  3. Do Fixed-Prize Lotteries Crowd Out Public Good Contributions Driven by Social Preferences? By Peter Katuscak; Tomas Miklanek
  4. Impact of delivering iron-fortified salt through a school feeding program on child health, education and cognition: Evidence from a randomized controlled trial in rural India By Krämer, Marion; Kumar, Santosh; Vollmer, Sebastian
  5. The effects of official and unofficial information on tax compliance By Garcia, Filomena; Marques, Rafael; Opromolla, Luca David; Vezzulli, Andrea
  6. Cognitive stress and learning Economic Order Quantity (EOQ) inventory management: An experimental investigation By Pan, Jinrui; Shachat, Jason; Wei, Sijia
  7. Wealth Effects and Labor Supply: An Experimental Study By Deniz Nebioglu; Ayca Ebru Giritligil
  8. Promises Undone: How Committed Pledges Impact Donations to Charity By Toke R. Fosgaard; Adriaan (A.R.) Soetevent
  9. Motivated Memory in Dictator Games By Charlotte Saucet; Marie Villeval
  10. Ignoring Good Advice By Ronayne, David; Sgroi, Daniel
  11. Social Accountability and Service Delivery: Experimental Evidence from Uganda By Nathan Fiala; Patrick Premand
  12. Fairness in Winner-Take-All Markets. By Bartling, Björn; Cappelen, Alexander W.; Ekström, Mathias; Sørensen, Erik Ø.; Tungodden, Bertil
  13. More Opportunity, More Cooperation? The Behavioral Effects of Birthright Citizenship on Immigrant Youth By Christina Felfe; Martin G. Kocher; Helmut Rainer; Judith Saurer; Thomas Siedler
  14. Digit ratio (2D:4D) predicts pro-social behavior in economic games only for unsatisfied individuals By Brañas-Garza, Pablo; Espín, Antonio M.; Garcia, Teresa; Kovářík, Jaromír
  15. Skills, Signals, and Employability: An Experimental Investigation By Piopiunik, Marc; Schwerdt, Guido; Simon, Lisa; Woessmann, Ludger
  16. Undressed for Success? The Effects of Half-Naked Women on Economic Behavior By Bonnier, Evelina; Dreber, Anna; Hederos, Karin; Sandberg, Anna
  17. From the Lab to the Field: A Review of Tax Experiments By Mascagni, Giulia
  18. Time vs. State in Insurance: Experimental Evidence from Contract Farming in Kenya By Casaburi, Lorenzo; Willis, Jack
  19. Physical Disability and Labor Market Discrimination: Evidence from a Field Experiment By Charles Bellemare; Marion Gousse; Guy Lacroix; Steeve Marchand
  20. Energy efficiency, information, and the acceptability of rent increases: A multiple price list experiment with tenants By Ghislaine Lang; Bruno Lanz
  21. Blood Type and Blood Donation Behaviors: An Empirical Test of Pure Altruism Theory By Shusaku Sasaki ,; Yoshifumi Funasaki; Hirofumi Kurokawa; Fumio Ohtake
  22. The development of risk aversion and prudence in Chinese children and adolescents By Heinrich, Timo; Shachat, Jason
  23. When do populations polarize? An explanation By Benoît, Jean-Pierre; Dubra, Juan
  24. Gender differences in altruism on Mechanical Turk: Expectations and actual behaviour By Pablo Brañas-Garza; Valerio Capraro; Ericka Rascón Ramírez
  25. Using Non-Invasive Brain Stimulation to Test the Role of Self-Control in Investor Behavior By Li, Jianbiao; Niu, Xiaofei; Li, Dahui; Cao, Qian
  26. Building support for taxation in developing countries: Experimental evidence from Mexico By Flores-Macías, Gustavo A.
