|
on Experimental Economics |
|
Issue of 2019‒01‒21
thirty papers chosen by |
| By: | Michael Kirchler (University of Innsbruck, Department of Banking and Finance); Florian Lindner (Max Planck Institute for Research on Collective Goods, Bonn); Utz Weitzel (Utrecht University School of Economics) |
| Abstract: | Two aspects of social context are central to the finance industry. First, financial professionals usually make investment decisions on behalf of third parties. Second, social competition, in the form of performance rankings, is pervasive. Therefore, we investigate professionals’ risk-taking behavior under social competition when investing for others. We run online and lab-in-the-field experiments with 965 financial professionals and show that professionals increase their risk taking for others when they lag behind. This effect, however, disappears when professionals’ incentives are flat. Additional survey evidence from 1,349 respondents reveals that professionals’ preferences for high rankings are significantly stronger than the general population’s. |
| Keywords: | Experimental finance, behavioral finance, social competition, rank incentives, financial professionals, delegated decision making, investment game, lab-in-the-field experiment. |
| JEL: | G02 G11 D03 C93 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2018_08&r=all |
| By: | Parampreet Christopher Bindra; Daniela Glätzle-Rützler; Philipp Lergetporer |
| Abstract: | Discrimination is an ubiquitous phenomenon in many societies, but little is known about its origins in childhood. In a framed field experiment, we let 142 three to six-year old preschool children allocate a fixed endowment between an in-group and an out-group receiver in two domains (gender and group affiliation). Discrimination is prevalent in our subjects, since they allocate more than half of their endowment to the in-group. The extent of discrimination does not differ between domains, suggesting that it is a universal, as opposed to a domain-specific, trait. Analyzing age dynamics, we find that discrimination develops with age. |
| Keywords: | discrimination, children, experiment, fairness |
| JEL: | C91 C93 D03 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7396&r=all |
| By: | Dimitri Dubois (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Stefano Farolfi (UMR G-EAU - Gestion de l'Eau, Acteurs, Usages - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - AgroParisTech - IRSTEA - Institut national de recherche en sciences et technologies pour l'environnement et l'agriculture - CIHEAM - Centre International des Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Phu Nguyen-Van (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Juliette Rouchier (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique) |
| 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. |
| Date: | 2018–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01947419&r=all |
| By: | Mamadou Gueye (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Nicolas Querou (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Raphaël Soubeyran (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) |
| Abstract: | In this paper, we use a laboratory experiment to analyze the relationship between equity and coordination success in a game with Pareto ranked equilibria. Equity is decreased by increasing the coordination payoffs of some subjects while the coordination payoffs of others remain unchanged. Theoretically, in this setting, difference aversion may lead to a positive relationship between equity and coordination success, while social welfare motivations may lead to a negative relationship. Using a within-subject experimental design, we find that less equity unambiguously leads to a higher level of coordination success. Moreover, this result holds even for subjects whose payoffs remain unchanged. Our results suggest that social welfare motivations drives the negative relationship between equity and coordination success found in this experiment. Moreover, our data suggest that the order of treatment matters. Groups facing first the treatment with high inequality in coordination payoffs, then the treatment with low inequality in coordination payoffs, reach the Pareto dominant equilibrium more often in both treatments compared to groups playing first the treatment with low inequality in coordination payoffs, then the treatment with high inequality in coordination payoffs. |
| Keywords: | coordination game,difference aversion,equity,effciency,social welfare motivation |
| Date: | 2018–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01947414&r=all |
| By: | Sylvain Chabé-Ferret (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Philippe Le Coent (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Arnaud Reynaud (TSE - Toulouse School of Economics - Toulouse School of Economics); Julie Subervie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Daniel Lepercq (CACG - Compagnie d'aménagement des côteaux de Gascogne - Compagnie d'aménagement des côteaux de Gascogne - CACG) |
| Abstract: | Improving water efficiency is a growing challenge for the Common Agricultural Policy. In this article, we test whether social comparison nudges can promote water-saving behavior among farmers. We report on a pilot Randomized Controlled Trial, in which information on individual and group water consumption were sent every week to farmers equipped with smartmeters. We do not detect an effect of nudges on average water consumption. We however find that the nudge decreases water consumption at the top of the distribution while it increases consumption at the bottom. This study highlights the potential of nudges as an agricultural policy tool. |
