nep-exp New Economics Papers
on Experimental Economics
Issue of 2019‒01‒07
24 papers chosen by

  1. How much Priority Bonus Should be Given to Registered Donors? An Experimental Analysis By Herr, Annika; Normann, Hans-Theo
  2. Green, yellow or red lemons? Artefactual field experiment on houses energy labels perception By Edouard Civel; Nathaly Cruz
  3. Can Whistleblower Programs Reduce Tax Evasion? Experimental Evidence By David Masclet; Claude Montmarquette; Nathalie Viennot-Briot
  4. Reshaping Adolescents' Gender Attitudes: Evidence from a School-Based Experiment in India By Diva Dhar; Tarun Jain; Seema Jayachandran
  5. Capacity precommitment, communication, and collusive pricing: Theoretical benchmark and experimental evidence By Güth, Werner; Stadler, Manfred; Zaby, Alexandra
  6. Sunspots in Global Games: Theory and Experiment By Heinemann, Frank; Moradi, Homayoon
  7. Social norms and preferences for generosity are domain dependent By Erkut, Hande
  8. Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale field experiments in Peru By Dustan, Andrew; Maldonado, Stanislao; Hernandez-Agramonte, Juan Manuel
  9. Motivating bureaucrats with non-monetary incentives when state capacity is weak: Evidence from large-scale field experiments in Peru By Andrew Dustan; Stanislao Maldonado; Juan Manuel Hernandez-Agramonte
  10. Changing male perceptions of gender equality: Evidence from an experimental study By Cuong Nguyen; Finn Tarp
  11. Does Random Consideration Explain Behavior when Choice is Hard? Evidence from a Large-scale Experiment By Victor H. Aguiar; Maria Jose Boccardi; Nail Kashaev; Jeongbin Kim
  12. Learning Intensity Effects in Students’ Mental and Physical Health – Evidence from a Large Scale Natural Experiment in Germany By Sarah Hofmann; Andrea Mühlenweg
  13. Do Children Benefit from Internet Access? Experimental Evidence from Peru By Ofer Malamud; Santiago Cueta; Julian Cristia; Diether W. Beuermann
  14. Equity Concerns are Narrowly Framed By Christine L. Exley; Judd B. Kessler
  15. The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana By Christian Crentsil; Adelina Gschwandtner; Zaki Wahhaj
  16. Adoption and Cooperation Decisions in Sustainable Energy Infrastructure: Evidence from a Sequential Choice Experiment in Germany By Oberst, Christian; Harmsen - van Hout, Marjolein J. W.
  17. Conned by a Cashback? Disclosure, Nudges and Consumer Rationality in Mortgage Choice By Michael King; Anuj Singh
  18. Using Goals to Motivate College Students: Theory and Evidence from Field Experiments By Damon Clark; David Gill; Victoria Prowse; Mark Rush
  19. Collusive Tax Evasion by Employers and Employees: Evidence from a Randomized Field Experiment in Norway By Marie Bjørneby; Annette Alstadsæter; Kjetil Telle
  20. Cooperation and evolution of meaning in senders-receivers games By Claude Meidinger
  21. Would Greater Awareness of Social Security Survivor Benefits Affect Claiming Decisions? By Anek Belbase; Laura D. Quinby
  22. Does pre-play social interaction improve negotiation outcomes? By Brañas-Garza, Pablo; Cabrales, Antonio; Mateu, Guillermo; Sanchez, Angel; Sutan, Angela
  23. The Cultural Transmission of Trust and Trustworthiness By Akira Okada
  24. M Equilibrium: A dual theory of beliefs and choices in games By Jacob K. Goeree; Philippos Louis

  1. By: Herr, Annika; Normann, Hans-Theo
    Abstract: Giving registered organ donors priority on organ waiting list can substantially increase the number of donors and save lifes. Evidence for these effects comes from recent experiments that implemented such priority rules in abstract laboratory environments. In these experiments, participants who registered as organ donors were fully prioritized over those who did not. In the field, however, registering as a donor is only one factor affecting the recipient’s score. In this paper, we provide a comparative statics analysis of the priority treatment by varying the number of bonus periods that a registered person can skip on the waiting list. We find that behavior is monotonic: giving more priority to registered donors leads to higher registration rates. Our results also indicate that a medium sized bonus improves registration rates as much as absolute priority (used in the previous literature).
