nep-exp New Economics Papers
on Experimental Economics
Issue of 2018‒07‒16
thirty papers chosen by

  1. Social Preferences and Social Curiosity By Weiwei Tasch; Daniel Houser
  2. Information sharing is not always the right option when it comes to CPR extraction management: experimental findings. By Dimitri Dubois; Stefano Farolfi; Phu Nguyen-Van; Juliette Rouchier
  3. Risky Choices and Solidarity: Why Experimental Design Matters By Strobl, Renate; Wunsch, Conny
  4. Gender Robustness of Overconfidence and Excess Entry By Danková, Katarína; Servátka, Maroš
  5. Mind, Body, Bubble! Psychological and Biophysical Dimensions of Behavior in Experimental Asset Markets By Butler, David; Cheung, Stephen L.
  6. An Experimental Analysis Of The Effect Of Quantitative Easing By Adrian Penalver, Nobuyuki Hanaki, Eizo Akiyama, Yukihiko Funaki, Ryuichiro Ishikawa
  7. An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving By Attanasi, Giuseppe Marco; D'Albis, Hippolyte; Thibault, Emmanuel
  8. Information Feedback in Relative Grading: Evidence from a Field Experiment By Shinya Kajitani
  9. Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya By Strobl, Renate; Wunsch, Conny
  10. Shill Bidding and Information in Sequential Auctions: A Laboratory Study By Ingebretsen Carlson, Jim; Wu, Tingting
  11. Take-up and Targeting: Experimental Evidence from SNAP By Finkelstein, Amy; Notowidigdo, Matthew J.
  12. Is there really a difference between “contingent valuation” and “choice experiments”? By Patrick Lloyd-Smith; Ewa Zawojska; Wiktor L. Adamowicz
  13. Experimental evidence on deceitful communication: does everyone have a price ? By Radu Vranceanu; Delphine Dubart
  14. Spillovers as a Driver to Reduce Ex-post Inequality Generated by Randomized Experiments: Evidence from an Agricultural Training Intervention By Kazushi Takahashi; Yukichi Mano; Keijiro Otsuka
  15. Obfuscation and Honesty Experimental Evidence on Insurance Demand with Multiple Distribution Channels By Claire Mouminoux; Jean-Louis Rullière; Stéphane Loisel
  16. Framing and repetition effects on risky choices: A behavioral approach By Noemí Herranz-Zarzoso; Gerardo Sabater-Grande
  17. Formation of coalition structures as a non-cooperative game By Dmitry Levando
  18. Three Layers of Uncertainty: an Experiment By Ilke Aydogan; Lo?c Berger; Valentina Bosetti; Ning Liu
  19. Sophisticated Bidders in Beauty-Contest Auctons By Stefano Galavotti; Luigi Moretti; Paola Valbonesi
  20. Not all Group Members are created Equal: Heterogeneous Abilities in Inter-group Contests By Francesco Fallucchi; Enrique Fatas; Felix Koelle; Ori Weisel
  21. Experimentelles Design zur Untersuchung der Auswirkungen von fiskalpolitischen Instrumenten auf nachhaltige Kaufentscheidungen im Leuchtmittelmarkt By Hübner, Julian
  22. Hidden Persuaders: Do Small Gifts Lubricate Business Negotiations? By Michel André Maréchal; Christian Thöni
  23. Inclusive Cognitive Hierarchy in Collective Decisions By Yukio Koriyama; Ali Ozkes
  24. Using Ethical Dilemmas to predict Antisocial Choices with Real Payoff Consequences: an Experimental Study By David Dickinson; David Masclet
  25. Convergence to the Mean Field Game Limit: A Case Study By Marcel Nutz; Jaime San Martin; Xiaowei Tan
  26. Nudgital: Critique of Behavioral Political Economy By Julia M. Puaschunder
  27. What Does 'We' Want? Team Reasoning, Game Theory, and Unselfish Behaviours By Guilhem Lecouteux
  28. Which Measures Predict Risk Taking in a Multi-Stage Controlled Decision Process? By Kremena Bachmann; Thorsten Hens; Remo Stössel
  29. A Note on Optimal Experimentation under Risk Aversion By Vladimir Novak; Tim Willems
  30. Path Dependency in Jury Decision-Making By Bindler, Anna; Hjalmarsson, Randi

  1. By: Weiwei Tasch (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: Over the last two decades social preferences have been implicated in a wide variety of key economic behaviors. Here we investigate connections between social preferences and the demand for information about others’ economic decisions and outcomes, which we denote “social curiosity.†Our analysis is within the context of the inequality aversion model of Fehr and Schmidt (1999). Using data from laboratory experiments with sequential public goods games, we estimate social preferences at the individual level, and then correlate social preferences with one’s willingness to pay to make visible others’ contribution decisions. Our investigation enables us to shed light on how costs to knowing others’ economic decisions and outcomes impact decisions among people with different social preferences, and in particular the extent to which such costs impact the willingness for groups to cooperate.