  27. Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry By Casaburi, Lorenzo; Macchiavello, Rocco
  28. Empirical Equilibrium By Rodrigo A. Velez; Alexander L. Brown
  29. Intertemporal Consumption with Risk: A Revealed Preference Analysis By Lanier, Joshua; Miao, Bin; Quah, John; Zhong, Songfa
  30. Loyalty Shares with Tenure Voting - a Coasian bargain? Evidence from the Loi Florange Experiment By Becht, Marco; Kamisarenka, Yuliya; Pajuste, Anete

  1. By: David Dickinson (IZA Department of Economics - Appalachian State University); David Masclet (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - CNRS - Centre National de la Recherche Scientifique); Emmanuel Péterlé (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UBFC - Université Bourgogne Franche-Comté - UFC - Université de Franche-Comté)
    Abstract: In this paper, we examine labor market favoritism in a unique laboratory experiment design that can shed light on both the private benefits and spillover costs of employer favoritism (or discrimination). Group identity is induced on subjects such that each laboratory "society" consists of eight individuals each belonging to one of two different identity groups. In some treatments randomly assigned employer-subjects give preference rankings of potential worker-subjects who would make effort choices that impact employer payoffs. Though it is common knowledge that group identity in this environment provides no special productivity information and cannot facilitate communication or otherwise lower costs for the employer, employers preferentially rank in-group members. In such instances, the unemployed workers are aware that an intentional preference ranking resulted in their unemployment. Unemployed workers are allowed to destroy resources in a final stage of the game, which is a simple measure of the spillover effects of favoritism in our design. Though we find evidence that favoritism may privately benefit a firm in terms of higher worker effort, the spillover costs that result highlight a reason to combat favoritism/discrimination. This result also identifies one potential micro-foundation of societal unrest that may link back to labor market opportunity.
    Keywords: Discrimination,Experimental Economics,Social identity,Conflict
    Date: 2018–05
  2. By: Florian Ederer (Cowles Foundation, Yale University); Frédéric Schneider (Yale School of Management)
    Abstract: This paper investigates how the passage of time affects trust, trustworthiness, and cooperation. We use a hybrid lab and online experiment to provide the first evidence for the persistent power of communication. Even when 3 weeks pass between messages and actual choices, communication raises cooperation, trust, and trustworthiness by about 50 percent. Lags between the beginning of the interaction and the time to respond do not substantially alter trust or trustworthiness. Our results further suggest that the findings of the large experimental literature on trust that focuses on laboratory scenarios in which subjects are forced to choose their actions immediately after communicating, may translate to more ecologically valid settings in which individuals choose actions outside the lab and long after they initially made promises.
    Keywords: Trust, Promises, Persistence, Trustworthiness, Delay, Experiment
    JEL: A13 C91 D03 C72 D64 K12
    Date: 2018–04
  3. By: Peter Katuscak; Tomas Miklanek
    Abstract: Fundraising for public goods by private contributions is often undermined by free-riding. One prominent mechanism suggested to alleviate problem of free-riding is a fixed-prize lottery with winning probabilities proportional to individual contri- butions (Morgan, 2000; Morgan and Sefton, 2000). Yet, as extensively documented by economic experiments, subjects often contribute even in the absence of incentives of this kind, suggesting that their contributions are driven social preferences. This raises a question of how the lottery incentive interacts with social preferences. We present an experiment in which we de-couple the contribution effect of own prize seeking from the potential crowding out effect due to the perception that the others contribute because of their prize seeking, rather than to benefit the group. Even though the lottery increases contributions relative to the voluntary contribution case, we find that it also crowds out voluntary contributions that are likely driven by social preferences.
    Keywords: public good game; crowding out; social preferences; lottery;
    JEL: C91 D91 D03
    Date: 2018–04
  4. By: Krämer, Marion; Kumar, Santosh; Vollmer, Sebastian
    Abstract: We present experimental evidence on the impact of delivering double-fortified salt (DFS), salt fortified with iron and iodine, through the Indian school-feeding program called “midday meal” on anemia, cognition, and math and reading outcomes of primary school children. We conducted a field experiment that randomly provided one-year supply of DFS at a subsidized price to public primary schools in one of the poorest regions of India. The DFS treatment had significantly positive impacts on hemoglobin levels and reduced the prevalence of any form of anemia by 9.3 percentage points (or about 20 percent) but these health gains did not translate into statistically significant impacts on cognition and test scores. While exploring the heterogeneity in effects, we find that treatment had statistically significant gains in anemia and test scores among children with higher treatment compliance. We further estimate that the intervention was very cost effective and can potentially be scaled up rather easily.