    Keywords: organ donation,laboratory experiment,priority rule,waiting list
    JEL: C90 I10 I18
    Date: 2018
  2. By: Edouard Civel; Nathaly Cruz
    Abstract: Labels are increasingly popular among policy-makers, companies and NGOs to improve consumers’ awareness, especially about environmental footprints. Yet, the efficiency of these informational tools is mostly looked as their ability to shift behaviors, whereas their first goal is to enable people to discriminate labelled goods. This paper studies how the complex information displayed by houses’ Energy Performance Certificates is processed by real economic agents. Through a randomized artefactual field experiment on 3,000 French subjects, we test the impact of these labels on people’s perception of a home energy performance. Results evidence that 24% of subjects did not pay attention to the energy label. Unexpectedly, we find out that gender is the most critical socio-demographic characteristic in this changing attention. We interpret this effect by the Selectivity Hypothesis: energy labels design engages more male subjects. Among attentive subjects, energy labels’ efficiency to transmit information is mixed. Subjects do identify separately each label’s grade, but their judgment is biased by prior beliefs and blurred by idiosyncratic features. Aggregated reading is Bayesian: subjects infer the label information to revise their belief on energy quality. Moreover, our results shed light on strong asymmetries. While worsening grades induce decreasing judgments on energy quality, top level quality label seems to undergo skepticism, intensifying idiosyncratic noise.
    Keywords: Information treatment, Experimental economics, Cognitive psychology, Green Value, Energy efficiency
    JEL: D03 D12 D83 L15
    Date: 2018
  3. By: David Masclet (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France and CIRANO); Claude Montmarquette (Centre interuniversitaire de recherche en analyse des organisations (CIRANO), Montréal, Québec (Canada)); Nathalie Viennot-Briot (Centre interuniversitaire de recherche en analyse des organisations (CIRANO), Montréal, Québec (Canada))
    Abstract: There are many ways of tackling tax evasion. The traditional strategies implemented by tax authorities fight fiscal fraud through audit and penalties. However, there also exist a plethora of unconventional methods, such as whistleblower programs. Although there is a rich economic literature on tax evasion, auditing and penalties, tax agencies’ heavy reliance on whistleblower programs has mostly been ignored. We ran an experiment in which taxpayers can punish tax evaders by reporting them to the authorities, even though it is costly for them to do so and despite the lack of any material benefit from doing so. Information on other taxpayers' compliance rates together with the opportunity to report tax evaders has a positive and a very significant effect on the level of income reported. Observing the compliance rates of other participants alone does not suffice to increase tax revenues, while the mere threat of being reported significantly increases revenues.
    Keywords: fiscal fraud, whistleblowers, ambiguous risk, laboratory experiment
    JEL: H26 H31 C91
    Date: 2018–11
  4. By: Diva Dhar; Tarun Jain; Seema Jayachandran
    Abstract: Societal norms about gender roles contribute to the economic disadvantages facing women in many developing countries. This paper evaluates an intervention aimed at eroding support for restrictive gender norms, specifically a multi-year school-based intervention in Haryana, India, that engaged adolescents in classroom discussions about gender equality. Using a randomized controlled trial, we find that the intervention increased adolescents' support for gender equality by 0.25 standard deviations, a sizable effect compared to other correlates of their gender attitudes such as their parents' views. Program participants also report more gender-equitable behavior; for example, boys report helping out more with household chores.