| Keywords: | behavioral economics,government policy,irrigation water use,nudges |
| Date: | 2018–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01947420&r=all |
| By: | Luengo, Carol; Caffera, Marcelo; Chávez, Carlos |
| Abstract: | We present the results of a series of laboratory economic experiments designed to study compliance behavior of polluting firms when information on the penalty is uncertain. The experiments consist of a regulatory environment in which university students face emission standards and an enforcement mechanism composed of audit probabilities and penalties (conditional on detection of a violation). We examine how uncertainty on the penalty affects the compliance decision and the extent of violation under two enforcement levels: one in which the regulator induces perfect compliance and another one in which it does not. Our results suggest that in the first case, uncertain penalties increase the extent of the violations of those firms with higher marginal benefits. When enforcement is not sufficient to induce compliance, the uncertain penalties do not have any statistically significant effect on compliance behavior. Overall, the results suggest that a cost-effective design of emission standards should consider including public and complete information on the penalties for violations. |
| Keywords: | uncertainty, penalty, emission standard, economic experiment |
| JEL: | C91 K42 L51 Q58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90945&r=all |
| By: | Nobuyuki Hanaki (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Yukio Koriyama (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique); Angela Sutan (BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC)); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) |
| Abstract: | Recent experimental studies have shown that observed outcomes deviate significantly morefrom the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This "strategic environment effect" offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect, and we use both theory and experiments to shed light on its effectiveness. Based on cognitive hierarchy and level-K models, we show theoretically that the effect is operative for interactions among three or more agents. Our experimental results show a statistically significant strategic environment effect for groups of five or more agents, establishing its robustness against the increase in the population size. Our results bolster other experimental ndings on the strategic environment effects that are relevant for macroeconomic issues such as price fluctuations and nominal rigidity. |
| Keywords: | beauty contest games,iterative reasoning,strategic complementarity,strategic substitutability |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01954922&r=all |
| By: | Alex Armand, Alexander Coutts, Pedro C. Vicente,Inês Vilela |
| Abstract: | The political resource curse is the idea that natural resources can lead to the deterioration of public policies through corruption and rent-seeking by those closest to political power. One prominent consequence is the emergence of conflict. This paper takes this theory to the data for the case of Mozambique, where a substantial discovery of natural gas recently took place. Focusing on the anticipation of a resource boom and the behavior of local political structures and communities, a large-scale field experiment was designed and implemented to follow the dissemination of information about the newly-discovered resources. Two types of treatments provided variation in the degree of dissemination: one with information targeting only local political leaders, the other with information and deliberation activities targeting communities at large. A wide variety of theory-driven outcomes is measured through surveys, behavioral activities, lab-in-the-field experiments, and georeferenced administrative data about local con- flict. Information given only to leaders increases elite capture and rent-seeking, while infor- mation and deliberation targeted at citizens increases mobilization and accountability-related outcomes, and decreases violence. While the political resource curse is likely to be in play, the dissemination of information to communities at large has a countervailing effect. |
| Keywords: | Natural Resources, Curse, Natural Gas, Information, Deliberation, Rent-seeking, Mozambique. |
| JEL: | D72 O13 O55 P16 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nva:unnvaa:wp01-2019&r=all |
| By: | Caffera, Marcelo; Chávez, Carlos; Ardente, Analía |
| Abstract: | We study the individual compliance behavior of polluting firms in an experimental setting under two different penalty functions (a linear and a strictly convex) and two different regulatory instruments (emission standards and tradable pollution permits). We find that a convex penalty, as compared to a linear penalty, increases the market price of pollution permits and the violation rate of firms. The effect of the structure of the fine on the price of permits operates through an increase in the ask-prices of sellers, not on the bids by suppliers. With convex penalties, sellers are not willing to sell a permit at a price as low as with linear penalties. We do not observe an effect of convex penalties on the compliance status of firms with emission standards. These results call for attention on the possible effect that the type of penalties may have on the cost-effectiveness of pollution control programs based on tradable pollution permits. |
| Keywords: | Environmental policy, enforcement, penalty structure, emissions standards, emissions trading, laboratory experiments |
| JEL: | C91 K42 L51 Q58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90946&r=all |