    Keywords: Double-fortified salt,education,anemia,school feeding,India,randomized controlled trial
    JEL: C93 I1 O11
    Date: 2018
  5. By: Garcia, Filomena; Marques, Rafael; Opromolla, Luca David; Vezzulli, Andrea
    Abstract: The administration of tax policy has shifted its focus from enforcement to complementary instruments aimed at creating a social norm of tax compliance. In this paper we provide an analysis of the effects of the dissemination of information regarding the past degree of tax evasion at the social level on the current individual tax compliance behavior. We build an experiment where, for given levels of audit probabilities, fines and tax rates, subjects have to declare their income after receiving either a communication of the official average tax evasion rate or a private message from a group of randomly matched peers about their tax behavior. We use the experimental data to estimate a dynamic econometric model of tax evasion. The econometric model extends the Allingham-Sandmo-Yitzhaki tax evasion model to include self-consistency and endogenous social interactions among taxpayers. We find four main results. First, tax compliance is very persistent. Second, the higher the official past tax evasion rate the higher the degree of persistence: evaders are more likely to evade again, and compliant individuals are more likely to comply again. Third, when all peers communicate to have evaded (complied) in the past, both evaders and compliant individuals are more likely to evade (comply). Fourth, while both treatments, and especially the unofficial information treatment, are associated, in the context of our experiment, with a significantly larger growth in evasion intensity, the aggregate effect depends on the characteristics of the population. In countries with inherently low levels of tax evasion, official information can have beneficial effects by consolidating the behavior of compliant individuals. However, in countries with inherently high levels of tax evasion, official information can have detrimental effects by intensifying the behavior of evaders. In both cases, the impact of official information is magnified in the presence of strong peer effects.
    Keywords: Experiment; Information; peer effects; tax evasion; Tax morale
    JEL: C24 C92 D63 H26 Z13
    Date: 2018–04
  6. By: Pan, Jinrui; Shachat, Jason; Wei, Sijia
    Abstract: We use laboratory experiments to evaluate the effects of cognitive stress on inventory management decisions in a finite horizon Economic Order Quantity (EOQ) model. We manipulate two sources of cognitive stress. First, we vary participants' ability to order inventory from any decision period to only when inventory is depleted. This reduces cognitive stress by restricting the policy choice set. Second we vary participants' participation in a competing pin memorization. This increases cognitive load. Participants complete a sequence of five ``annual'' inventory management tasks, with monthly ordering decisions. Both sources of cognitive stress negatively impact earnings, with the bulk of these impacts occurring in the first year. Participants' choices in all treatments exhibit trends to near optimal policy adoption. But only in the most favorable treatment do the majority of choices reach the optimal policy. We estimate the learning dynamics of monthly order decisions using a Markov switching model. Estimates suggest increased cognitive load reduces the probability of switching to more profitable policies, and that more complex policy choice sets leads to a greater policy lock-in. Our results suggests that inexperienced individuals will perform more poorly when called upon to make inventory management situations in cognitively stressfully environments, and that the benefits of providing support and task simplicity is greatest when the task is first assigned.
    Keywords: Economic Order Quantity, Cognitive load, Choice set complexity, Learning
    JEL: C92 D83 M11
    Date: 2018–04–15
  7. By: Deniz Nebioglu (Bilgi Economics Lab of ?stanbul (BELIS); Istanbul Bilgi University); Ayca Ebru Giritligil (Murat Sertel Center for Advanced Economic Studies; Istanbul Bilgi University)
    Abstract: The preferences introduced by Greenwood et al. [1988] (GHH preferences) are being used in the macroeconomics literature to resolve puzzles regarding the comovement of labor and consumption in response to exogenous shocks which do not change the current schedule for marginal product of labor. The GHH preferences imply that labor/leisure decision is independent of consumption decision and wealth effects on labor supply is zero. Despite its widespread usage, there is little and mixed empirical evidence regarding the wealth elasticity of labor supply. This study is an attempt to experimentally test the behavioral foundations of the GHH preferences. Employing the BDM mechanism proposed by Becker et al. [1964], we try to elicit the subjects’ innate preferences for leisure in a real effort experiment, and then observe whether these preferences change in response to an unexpected increase in non-labor income. Our results show that approximately 19% of the subjects react to the positive income shock by increasing their reservation wages. This finding on the existence of wealth effect on labor supply in the short run and even in the lab environment puts the predictions of the macroeconomic models that employ GHH preferences under scrutiny and calls for further experimental/empirical research on the topic.