    JEL: I25 J13 J16 O12
    Date: 2018–12
  5. By: Güth, Werner; Stadler, Manfred; Zaby, Alexandra
    Abstract: In a capacity-then-price-setting game we experimentally identify capacity precommitment, the possibility to communicate before price choices, and prior competition experience as crucial factors for collusive pricing. The theoretical analysis determines the capacity thresholds above which firms have an incentive to coordinate on higher prices. The experimental data reveals that such intra-play communication after capacity but before price choices has a collusive effect only for capacity levels exceeding these thresholds. Subjects with high capacities generally choose higher prices when they have the possibility to communicate. Asymmetry in capacity choices decreases the truthfulness of price messages as well as the probability to coordinate on the same price.
    Keywords: capacity-then-price competition,excessive capacities,cheap talk,intra-play communication,collusion,experimental economics
    JEL: C72 C91 L1
    Date: 2018
  6. By: Heinemann, Frank (TU Berlin); Moradi, Homayoon (WZB Berlin)
    Abstract: We solve and test experimentally a global-games model of speculative attacks where agents can choose whether to read, at a cost, a payoff irrelevant (sunspot) announcement. Assuming that subjects exogenously believe some others to follow sunspots, we provide conditions for a unique equilibrium where agents follow a sunspot announcement depending on the realization of an informative private signal. Although most groups converge to classical global-game strategies that neglect sunspots, we find that about one-third of groups are eventually coordinating on sunspots, which is inconsistent with the standard theory. In line with the assumption of subjects expecting others to follow sunspots, subjects overestimate the number of subjects who follow sunspots by about 100% on average. We conclude that in environments with high strategic uncertainty, payoff irrelevant signals can affect behavior even if they are costly to obtain and not expected to be publicly observed.
    Keywords: creditor coordination; global games speculative attack; sunspots;
    JEL: D82 F31 G12
    Date: 2018–12–27
  7. By: Erkut, Hande
    Abstract: Experimental research on generosity has focused predominantly on behavior in the monetary domain, although many real life decisions take place in the non-monetary domain. Investigating generosity preferences in the non-monetary domain is important to understand a large class of situations ranging from effort provision at work to individual CO2; emissions. This study explores whether generosity differs between the monetary and non-monetary domains and if so why. The results show that preferences for generosity are different between domains and that different social norms of allocation can explain the greater levels of generosity in the non-monetary compared to the monetary domain.
    Keywords: generosity,dictator game,non-monetary domain,GARP,social norms
    JEL: D03 D64 C91
    Date: 2018
  8. By: Dustan, Andrew; Maldonado, Stanislao; Hernandez-Agramonte, Juan Manuel
    Abstract: We study how non-monetary incentives, motivated by recent advances in behavioral economics, affect civil servant performance in a context where state capacity is weak. We collaborated with a government agency in Peru to experimentally vary the content of text messages targeted to civil servants in charge of a school maintenance program. These messages incorporate behavioral insights in dimensions related to information provision, social norms, and weak forms of monitoring and auditing. We find that these messages are a very cost-effective strategy to enforce compliance with national policies among civil servants. We further study the role of social norms and the salience of social benefits in a follow-up experiment and explore the external validity of our original results by implementing a related experiment with civil servants from a different national program. The findings of these new experiments support our original results and provide additional insights regarding the context in which these incentives may work. Our results highlight the importance of carefully designed non-monetary incentives as a tool to improve civil servant performance when the state lacks institutional mechanisms to enforce compliance.