    Keywords: Laboratory Experiment, Inequality Aversion, Social Curiosity, Information, Sequential Public Goods Game
    JEL: C91 D83 D91 H41
    Date: 2018–07
  2. By: Dimitri Dubois; Stefano Farolfi; Phu Nguyen-Van; Juliette Rouchier
    Abstract: We experimentally investigate the impact of information sharing in a common pool resource game. More precisely, we test whether the voluntary disclosure of the decision by a player has a positive impact on the extraction level exhibited by the group compared to the level observed when decisions are compulsory disclosed. We design an experiment composed by three treatments: a mandatory disclosure treatment and two treatments where players are free to choose whether or not to disclose their decisions. The latter differ by the degree of freedom given to players. In the treatment "Voluntary Free Disclosure" players are also free to choose the extraction level that is displayed, while in the treatment "Voluntary Binary Disclosure" if the player discloses h(is)er decision the value displayed is the effective extraction level. We observe that the voluntary disclosure has a positive effect in the social dilemma, measured by lower average extraction levels. However the disclosure mechanism should not allow to self-declare extraction: here it reveals a large tendency to lie leading to an increase in extraction.
    Keywords: Common pool resource; information sharing; voluntary disclosure; lying; experiment.
    JEL: C91 D90 Q57
    Date: 2018
  3. By: Strobl, Renate; Wunsch, Conny
    Abstract: Negative income shocks can either be the consequence of risky choices or random events. A growing literature analyzes the role of responsibility for neediness for informal financial support of individuals facing negative income shocks based on randomized experiments. In this paper, we show that studying this question involves a number of challenges that existing studies either have not been aware of, or have been unable to address satisfactorily. We show that the average effect of free choice of risk on sharing, i.e.\ the comparison of mean sharing across randomized treatments, is not informative about the behavioural effects and that it is not possible to ensure by the experimental design that the average treatment effect equals the behavioural effect. Instead, isolating the behavioural effect requires conditioning on risk exposure. We show that a design that measures subjects preferred level of risk in all treatments allows isolating this effect without additional assumptions. Another advantage of our design is that it allows disentangling changes in giving behaviour due to attributions of responsibility for neediness from other explanations. We implement our design in a lab experiment we conducted with slum dwellers in Nairobi that measures subjects' transfers to a worse-off partner both in a setting where participants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that free choice matters for giving and that the effects depend on donors' risk preferences but that attributions of responsibility play a negligible role in this context.
    Keywords: experimental design; Risk Taking; Solidarity
    JEL: C91 D63 D81 O12
    Date: 2018–06
  4. By: Danková, Katarína; Servátka, Maroš
    Abstract: Camerer and Lovallo (1999) present a thought-provoking experimental evidence that overconfidence might lead to excess entry into markets. As their findings are based on the majority of the sessions exclusively consisting of male participants, we replicate their experiment while including both men and women in all of our sessions. We are able to only partially replicate their main finding that the market entry decisions are driven by overconfidence. Surprisingly we also find that self-selection significantly decreases the entry rate. However, this is also where we observe gender differences in the entry rate – males who self-select into the experiment actually enter more often, which is in line with Camerer & Lovallo’s observation. Our experiment thus points out that the overconfidence effect is sensitive to the participants’ gender and experimental conditions.