    Date: 2018–05
  8. By: Toke R. Fosgaard (University of Copenhagen); Adriaan (A.R.) Soetevent (University of Groningen; Tinbergen Institute, The Netherlands)
    Abstract: The declining use of cash in society urges charities to experiment with digital payment instruments in their off-line fund raising activities. Cash and card payments differ in that the latter do not require individuals to donate at the time of the ask, disconnecting the decision to give from the act of giving. Evidence shows that people who say they will give mostly do not follow through. Our theory shows that having people to formally state the intended amount may alleviate this problem. We report on a field experiment the results of which show that donors who have pledged an amount are indeed more likely to follow through. The firmer the pledge, the more closely the amount donated matches the amount that was pledged. 45% of all participants however refuses to pledge. This proves that donors value flexibility over commitment in intertemporal charitable giving.
    Keywords: Charitable fundraising; Field experiment; Image motivation
    JEL: C93 D64 D91 H41
    Date: 2018–05–04
  9. By: Charlotte Saucet (UL2 - Université Lumière - Lyon 2, 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 - Université de Lyon - 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 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The memory people have of their past actions is one of the main sources of information about themselves. To study whether people retrieve their memory self-servingly, we designed an experiment in which participants have first to play binary dictator games and, second, recall the amounts allocated to the receiver. We investigate whether dictators (i) exhibit poorer recalls, (ii) overestimate more often and (iii) to a larger extent the receiver's amount when they have chosen the selfish option. We find that introducing monetary incentives for memory accuracy increases the dictators' percentage of correct recalls only when they have chosen the altruistic option. The percentage of correct recalls of the dictators is lower when they have chosen the selfish option, showing that amnesia is more likely to affect selfish than altruistic dictators. However, dictators do not bias strategically the direction and magnitude of their recalls.
    Keywords: Motivated memory, selective recalls, self-image, dictator game, experiment
    Date: 2018–04–30
  10. By: Ronayne, David (University of Oxford); Sgroi, Daniel (University of Warwick)
    Abstract: We ran an experiment where 1,503 subjects (advisees) completed tasks, and then had the choice to submit either their own score or the score of other subjects (advisers). The observed data are irreconcilable with rational behaviour. First, good advice was ignored: about 25% of the time, advisees chose to submit their own score instead of the higher score of an adviser, reducing their payoff. Second, when the adviser was superior in skill, good advice was ignored more often. Third, when the adviser was relatively highly paid, subjects were less likely to make use of them. We offer an explanation of the data focused on two behavioral forces: envy and the sunk cost fallacy. The role of envy was complex: more envious advisees, as measured using a dispositional envy scale, opted to follow advisers more often in the skill-based task revealing a positive, motivational effect of envy. However, higher adviser remuneration reduced this effect, revealing a negative side of envy as a constraint on rational decision-making. Susceptibility to the sunk cost fallacy, measured using a novel scale we developed, had a negative impact on the uptake of good advice. This is consistent with the idea that subjects feel resistant to changing their answers when they put in effort to formulate them. We also present findings from a new survey of 3,096 UK voters who took part in the national referendum on EU membership, consistent with some of our experimental results.
    Keywords: experiment, individual decision-making, relative comparisons, inter-personal comparisons, good advice, skill vs. luck, adviser remuneration, envy, sunk cost fallacy, stubbornness, Brexit survey JEL Classification: C91, C99, D91
    Date: 2018
  11. By: Nathan Fiala (University of Connecticut); Patrick Premand (World Bank)
    Abstract: Corruption and mismanagement of public resources can affect the quality of government services and undermine growth. Can citizens in poor communities be empowered to demand better-quality public investments? We look at whether providing social accountability training and information on project performance can lead to improvements in local development projects. The program we study is unique in its size and integration in a national program. We find that offering communities a combination of training and information on project quality leads to significant improvements in household welfare. However, providing either social accountability training or project quality information by itself has no welfare effect. These results are concentrated in areas that are reported by local officials as more corrupt or mismanaged, suggesting local agents have significant information about where corruption and mismanagement is worse. We show evidence that the impacts come in part from community members increasing their monitoring of local projects, making more complaints to local and central officials and increasing cooperation. We also find modest improvements in people’s trust in the central government. The results suggest that government-led, large-scale social accountability programs can strengthen communities’ ability to address corruption and mismanagement as well as improve services.