    Keywords: State capacity, non-monetary incentives, civil servants
    JEL: C93 D73 O1 O12 O15
    Date: 2018–12–22
  9. By: Andrew Dustan (Vanderbilt University); Stanislao Maldonado (Universidad del Rosario); Juan Manuel Hernandez-Agramonte (Innovations for Poverty Action)
    Abstract: We study how non-monetary incentives, motivated by recent advances in behavioral economics, affect civil servant performance in a context where state capacity is weak. We collaborated with a government agency in Peru to experimentally vary the content of text messages targeted to civil servants in charge of a school maintenance program. These messages incorporate behavioral insights in dimensions related to information provision, social norms, and weak forms of monitoring and auditing. We find that these messages are a very cost-effective strategy to enforce compliance with national policies among civil servants. We further study the role of social norms and the salience of social benefits in a follow-up experiment and explore the external validity of our original results by implementing a related experiment with civil servants from a different national program. The findings of these new experiments support our original results and provide additional insights regarding the context in which these incentives may work. Our results highlight the importance of carefully designed non-monetary incentives as a tool to improve civil servant performance when the state lacks institutional mechanisms to enforce compliance.
    Date: 2018–12
  10. By: Cuong Nguyen; Finn Tarp
    Abstract: Reducing gender inequality is a critically important development challenge, especially in countries with widespread and deep-rooted prejudices against women. In this study, we use a randomized control trial to examine whether facilitating Vietnamese men to reflect about gender equality can reduce their gender bias. We randomly selected two groups of husbands and requested one group to make comments on gender-related laws and another group to write stories about gender equality. We find that commenting on gender-related laws reduces men’s bias against women slightly, while writing stories has a strong effect on reducing existing prejudice against women. Moreover, writing gender-related stories improves men’s knowledge of gender-related laws. Nonetheless, there is only a small effect of this treatment on doing housework. Changing men’s behaviour in practice requires stronger, more sustained interventions.
    Date: 2018
  11. By: Victor H. Aguiar; Maria Jose Boccardi; Nail Kashaev; Jeongbin Kim
    Abstract: We study population behavior when choice is hard because considering alternatives is costly. To simplify their choice problem, individuals may pay attention to only a subset of available alternatives. We design and implement a novel online experiment that exogenously varies choice sets and consideration costs for a large sample of individuals. We provide a theoretical and statistical framework that allows us to test random consideration at the population level. Within this framework, we compare competing models of random consideration. We find that the standard random utility model fails to explain the population behavior. However, our results suggest that a model of random consideration with logit attention and heterogeneous preferences provides a good explanation for the population behavior. Finally, we find that the random consideration rule that subjects use is different for different consideration costs while preferences are not. We observe that the higher the consideration cost the further behavior is from the full-consideration benchmark, which supports the hypothesis that hard choices have a substantial negative impact on welfare via limited consideration.
    Date: 2018–12
  12. By: Sarah Hofmann (WifOR Darmstadt); Andrea Mühlenweg (WifOR Darmstadt)
    Abstract: In this study, we analyze health effects of a recent education reform in Germany exposing students to increased schooling intensity. The reform shortened the higher secondary education track by one year. As the overall curriculum required for graduation was held constant, this led to an increase in instruction hours in the remaining school years. The reform has been introduced at different points in time across federal states, providing us with a difference-in-difference setup for analysis. Based on data from the German SocioEconomic Panel Study (SOEP), our results imply that the reform significantly reduced adolescents’ self-rated mental health status. The overall effect on the mental component summary score (MCS) is about a quarter of a standard deviation. Examining MCS subdimensions, we find detrimental effects of the reform on vitality and on emotional balance. We also observe significant impacts on self-assessed general physical health.
    Keywords: Adolescent health, schooling intensity, school reform, natural experiment
    JEL: J24 I14
  13. By: Ofer Malamud; Santiago Cueta; Julian Cristia; Diether W. Beuermann
    Abstract: This paper provides experimental evidence for the impact of home internet access on a broad range of child outcomes in Peru. We compare children who were randomly chosen to receive laptops with high-speed internet access to (i) those who did not receive laptops and (ii) those who only received laptops without internet. We find that providing free internet access led to improved computer and internet proficiency relative to those without laptops and improved internet proficiency compared to those with laptops only. However, there were no significant effects of internet access on math and reading achievement, cognitive skills, self-esteem, teacher perceptions, or school grades when compared to either group. We explore reasons for the absence of impacts on these key outcomes with survey questions, time-diaries, and computer logs.