    Keywords: Experiment, Gender, Market Entry, Overconfidence, Real Effort, Replication, Robustness
    JEL: C72 C9 D2
    Date: 2018–05–31
  5. By: Butler, David (Griffith University); Cheung, Stephen L. (University of Sydney)
    Abstract: Asset market bubbles and crashes are a major source of economic instability and inefficiency. Sometimes ascribed to animal spirits or irrational exuberance, their source remains imperfectly understood. Experimental methods can isolate systematic deviations from an asset's fundamental value in a manner not possible on the trading floor. In this chapter, we review evidence from dozens of laboratory experiments that investigate the measurement and manipulation of an array of psychological and biophysical attributes. Measures of emotion self‐regulation and interoceptive ability are informative, as is cognitive ability and the level and fluctuation of hormones. Rules that promote deliberative decision making can improve market efficiency, while incidental emotions can impair it. Signals in specific brain areas can be a trigger precipitating a bubble's collapse. We conclude that trading decisions are profoundly biophysical in a manner not captured by efficient markets models, and close with speculations on implications for algorithmic trading.
    Keywords: efficient markets hypothesis, emotions, experimental asset markets, price bubbles and crashes, somatic marker hypothesis
    JEL: C92 D91 G12
    Date: 2018–05
  6. By: Adrian Penalver, Nobuyuki Hanaki, Eizo Akiyama, Yukihiko Funaki, Ryuichiro Ishikawa
    Abstract: In this paper we report the results of a repeated experiment in which a central bank buys bonds for cash in a quantitative easing (QE) operation in an otherwise standard asset market setting. The experiment is designed so that bonds have a constant fundamental value which is not affected by QE under rational expectations. By repeating the same experience three times, we investigate whether participants learn that prices should not rise above the fundamental price in the presence of QE (as found in (Penalver et al., 2017)). We find that some groups do learn this but most do not, instead becoming more convinced that QE boosts bond prices. These claims are based on significantly different behaviour of two treatment groups relative to a control group that doesn't have QE.
    Keywords: Quantitative Easing, Experimental Asset Markets
    JEL: C90 D84 G21
    Date: 2018
  7. By: Attanasi, Giuseppe Marco; D'Albis, Hippolyte; Thibault, Emmanuel
    Abstract: In a life-cycle model with a bequest motive, we study the impact of smooth ambiguity aversion to uncertain survival probabilities on the optimal demand for annuities. We implement a theory-driven laboratory experiment. First, a subject's ambiguity attitude is elicited in a simple experimental setting able to make the smooth ambiguity model operational. Then, in a two-period annuity-bequest decision problem, the subject's bequest in the second period is presented as a donation to a previously chosen charity, contingent to the subject being active after the first period. In line with the theoretical predictions, we find that ambiguity-averse (resp., loving) subjects invest less (resp., more) in annuities than ambiguity-neutral ones. Furthermore, subjects'contingent donation to the chosen charity increases in their investment in annuities only for sufficiently high levels of warm-glow altruism.
    Keywords: Self-insurance; annuity; uncertain survival probabilities; smooth ambiguity aversion; charity; experiment
    JEL: C91 D81 G22
    Date: 2018–07
  8. By: Shinya Kajitani
    Abstract: The impact of relative performance information feedback could vary according to each student's previous examination performance. Binary grade environments enable us to identify the heterogeneous impacts of this feedback. Conducting a randomized control trial employing a compulsory course in economics at a Japanese university, we show the heterogeneous impacts of relative performance information feedback attributable to the students' earlier examination scores under a binary grade environment. Our experimental results prove that previous performance information feedback improves the performance of students with only intermediate scores but worsens the performance of high-scoring students in their next examination.