    Keywords: Social accountability; community training; scorecards; corruption; service delivery
    JEL: D7 H4 O1
    Date: 2018–04
  12. By: Bartling, Björn (University of Zurich); Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Ekström, Mathias (Dept. of Economics, Norwegian School of Economics and Business Administration); Sørensen, Erik Ø. (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: The paper reports the first experimental study on people’s fairness views on extreme Income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed.
    Keywords: Winner-take-all reward structures; fairness; income inequality
    JEL: C91 D63
    Date: 2018–04–30
  13. By: Christina Felfe; Martin G. Kocher; Helmut Rainer; Judith Saurer; Thomas Siedler
    Abstract: Inequality of opportunity, particularly when overlaid with racial, ethnic, or cultural differences, increases the social distance between individuals, which is widely believed to limit the scope of cooperation. A central question, then, is how to bridge such divides. We study the effects of a major citizenship reform in Germany—the introduction of birthright citizenship on January 1, 2000—in terms of inter-group cooperation and social segregation between immigrant and native youth. We hypothesize that endowing immigrant children with citizenship rights levels the playing field between them and their native peers, with possible spill-overs into the domain of social interactions. Our unique setup connects a large-scale lab-in-the-field experiment based on the investment game with the citizenship reform by exploiting the quasi-random assignment of citizenship rights around its cut-off date. Immigrant youth born prior to the reform display high levels of cooperation toward other immigrants, but low levels of cooperation toward natives. The introduction of birthright citizenship caused male, but not female, immigrants to significantly increase their cooperativeness toward natives. This effect is accompanied by a near-closure of the educational achievement gap between young immigrant men and their native peers..
    JEL: C93 D90 J15
    Date: 2018
  14. By: Brañas-Garza, Pablo; Espín, Antonio M.; Garcia, Teresa; Kovářík, Jaromír
    Abstract: Prenatal exposure to hormones, and to sex hormones in particular, exerts organizational effects on the brain and these have observable behavioral correlates in adult life. There are reasons to expect that social behaviors—which are fundamental for the evolutionary success of humans—might be related to biological factors such as prenatal sex hormone exposure. Nevertheless, the existing literature is inconclusive as to whether and how prenatal exposure to testosterone and estrogen, proxied by the second-to-fourth digit ratio (2D:4D), may predict non-selfish behavior. Here, we investigate this question using economic experiments with real monetary stakes and analyzing five different dimensions of social behavior in a comparatively large sample of Caucasian participants (n=560). For both males and females, our results show no robust association between right- or left-hand 2D:4D and generosity, bargaining, or trust-related behaviors. Since 2D:4D is thought to be a marker for status, we set-up and test the hypothesis that 2D:4D explains prosocial behavior only for people with low subjective wellbeing who are in need for status. Using two different measures of subjective wellbeing, we find considerable support for our hypothesis, especially among males. These results contribute to the debate regarding the context-dependent interpretation of the effect of prenatal hormone exposure on behavior by suggesting that important moderating factors may explain the differing results in the literature. In particular, we uncover the importance of accounting for the subjective nature of need for status, which has been largely overlooked in previous work.