    Keywords: internet, children, education, skills, experimental, Peru
    JEL: I21
    Date: 2018
  14. By: Christine L. Exley; Judd B. Kessler
    Abstract: We show that individuals narrowly bracket their equity concerns. Across four experiments including 1,600 subjects, individuals equalize components of payoffs rather than overall payoffs. When earnings are comprised of "small tokens" worth 1 cent and "large tokens" worth 2 cents, subjects frequently equalize the distribution of small (or large) tokens rather than equalizing total earnings. When payoffs are comprised of time and money, subjects similarly equalize the distribution of time (or money) rather than total payoffs. In addition, subjects are more likely to equalize time than money. These findings can help explain a variety of behavioral phenomena including the structure of social insurance programs, patterns of public good provision, and why transactions that turn money into time are often deemed repugnant.
    JEL: C91 D63 H2
    Date: 2018–12
  15. By: Christian Crentsil; Adelina Gschwandtner; Zaki Wahhaj
    Abstract: We study how aversion to risk and ambiguity affects the adoption of new technologies by Ghanaian smallholder aquafarmers. We conduct a set of field experiments designed to elicit farmers's risk and ambiguity preferences and combine it with surveybased information on their technology adoption decisions. We find that aquafarmers who are more risk-averse were quicker to adopt the new technologies: a fast-growing breed of tilapia fish, extruded feed and floating cages. By contrast, ambiguity aversion has no effect on the adoption of the new tilapia breed and extruded feed. Furthermore, it slows down the adoption of floating cages - a technology which entails higher fixed costs than the others - and the effect is diminishing in the number of other adopters in the village. We argue that these differential effects are due to the fact that the technologies are risk-reducing, with potential ambiguity about their payoff distributions at the early stages of adoption. The findings highlight the importance of distinguishing between risk and ambiguity in investigating technology adoption decisions of small-holder farmers in developing countries.
    Keywords: Uncertainty Aversion, Aquafarming, Technology Adoption, Extruded Feed, Floating Cages, Akosombo strain of Tilapia (AST)
    JEL: C93 D81 O33 Q12 Q16
    Date: 2018–12
  16. By: Oberst, Christian (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Harmsen - van Hout, Marjolein J. W. (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In this paper, we propose and apply the design of a sequential discrete choice experiment to examine homeowner preferences regarding the adoption of micro-generation systems and willingness to cooperate in sustainable energy infrastructure. Adoption and cooperation decisions of private households in the energy sector are complex, interlinked, and assumably sequential. A common design with single choice tasks reflecting both adoption and cooperation decisions is assumed as cognitively too burdensome for survey respondents. The objective of the proposed sequential choice task design is twofold. Firstly, reducing complexity for respondents. Secondly, reflecting a step-wise decision process as is appropriate for the studied decisions. Our application from the energy sector is motivated by the need for innovative business models for non-industrial prosumers providing flexibility services in (local) distribution grids, due to an increasing amount of volatile and decentrally generated electricity. Results indicate that respondents reveal more pronounced preferences when dealing with their decision in sequential steps and that the task design has a lasting effect on respondents’ choices. By estimating latent class logit models, five consumer classes are identified and labeled by their distinguished motivational foci: costs (1), climate protection (2), self-supply (3), local reference (4), and other (5).
    Keywords: Choice Experiment; Micro-generation; Renewable Energy; Community Energy; Energy Transition
    JEL: C25 D12 Q42
    Date: 2017–10
  17. By: Michael King (Department of Economics, Trinity College Dublin); Anuj Singh (Department of Economics, Trinity College Dublin)
    Abstract: Financial products with a cashback feature typically cost consumers more in the long run, but their popularity is rising in the mortgage and credit markets. Using a nationally representative online sample, we find that consumers who are younger, less educated and suffer from present bias are more likely to choose costly cash back mortgages. Through a series of experiments, we provide strong evidence that advanced disclosure improves financial decision making of customers and that negative nudges, or advertising, encourages prospective buyers into more costly mortgages. We also find evidence that consumers who demonstrate limited attention bias choose more expensive cashback mortgages that are financially equivalent at the point of drawdown.