    Keywords: Education, experiments, relative performance information feedback, relative grading
    JEL: D81 I21
  9. By: Strobl, Renate; Wunsch, Conny
    Abstract: In this study we experimentally investigate whether solidarity, which is a crucial base for informal insurance arrangements in developing countries, is sensitive to the extent to which individuals can influence their risk exposure. With slum dwellers of Nairobi our design measures subjects' willingness to share income with a worse-off partner both in a setting where participants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that only a subgroup of subjects reduces willingness to give when risk exposure is a choice. Responses are limited to donors in the risky project, whereas donors in the safe project do not adjust their willingness to give. This difference in behaviour can be explained by differential giving in the absence of choice. Lucky winners with the risky project show a particularly high degree of solidarity with unlucky losers compared to donors and partners assigned to the safe project when they face risk for exogenous reasons. The possibility of free project choice removes these differences in generosity and we show that this is driven by attributions of responsibility for neediness. Our results suggest that crowding out of informal support might be less severe than suggested by the studies from Western countries and the evidence on formal insurance from developing countries.
    Keywords: Kenya; Risk Taking; Solidarity
    JEL: C91 D63 D81 O12
    Date: 2018–06
  10. By: Ingebretsen Carlson, Jim (Department of Economics, Lund University); Wu, Tingting (Department of Economics, Universitat Autònoma de Barcelona)
    Abstract: Second-price auctions with public information, such as those on eBay, provide an opportunity for sellers to use the information from finished and ongoing auctions when acting strategically in future auctions. Sellers have frequently been observed to bidding on their own item with the intent to artificially increase its price. This is known as shill bidding. Using lab experiments with two sequential auctions, we study the effect of shill bidding when the seller can choose to shill bid in the second auction. We also study the impact of different information revelation policies regarding the provision of the first auction bidding history to the seller. The experimental data confirm that shill bidding in the second auction affects outcomes in both auctions. Our findings are consistent with the predictions that the threat of shill bidding in the second auction does increase the bidders' final bid in the first auction. However, providing the seller with the bidding history from the first auction does not affect any important outcome variables.
    Keywords: Sequential auctions; shill bidding; experiment
    JEL: C92 D03 D44
    Date: 2018–06–18
  11. By: Finkelstein, Amy (MIT); Notowidigdo, Matthew J. (Northwestern University)
    Abstract: This paper develops a framework for evaluating the welfare impact of various interventions designed to increase take-up of social safety net programs in the presence of potential behavioral biases. We calibrate the key parameters using a randomized field experiment in which 30,000 elderly individuals not enrolled in – but likely eligible for – the Supplemental Nutrition Assistance Program (SNAP) are either provided with information that they are likely eligible, provided with this information and also offered assistance in applying, or are in a "status quo" control group. Only 6 percent of the control group enrolls in SNAP over the next 9 months, compared to 11 percent of the Information Only group and 18 percent of the Information Plus Assistance group. The individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group. The results are consistent with the existence of optimization frictions that are greater for needier individuals, suggesting that the poor targeting properties of the interventions reduce their welfare gains.
    Keywords: SNAP, food stamps, take-up, targeting, welfare
    JEL: C93 H53 I38
    Date: 2018–05
  12. By: Patrick Lloyd-Smith (Department of Agricultural and Resource Economics, University of Saskatchewan); Ewa Zawojska (Faculty of Economic Sciences, University of Warsaw); Wiktor L. Adamowicz (Department of Resource Economics and Environmental Sociology)
    Abstract: “Contingent valuation” (“CV”) and “choice experiments” (“CE”) are generally introduced as two separate stated preference methods to estimate welfare measures, and a large literature investigates their convergent validity. We first review the literature comparing “CV” and “CE”, and show that these comparisons typically differ in (1) the number of options presented per value elicitation task, (2) the number of tasks given to a single respondent, (3) the framing of tasks, (4) the set (and order) of attributes characterizing options in tasks, (5) sizes of “CV” and “CE” samples, (6) econometric models used for data analysis, and (7) the format of information presented. Despite the wide variety of applications, we argue that the main (and perhaps only) difference between “CV” and “CE” is the presentation of information in elicitation tasks: as text in “CV” and as a table in “CE”. We then assess the effect of presentation of information in an induced-value experiment. We find that participants perform equally well in “CV” and “CE” tasks in terms of making payoff-maximizing choices based on the induced values, but “CV” tasks take substantially more time to answer. A significant difference between payoff-maximizing choices in “CV” and “CE” is observed when only answers to the first elicitation task are considered. This latter finding is particularly important in light of recommendations for stated preference research that suggest that valuation studies should use only one task for eliciting preferences.