    Keywords: Social Preferences, Economic Games, Digit Ratio, Life Satisfaction
    JEL: C91 D63 D64
    Date: 2018–04–10
  15. By: Piopiunik, Marc (University of Munich); Schwerdt, Guido (University of Konstanz); Simon, Lisa (University of Munich); Woessmann, Ludger (University of Munich)
    Abstract: As skills of labor-market entrants are usually not directly observed by employers, individuals acquire skill signals. To study which signals are valued by employers, we simultaneously and independently randomize a broad range of skill signals on pairs of resumes of fictitious applicants among which we ask a large representative sample of German human-resource managers to choose. We find that signals in all three studied domains – cognitive skills, social skills, and maturity – have a significant effect on being invited for a job interview. Consistent with the relevance, expectedness, and credibility of different signals, the specific signal that is effective in each domain differs between apprenticeship applicants and college graduates. While GPAs and social skills are significant for both genders, males are particularly rewarded for maturity and females for IT and language skills. Older HR managers value school grades less and other signals more, whereas HR managers in larger firms value college grades more. Keywords: Signals, cognitive skills, social skills, resume, hiring, labor market JEL Classification: J24, J21, I26
    Date: 2018
  16. By: Bonnier, Evelina (Stockholm School of Economics); Dreber, Anna (Stockholm School of Economics); Hederos, Karin (Swedish Institute for Social Research, Stockholm University); Sandberg, Anna (Swedish Institute for Social Research, Stockholm University)
    Abstract: Images of half-naked women are in many societies ubiquitous in advertising and popular culture. Yet relatively little is known about the potential impacts of such images on economic decision making. In this paper, we examine how exposure to images of half-naked women affect risk taking, willingness to compete and math performance. We perform a lab experiment with a total of 648 participants of both genders, randomly exposing participants to advertising images including either women in bikini or underwear, fully dressed women, or no women. Exposure to images of half-naked women could potentially have effects on economic preferences and performance through channels such as arousal, cognitive load and stereotyping. Following a pre-registered pre-analysis plan, we find no treatment effects on any of the outcome measures for female participants. For male participants, we also find no effect on willingness to compete or math performance, but suggestive evidence that men take more risk after having been exposed to images of half-naked women compared to images including no women. We thus do not find any strong support for the hypothesis that exposure to images of half-naked women impact economic preferences, but given the suggestive evidence for risk taking future studies should explore this further.
    Keywords: Experiment; Gender; Economic decision making; Risk preferences; willingness to compete; Advertising
    Date: 2018–05–08
  17. By: Mascagni, Giulia
    Abstract: Tax experiments have been gaining momentum in recent years, although this literature dates back several decades.With new developments in methods and data availability, tax experiments have gradually moved away from lab settings and towards the ï¬ eld. This movement from the lab to the ï¬ eld has happened against the background of the ‘credibility revolution’ in applied economics, which has seen more rigorous methods applied to policy relevant questions, and of the availability to researchers of administrative data from tax returns. These developments have allowed signiï¬ cant advances in the experimental literature on tax compliance. This paper reviews this literature, giving particular attention to ï¬ eld experiments using administrative data, but putting them in the broader context of the compliance literature. A particular effort is made to take a global perspective, in a literature that is only recently seeing the emergence of evidence from Africa, Latin America and Asia.
    Keywords: Governance,
    Date: 2017
  18. By: Casaburi, Lorenzo; Willis, Jack
    Abstract: The gains from insurance arise from the transfer of income across states. Yet, by requiring that the premium be paid upfront, standard insurance products also transfer income across time. We show that this intertemporal transfer can help explain low insurance demand, especially among the poor, and in a randomized control trial in Kenya we test a crop insurance product which removes it. The product is interlinked with a contract farming scheme: as with other inputs, the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time. The take-up rate for pay-at-harvest insurance is 72%, compared to 5% for the standard pay-upfront contract, and the difference is largest among poorer farmers. Additional experiments and outcomes provide evidence on the role of liquidity constraints, present bias, and counterparty risk, and find that enabling farmers to commit to pay the premium just one month later increases demand by 21 percentage points.
    Date: 2018–04
  19. By: Charles Bellemare; Marion Gousse; Guy Lacroix; Steeve Marchand
    Abstract: We investigate the determinants and extent of labor market discrimination toward people with physical disabilities using a large scale field experiment. Applications were randomly sent to 1477 private firms advertising open positions. We find that average callback rates of disabled and non-disabled applicants are respectively 14.4% and 7.2%. We find this differential does not result from accessibility constraints related to firm infrastructures. We also find that mentioning eligibility to a government subsidy to cover the cost of workplace adaptation does not increase callback rates. Finally, we estimate that a lower bound of the proportion of discriminating firms is 49.7%.