    Keywords: Household Finance, Consumer Protection, Mortgages, Behavioural Biases, Marketing Nudges, Choice Experiment
    JEL: G21 G28 M3
    Date: 2018–11
  18. By: Damon Clark; David Gill; Victoria Prowse; Mark Rush
    Abstract: Will college students who set goals for themselves work harder and achieve better outcomes? In theory, setting goals can help present-biased students to mitigate their self-control problem. In practice, there is little credible evidence on the causal effects on goal setting for college students. We report the result of two field experiments that involved almost four thousand college students in total. One experiments asked treated students to set goals for performance in the course; the other asked treated students to set goals for a particular task (completing online practice exams). Task-based goals had robust positive effects on the level of task completion, and task-based goals also increased course performance. We also find that performance-based goals had positive but small effects on course performance. We use a theoretical framework that builds on present bias and loss aversion to interpret our results. Since task-based goal setting is low-cost, scalable and logistically simple, we conclude that our findings have important implications for educational practice and future research.
    Date: 2018
  19. By: Marie Bjørneby; Annette Alstadsæter; Kjetil Telle
    Abstract: Third-party reporting and employers’ tax withholding are powerful compliance mechanisms, as long as the employer and employee do not collude to evade. Using data from randomly assigned on-site audits among 2,462 Norwegian firms, we provide evidence of collusive tax evasion. We find that firms assigned to be audited increased their subsequent wage reporting on behalf of their employees by 18 percent relative to firms assigned to the control group. The effect is more pronounced among small firms with few employees. Our results document the limitations of third-party reporting, but also that these limitations can be counteracted by relatively inexpensive on-site audits.
    Keywords: collaborative tax evasion, collusive tax evasion, random audits, undeclared work, third-party reporting
    JEL: E26 H26 H32
    Date: 2018
  20. By: Claude Meidinger (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Whether there is a pre-existing common "language" that ties down the literal meanings of cheap talk messages or not is a distinction plainly important in practice. But it is assumed irrelevant in traditional game theory because it affects neither the payoff structure nor the theoretical possibilities for signaling. And when in experiments the "common-language" assumption is simplicitly implemented, such situations ignore the meta-coordination problem created by communication. Players must coordinate their beliefs on what various messages mean before they can use messages to coordinate on what to do. Using simulations with populations of artificial agents, the paper investigates the way according to which a common meaning can be constituted through a collective process of learning and compares the results thus obtained with those available in some experiments.
    Abstract: Le fait de savoir s'il existe ou non un « langage » commun préexistant qui détermine les significations littérales des messages cheap talk est manifestement important en pratique. Cependant ce fait est considéré comme non pertinent dans la théorie traditionnelle des jeux car il n'affecte ni la structure des gains ni les possibilités théoriques de signaler. Et quand dans les expériences l'hypothèse d'un « langage commun » est implicitement implémentée, de telles situations ignorent le problème de méta-coordination créé par la communication. Les joueurs doivent coordonner leurs croyances sur ce que signifient les différents messages avant d'utiliser les messages pour coordonner leurs actions. A l'aide de simulations au sein de populations d'agents artificiels, ce papier étudie la manière selon laquelle une signification commune de messages peut se constituer dans le cadre d'un processus collectif de learning et compare les résultats obtenus avec ceux résultant d'expériences.