    Keywords: Stated preference, Contingent valuation, Choice experiment, Experimental economics
    JEL: Q51 D6 H4 C91 M31
    Date: 2018
  13. By: Radu Vranceanu (ESSEC Business School - Essec Business School); Delphine Dubart (ESSEC Business School - Essec Business School)
    Abstract: This paper introduces a new task to elicit individual aversion to deceiving, defined as the lowest payoff for which an individual agrees to switch from faithful to deceitful communication. The core task is a modified version of the Deception Game as presented in Gneezy (Am. Econ. Rev. 95 (1): 384395: 2005). Deceitful communication brings about a constant loss for the receiver, and a range of benefits for the sender. A multiple-price-list mechanism is used to determine the sender's communication strategy contingent on the various benefits from deception. The results show that 71% of the subjects in the sender role will implement pure or threshold communication strategies. Among them, 40% appear to be process driven, being either "ethical" or "spiteful". The other 60% respond to incentives in line with the fixed cost of lying theory; they will forego faithful communication if the benefit from deceiving the other is large enough. Regression analysis shows that this reservation payoff¤ is independent of the risk aversion and social preferences of the subject; it would thus capture an inner preference for "behaving well".
    Keywords: Deception,Communication strategy,Cost of lying,Inequality aversion,Multiple price list
    Date: 2018–06–22
  14. By: Kazushi Takahashi; Yukichi Mano; Keijiro Otsuka
    Abstract: Randomized experiments ensure equal opportunities but could generate unequal outcomes by treatment status, which can be socially costly. This study demonstrates a sequential intervention to conduct rigorous impact evaluation and subsequently to mitigate ‘“experiment-driven’ driven” inequality, using Cote d’Ivoire as a case. Specifically, control farmers were initially restricted from exchanging information with treated farmers, who received rice management training, to satisfy the stable unit treatment value assumption. We then encouraged information exchange between the two groups of farmers one year after the training. We found positive training effects, but initial performance gaps created by our randomized assignment disappeared over time because of information spillovers and, hence, eventually control farmers also benefitted from our experiment.
    Keywords: Inequality, Program evaluation, Randomised experiment, Spillover
    Date: 2018–06–14
  15. By: Claire Mouminoux (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon); Jean-Louis Rullière (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: This paper aims to shed light on the dilemma faced by insurance purchasers faced with multiple distribution channels. Should the consumer herself choose from a large set of insurance policies or rather delegate a part her decision to an intermediary who is more or less honest? We consider decisions based on a number of real-world insurance distribution channels with different information frames. Beliefs about intermediary honesty are the main determinants of individual choice. In addition, the obfuscation of information is the main source of inefficiency in decision-making, particularly regarding the characteristics of the insurance contracts chosen by consumers.
    Keywords: behavioral economics,distribution channels,honesty,insurance,intermediation,obfuscation,search costs
    Date: 2018–06–20
  16. By: Noemí Herranz-Zarzoso (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Gerardo Sabater-Grande (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this study we analyze framing effects caused by two versions of the choice (multiple price) list procedure used to elicitate individual risk preferences. In the probability equivalence (PE) version, subjects face pairwise choices between lotteries within a choice list. In the certainty equivalence (CE) version, subjects are asked to state a minimum selling price to give up the lottery they cope to. We implement a within-subjects experiment allowing for preference imprecision and preference for compound lotteries, by means of repetition of identical risk tasks. Introducing different variations in the number of lottery options offered with and without decreasing their range, we find that changes in the framework disturb subject’s risk preferences only in the CE version.