    Keywords: discrimination, disabilities, partial identification
    JEL: J71 J68
    Date: 2018
  20. By: Ghislaine Lang; Bruno Lanz
    Abstract: This paper studies split incentives associated with energy efficiency investments in rented properties. We design a multiple price list experiment representing owners' decisions to replace the central heating appliance, and elicit tenants' willingness to pay (WTP) for an option that is 30% more energy efficient. We then quantify how tenants' WTP varies with a set of informational interventions. Our results show that tenants' baseline WTP is around CHF 450 per year on average (about USD 470), and that information on expected financial savings increases mean WTP by up to 70%. A set of quantile regressions further suggest that information on financial gains induces around 30% of tenants to adjust baseline WTP accordingly, while 20% oppose rent increases and do not respond to information and tenants in the upper tail of the distribution increase their WTP substantially. By contrast, informing tenants about CO2 tax payments has no incremental impact on WTP.
    Keywords: Energy efficiency, Split incentives, Energy consumption, Rented properties, Acceptability of rent increases, Willingness to pay, Economic experiments, Multiple price lists
    JEL: Q4 R31 Q5 H23
    Date: 2018–05
  21. By: Shusaku Sasaki ,; Yoshifumi Funasaki; Hirofumi Kurokawa; Fumio Ohtake
    Abstract: We examined whether the knowledge that your private donation has a large number of potential recipients causes you to give more or less. We found that the people with blood type O are more likely to have donated blood than those with other blood types, by using a Japan’s nationally representative survey. This association was found to be stronger in a subsample of individuals who knew and believed that blood type O can be medically transfused into individuals of all blood groups. However, we found that blood type O does not have any significant relationship with the other altruistic behaviors (registration for bone-marrow donation, intention to donate organs, and the making of monetary donations) and altruistic characteristics (altruism, trust, reciprocity, and cooperativeness). After further analyses, we confirmed that the wider number of potential recipients of blood type O donations promoted the blood-donation behaviors of the people with this blood type.
    Date: 2018–05
  22. By: Heinrich, Timo; Shachat, Jason
    Abstract: This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that subjects from grades 5 to 11 (10 to 17 years) make mostly risk averse and prudent choices. With respect to risk aversion behavior of 3rd graders (8 to 9 years) does not differ statistically from risk neutrality. We also find 3rd graders to make mostly prudent choices. We also find evidence for a transmission of preferences: risk aversion is significantly correlated between children and their parents. Also, prudence is significantly correlated between girls (but not boys) and their parents.
    Keywords: risk aversion; prudence; transmission of preferences; age effects; experimental economics; children
    JEL: C93 D81 J13
    Date: 2018–04–30
  23. By: Benoît, Jean-Pierre; Dubra, Juan
    Abstract: Numerous experiments demonstrate attitude polarization. For instance, Lord, Ross & Lepper presented subjects with the same mixed evidence on the deterrent effect of the death penalty. Both believers and skeptics of its deterrent effect became more convinced of their views; that is, the population polarized. However, not all experiments find this attitude polarization. We propose a theory of rational updating that accounts for both the positive and negative experimental findings. This is in contrast to existing theories, which predict either too much or too little polarization.
    Keywords: Attitude Polarization; Confirmation Bias; Bayesian Decision Making
    JEL: D10 D11 D12 D81 D82 D83
    Date: 2018–04–10
  24. By: Pablo Brañas-Garza (Loyola Andalucia University); Valerio Capraro (Middlesex University); Ericka Rascón Ramírez (Middlesex University)
    Abstract: Whether or not there are gender differences in altruistic behavior 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 behavior 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.
    Date: 2018–02
  25. By: Li, Jianbiao; Niu, Xiaofei; Li, Dahui; Cao, Qian
    Abstract: We test whether self-control causally affects investor behavior with the non-invasive brain stimulation. Subjects trade stocks in an experimental asset market while their levels of self-control are exogenously varied by applying weak currents stimulation to a control-related brain area. We document that modulation of regional cortical excitability related to self-control significantly influences the propensity of realizing capital gains as well as capital losses. Our finding provides support for the role of self-control in the disposition effect and highlights the utility of using non-invasive brain stimulation to causally test the underlying mechanism of investor behavior.