    Keywords: Experimental Economics,Computational Economics,Signaling games,Economie expérimentale,Economie computationnelle,Jeux avec communication
    Date: 2018–12
  21. By: Anek Belbase; Laura D. Quinby
    Abstract: Most Americans enter retirement as married couples, and one spouse, typically the wife, outlives the other. Many widows lack the income needed to maintain the standard of living they had when their husbands were alive. Widows would generally have more adequate incomes if their husbands, who are typically the higher earner in the couple, delayed claiming Social Security. This project uses the Health and Retirement Study (HRS) to test the extent to which husbands consider their wives’ well-being as widows when making claiming decisions. It then uses an online experiment to determine whether raising a husband’s awareness of the risks that his widow faces, and how delayed claiming can reduce those risks, affect his claiming behavior.
    Date: 2018–10
  22. By: Brañas-Garza, Pablo; Cabrales, Antonio; Mateu, Guillermo; Sanchez, Angel; Sutan, Angela
    Abstract: We study experimentally the impact of pre-play social interactions on negotiations. These interactions are often complex. Thus, we attempt to isolate the impact of several of its more common components: conversations, food, and beverages, which could be alcoholic or non-alcoholic. To do this, our subjects take part in a standardized negotiation (complex and simple) under six conditions: without interaction, interaction only, and interactions with water, wine, water and food and wine and food. We find that none of the treatments improve the outcomes over the treatment without interactions. We also study trust and reciprocity in the same context. For all-male groups, we find the same lack of superiority of interaction treatments over no interaction. For all-female groups, some very simple social interactions have a positive impact on trust.
    Keywords: negotiation, trust, business meals, social interactions, alcohol.
    JEL: C91 I18 M11
    Date: 2018–12–25
  23. By: Akira Okada (Kyoto University)
    Abstract: We consider the cultural transmission of trust and trustworthiness in a trust game with spatial matching a la Tabellini. Players are assumed to enjoy psychological benefits from good conducts. The equilibrium probability that an investor trusts a receiver is a monotonically decreasing function of social distance, and the one that the receiver behaves in a trustworthy manner is non-monotonic. Parents with imperfect empathy transmit their own values to their children through education, and the ratio of individuals with good values globally converges to a stationary point with heterogeneity if educational costs are sufficiently small. Trust and trustworthiness are infl uenced by institutions in different ways. A better "intermediate" enforcement crowds out trust and crowds in trustworthiness.
    Keywords: crowding effect, cultural transmission, random matching game, social distance, trust, trustworthiness
    JEL: C72 D02 D64 D91
    Date: 2018–09
  24. By: Jacob K. Goeree; Philippos Louis
    Abstract: We introduce a set-valued generalization of Nash equilibrium, called M equilibrium, which is based on ordinal monotonicity - players' choice probabilities are ranked the same as the expected payoffs based on their beliefs - and ordinal consistency - players' beliefs yield the same ranking of expected payoffs as their choices. Using results from semi-algebraic geometry, we prove there exist a finite number of M equilibria, each consisting of a finite number of connected components. Generically, M-equilibria can be "color coded" by their ranks in the sense that choices and beliefs belonging to the same M equilibrium have the same color. We show that colorable M equilibria are behaviorally stable, a concept that strengthens strategic stability. Furthermore, set-valued and parameter-free M equilibrium envelopes various parametric models based on fixed-points, including QRE as well as a new and computationally simpler class of models called {\mu} Equilibrium. We report the results of several experiments designed to contrast M equilibrium predictions with those of existing behavioral game-theory models. A first experiment considers five variations of an asymmetric-matching pennies game that leave the predictions of Nash, various versions of QRE, and level-k unaltered. However, observed choice frequencies differ substantially and significantly across games as do players' beliefs. Moreover, beliefs and choices are heterogeneous and beliefs do not match choices in any of the games. These findings contradict existing behavioral game-theory models but accord well with the unique M equilibrium. Follow up experiments employ 3 by 3 games with a unique pure-strategy Nash equilibrium and multiple M equilibria. The belief and choice data exhibit coordination problems that could not be anticipated through the lens of existing behavioral game-theory models.
    Date: 2018–11

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