    Keywords: risk aversion, framing effects, risk task repetition, preference imprecision, preference for compound lotteries, choice list procedure
    JEL: C93 D03 D81
    Date: 2018
  17. By: Dmitry Levando (National Research University Higher School of Economics [Moscow], CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Traditionally social sciences are interested in structuring people in multiple groups based on their individual preferences. This paper suggests an approach to this problem in the framework of a non-cooperative game theory. Definition of a suggested finite game includes a family of nested simultaneous non-cooperative finite games with intra- and inter-coalition externalities. In this family, games differ by the size of maximum coalition, partitions and by coalition structure formation rules. A result of every game consists of partition of players into coalitions and a payoff profile for every player. Every game in the family has an equilibrium in mixed strategies with possibly more than one coalition. The results of the game differ from those conventionally discussed in cooperative game theory, e.g. the Shapley value, strong Nash, coalition-proof equilibrium, core, kernel, nucleolus. We discuss the following applications of the new game: cooperation as an allocation in one coalition, Bayesian games, stochastic games and construction of a non-cooperative criterion of coalition structure stability for studying focal points.
    Keywords: Noncooperative games,Nash equilibrium,Shapley value,strong equilibrium,core
    Date: 2017–05
  18. By: Ilke Aydogan (Department of Economics, Bocconi University); Lo?c Berger (IESEG School of Management and Bocconi University); Valentina Bosetti (Department of Economics, Bocconi University and Fondazione Eni Enrico Mattei (FEEM)); Ning Liu (Department of Economics, Bocconi University)
    Abstract: We experimentally explore decision-making under uncertainty using a framework that decomposes uncertainty into three distinct layers: (1) physical uncertainty, entailing inherent randomness within a given probability model, (2) model uncertainty, entailing subjective uncertainty about the probability model to be used and (3) model misspecification, entailing uncertainty about the presence of the true probability model among the set of models considered. Using a new experimental design, we measure individual attitudes towards these different layers of uncertainty and study the distinct role of each of them in characterizing ambiguity attitudes. In addition to providing new insights into the underlying processes behind ambiguity aversion -failure to reduce compound probabilities or distinct attitudes towards unknown probabilities- our study provides the first empirical evidence for the intermediate role of model misspecification between model uncertainty and Ellsberg in decision-making under uncertainty.
    Keywords: Ambiguity Aversion, Reduction of Compound Lotteries, Non-expected Utility, Model Uncertainty, Model Misspecification
    JEL: D81
    Date: 2018–07
  19. By: Stefano Galavotti (University of Padova); Luigi Moretti (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Paola Valbonesi (University of Padova)
    Abstract: We study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closet to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions, we show that firms' observed bidding behavior departs from equilibrium and can be predicted by a sophistication index, which captures the firms' accumulated capacity of bidding close to optimality in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of bidders' behavior. We also investigate whether and how firms learn to bid strategically through experience.
    Keywords: cognitive hierarchy,auctions,beauty-contest,public procurement
    Date: 2017–01
  20. By: Francesco Fallucchi (LISER); Enrique Fatas (Loughborough University and Universidad del); Felix Koelle (University of Cologne); Ori Weisel (Tel Aviv University)
    Abstract: Competition between groups is ubiquitous in social and economic life, and groups are typically not created equal. Here we experimentally investigate the implications of this general observation on the unfolding of symmetric and asymmetric competition between groups that are either homogeneous or heterogeneous in the ability of their members to contribute to the success of the group. Our main finding is that, in contrast with a number of theoretical predictions, efforts in contests involving heterogeneous groups are higher than in contests involving only homogeneous groups, leading to reduced earnings (to contest participants) and increased inequality. This effect is particularly pronounced in asymmetric contests, where both homogeneous and heterogeneous groups increase their efforts. We find that asymmetry between groups changes the way group members condition their efforts on those of their peers. Implications for contest designers are discussed.