    Keywords: self-control,investor behavior,disposition effect,non-invasive brain stimulation
    JEL: G02 G11
    Date: 2018
  26. By: Flores-Macías, Gustavo A.
    Abstract: Drawing on insights from the literature on institutional design—how rules shape behavior to achieve desired outcomes—this article examines how certain design features of taxes—such as allowing for civil society oversight, earmark mechanisms that direct tax revenue for a specific purpose, and sunset provisions that make the duration of taxes finite—affect political support for tax reforms. It also evaluates how three important aspects of the fiscal exchange—trust in government, perceptions of the public good, and level of income—shape the effect of these design features. Based on an original survey experiment focusing on the provision of public safety in Mexico, I find that these design features increase political support for taxation, especially among those with low trust in government and low income. These findings have important implications not just for Mexico but also a number of other countries across Latin America that have both low levels of extraction and increased public spending imperatives.
    Keywords: Governance,
    Date: 2017
  27. By: Casaburi, Lorenzo (University of Zurich); Macchiavello, Rocco (London School of Economics)
    Abstract: Despite extensive evidence that preferences are often time-inconsistent, there is only scarce field evidence of willingness to pay for commitment. Infrequent payments may naturally provide commitment for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: i) farmers are willing to incur sizable costs to receive infrequent payments and demand for commitment is an important driver of this preference; ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments; iii) in such a market, the effects of price increases on sales depend on both buyer credibility and payment frequency. Infrequent payments are common in many goods and labor markets, but they may not be competitively offered when contracts are not enforceable.
    Keywords: Saving Constraints; Commitment; Agricultural Markets; Contract Enforcement; Interlinked Transactions. JEL Classification: O12, O16, D90, Q13.
    Date: 2018
  28. By: Rodrigo A. Velez; Alexander L. Brown
    Abstract: We introduce empirical equilibrium, the prediction in a game that selects the Nash equilibria that can be approximated by a sequence of payoff-monotone distributions, a well-documented proxy for empirically plausible behavior. Then, we reevaluate implementation theory based on this equilibrium concept. We show that in a partnership dissolution environment with complete information, two popular auctions that are essentially equivalent for the Nash equilibrium prediction, can be expected to differ in fundamental ways when they are operated. Besides the direct policy implications, two general consequences follow. First, a mechanism designer may not be constrained by typical invariance properties. Second, a mechanism designer who does not account for the empirical plausibility of equilibria may inadvertently design implicitly biased mechanisms.
    Date: 2018–04
  29. By: Lanier, Joshua; Miao, Bin; Quah, John; Zhong, Songfa
    Abstract: This paper presents a nonparametric, revealed preference analysis of intertemporal consumption with risk. In an experimental setting, subjects allocate tokens over four commodities, consisting of consumption in two contingent states and at two time periods, subject to different budget constraints. With this data, one could test, using Afriat's Theorem and its generalizations, whether a subject's choices are consistent with utility maximization, and also utility maximization with various additional properties on the utility function. Our results broadly support a model where subjects maximize a utility function that is weakly separable across states but there is little support for weak separability across time. Our result sheds light on the source of the failure of the discounted expected utility model.
    Keywords: risk preference, time preference, revealed preference, budgetary choice, Afriat's Theorem, experiment
    JEL: C91 D03 D90
    Date: 2018–02–01
  30. By: Becht, Marco; Kamisarenka, Yuliya; Pajuste, Anete
    Abstract: French listed companies can issue shares that confer two votes per share after a holding period of at least two years (loyalty shares with tenure voting rights). In 2014 the default rule changed from one-share-one-vote to loyalty shares. The Coase theorem predicts that ceteris paribus shareholders rewrite the corporate charter to preserve the pre-reform structure. The theorem also predicts that the proportion of loyalty shares in initial public offerings is unchanged. The paper shows that most one-share-one-vote companies reverted to the pre-reform contract. The exception were firms with a stake held by the French state. In initial public offerings, the new default rule had an impact; the proportion of loyalty share statutes increased from about forty to fifty percent after the passage of the law. Companies that kept the same statutes have a significantly higher market to book ratio than companies forced into a different regime. The evidence is broadly consistent with the predictions of the Coase theorem, but only in the absence of conflicted parties with veto power.
    Keywords: Coase theorem; dual-class shares; Loyalty shares; one-share-one- vote; tenure voting; time-phased voting
    JEL: D23 G32 G34 K22
    Date: 2018–04

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.