    Keywords: Contests, groups, abilities, heterogeneity, experiments
    Date: 2018–06
  21. By: Hübner, Julian
    Abstract: [Einleitung ...] Im folgenden Kapitel werden die theoretischen Grundlagen des Experiments dargestellt. Dabei werden zunächst allgemeine Annahmen, die für das Experiment getroffen wurden, erläutert und danach auf die Hintergründe der verschiedenen Strategien, die für das Experiment modelliert wurden, eingegangen. Kapitel 3 zeigt im Anschluss den Aufbau des Experiments. Hierbei wird darauf eingegangen, wie sich das Experiment den Teilnehmern darstellte und was während der Durchführung im Hintergrund passierte. Jedes Treatment wird dazu einzeln erläutert und von den anderen abgegrenzt. Die Arbeit schließt in Kapitel 4 mit dem Fazit und einem Ausblick zur Durchführung des vorgestellten Experiments.
    Date: 2018
  22. By: Michel André Maréchal; Christian Thöni
    Abstract: Gift-giving customs are ubiquitous in social, political, and business life. Legal regulation and industry guidelines for gifts are often based on the assumption that large gifts potentially influence behavior and create conflicts of interest, but small gifts do not. However, scientific evidence on the impact of small gifts on business relationships is scarce. We conducted a natural field experiment in collaboration with sales agents of a multinational consumer products company to study the influence of small gifts on the outcome of business negotiations. We find that small gifts matter. On average, sales representatives generate more than twice as much revenue when they distribute a small gift at the onset of their negotiations. However, we also find that small gifts tend to be counterproductive when purchasing and sales agents meet for the first time, suggesting that the nature of the business relationship crucially affects the profitability of gifts.
    Keywords: reciprocity, gift exchange, field experiment, negotiations
    JEL: D63 C93
    Date: 2018
  23. By: Yukio Koriyama (CREST, Ecole Polytechnique, Université Paris-Saclay); Ali Ozkes (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE)
    Abstract: We study the implications of structural models of non-equilibrium thinking, in which players best respond while holding heterogeneous beliefs on the cognitive levels of others. We introduce an inclusive cognitive hierarchy model, in which players are capable of projecting the self to others in regard to their cognitive level. The model is tested in a laboratory experiment of collective decision-making, which supports inclusiveness. Our theoretical results show that inclusiveness is a key factor for asymptotic properties of deviations from equilibrium behavior. Asymptotic behavior can be categorized into three distinct types: naïve, Savage rational with inconsistent beliefs, and sophisticated.
    Keywords: collective decision-making, bounded rationality, cognitive hierarchy, information aggregation
    JEL: C92 D72 D91
    Date: 2018–06
  24. By: David Dickinson (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 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)
    Date: 2018–06–18
  25. By: Marcel Nutz; Jaime San Martin; Xiaowei Tan
    Abstract: We study the convergence of Nash equilibria in a game of optimal stopping. If the associated mean field game has a unique equilibrium, any sequence of $n$-player equilibria converges to it as $n\to\infty$. However, both the finite and infinite player versions of the game often admit multiple equilibria. We show that mean field equilibria satisfying a transversality condition are limit points of $n$-player equilibria, but we also exhibit a remarkable class of mean field equilibria that are not limits, thus questioning their interpretation as "large $n$" equilibria.
    Date: 2018–06
  26. By: Julia M. Puaschunder (The New School, Department of Economics)
    Abstract: Behavioral Economics revolutionized mainstream neo-classical economics. A wide range of psychological, economic and sociological laboratory and field experiments proved human beings deviating from rational choices as standard neo-classical profit maximization axioms failed to explain how human actually behave. Human beings rather use heuristics in their day-to-day decision making. These mental short cuts enable to cope with a complex world yet also often leave individuals biased and falling astray to decision making failures. What followed was the powerful extension of these behavioral insights for public administration and public policy making. Behavioral economists proposed to nudge and wink citizens to make better choices for them and the community. Many different applications of rational coordination followed ranging from improved organ donations, health, wealth and time management, to name a few. Yet completely undescribed remains that the implicit hidden persuasion opens a gate to deception and is an unprecedented social class division means. Social media forces are captures as unfolding a class dividing nudgital society, in which the provider of social communication tools can reap surplus value from the information shared of social media users. The social media provider is outlined as capitalist-industrialist, who benefits from the information shared by social media users, or so-called consumer-workers, who share private information in their wish to interact with friends and communicate to public.
    Keywords: Behavioral Economics, Behavioral Political Economy, Democratisation of information, Education, Exchange value, Governance, Libertarian Paternalism, Nudging
    Date: 2018–05
  27. By: Guilhem Lecouteux (Université Côte d'Azur; GREDEG CNRS)
    Abstract: This editorial presents the main contributions of the theory of team reasoning in game theory, and the issues that remain to be solved before this theory could become a credible alternative to 'orthodox' game theory. I argue in particular that an approach based on collective agency rather than rational choice theory and social preferences offer a scientifically preferable theory of unselfish behaviours, both in terms of parsimony and empirical validation. I review the economic literature on team reasoning, and highlight the contributions of the papers of the present volume to tackle the open issues of the theory of team reasoning.
    Keywords: team reasoning, preferences, rationality, cooperation, coordination
    JEL: B41 C72 D70
    Date: 2018–07
  28. By: Kremena Bachmann (University of Zurich); Thorsten Hens (University of Zurich, Norwegian School of Economics and Business Administration (NHH), and Swiss Finance Institute); Remo Stössel (University of Zurich)
    Abstract: We assess the ability of different risk profiling measures to predict risk taking along a multi-stage decision process. The latter involves decisions under ambiguity, decisions under risk, decisions after gaining experience and decisions after receiving outcome information on previous decisions. We find that in all decisions risk taking can be predicted by some questions on individuals’ risk tolerance but it is not related to self-reported investment experience. Although simulated experience as part of our study design improves the risk awareness and leads to higher risk taking, it cannot substitute the assessment of risk tolerance and in particular the assessment of individual’s loss aversion. In contrast, self-assessed risk tolerance measures are not suitable for predicting risk taking in any stage of the decision process. Among the socioeconomic characteristics only the gender has some predictive power.
    Keywords: investment advice, risk profiling, experience sampling, risk attitude, risk perception, risk preferences
    JEL: D81 G11
    Date: 2017–12
  29. By: Vladimir Novak; Tim Willems
    Abstract: This paper solves the two-armed bandit problem when decision makers are risk averse. It shows, counterintuitively, that a more risk-averse decision maker might be more willing to take risky actions. The reason relates to the fact that pulling the risky arm in bandit models produces information on the environment – thereby reducing the risk that a decision maker will face in the future. This finding gives reason for caution when inferring risk preferences from observed actions: in a bandit setup, observing a greater appetite for risky actions can actually be indicative of more risk aversion, not less. Studies which do not take this into account may produce biased estimates.
    Keywords: experimentation; learning; risk aversion;
    JEL: D81 D83
    Date: 2018–06
  30. By: Bindler, Anna; Hjalmarsson, Randi
    Abstract: A large behavioral economics literature is concerned with cognitive biases in individual and group decisions, including sequential decisions. These studies primarily find a negative path-dependency consistent with mechanisms such as the gambler's fallacy or contrast effects. We provide the first test for such biases in group decision making using observational data. Specifically, we study more than 27,000 verdicts adjudicated sequentially by over 900 juries for high-stakes criminal cases at London's Old Bailey Criminal Court in the 18th and 19th centuries. Using jury fixed effects to account for heterogeneity in their baseline propensity to convict, we find that a previous guilty verdict significantly increases the chance of a subsequent guilty verdict by 6.7-14.1%. This positive autocorrelation, which contrasts previous studies, is (i) robust to alternative estimation strategies, (ii) independent of jury experience and (iii) driven by the most recent lag and pairs of similar cases. Potential explanations of such positive path dependence include sequential assimilation effects, which may reflect a jury's desire to be internally consistent when deciding comparable cases and short-term 'emotional' impacts of the characteristics and/or outcome of one case on another. As in modern-day jury studies, our results highlight the possibility that factors independent of the facts and evidence of the current case affect jury behavior.
    Keywords: behavioral bias; crime; English history; jury; path dependency; sequential decision-making; verdict
    JEL: D7 K4 N43
    Date: 2018–06

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.