| By: | Gordon, James (American University); Herbst, Chris M. (Arizona State University); Tekin, Erdal (American University) |
| Abstract: | Despite the well-documented benefits of high-quality child care, many preschool-age children in the U.S. attend low-quality programs. Accordingly, improving the quality of child care is increasingly an explicit goal of government policy. However, accomplishing this goal requires a thorough understanding of the factors that influence parents' child care decisions. This paper provides the first credible evidence on the demand for child care characteristics in the market for home-based care. Using a randomized audit design, we study three dimensions of caregiving: affordability (i.e., the hourly price of child care), quality (i.e., caregiver education and experience), and convenience (i.e., caregiver car ownership and availability). We find that while parents are extremely sensitive to the cost of child care, they also have strong preferences for quality, particularly caregivers' educational attainment. Furthermore, we obtain mixed results on the convenience dimensions of child care, with parents valuing those owning a car but not those with more availability. Finally, we find significant heterogeneity in child care preferences according to families' age of youngest child, race and ethnicity, and willingness-to-pay. Our findings suggest that the child care market's quality problems may be driven by parents' inability to afford high-quality care or their lack of informational resources on how to identify such programs, rather than an unwillingness to pay for them. |
| Keywords: | child care, early childhood, education, parent preferences, field experiments |
| JEL: | I21 I28 J01 J23 J24 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11985&r=all |
| By: | Hong Luo (Harvard Business School); Julie Holland Mortimer (Boston College) |
| Abstract: | Copyright infringement may result from frictions preventing legal consumption, but may also reveal demand. Motivated by this fact, we run a field experiment in which we contact firms that are caught infringing on expensive digital images. Emails to all firms include a link to the licensing page of the infringed image; for treated firms, we add links to a significantly cheaper licensing site. Making infringers aware of the cheaper option leads to a fourteen-fold increase in the ex-post licensing rate. Two additional experimental interventions are designed to reduce search costs for (i) price and (ii) product information. Both interventions—immediate price comparison and recommendation of images similar to those infringed—have large positive effects. Our results highlight the importance of mitigating user costs in small-value transactions. |
| Keywords: | intellectual property, digital piracy, copyright, field experiment |
| JEL: | O3 O33 O34 C9 C93 |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:971&r=all |
| By: | Maria Bigoni (University of Bologna & IZA); Gabriele Camera (Chapman University & University of Bologna); Marco Casari (University of Bologna & IZA) |
| Abstract: | Human societies prosper when their members move beyond local exchange and cooperate with outsiders in the creation of wealth. Collaboration of this type presents formidable challenges because interaction is impersonal, reciprocity is unfeasible and trust cannot be easily established. Here we study this cooperation problem by modeling strategic interaction among strangers through an Intertemporal Exchange Game. The setup can be easily implemented in the laboratory to study a variety of cooperation-enhancing institutions. In particular, we study the role of a fiat monetary system by introducing intrinsically worthless tokens that can be offered in exchange for cooperation. The experiments show that a monetary system spontaneously emerges in the laboratory, and is a key institution to promote cooperation among strangers. |
| Keywords: | gift-giving, intertemporal trade, macroeconomic experiments, repeated games, social norms |
| JEL: | C70 C90 D03 E02 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:19-01&r=all |
| By: | Chen, Lishu |
| Abstract: | This research is focused on randomized designs, two-stage experiments that first randomize treatment of a group, then investigate on the significant factors with economic perspective. It is attempted to map the potential outcomes framework with partial interference to a regression model with clustered errors, calculate standard errors of randomized saturation designs. The objective of this study is to assess the clarity of a photographic image produced by a DSLR camera by varying relevant factors such as image distance, shutter speed, aperture etc with on impact financial support. The criterion for assigning the ranking was the ability of clearly seeing the object in the photographs and the sharpness of the object. Design of experiments (DOE)-based approach allows for an efficient estimation of the main effects and the interactions with minimal number of experiments. This study investigates the factors that are mostly responsible for DSLR image clarity. All the six factors are set in two levels to create a full-factorial 2k design. A residual analysis has been done to test for defects such as non-normality, non-independent and non-constant variance. Based upon this evidence, we assert that (DOE)-based approach valuation information has the potential to negatively impact financial support for the exact resources the information is designed to promote and holds considerable potential for experimental economics, deserves greater attention as a methodological tool, and promises important insights on strategic decision making. |
| Keywords: | Design of Experiment (DOE), Full Factorial Design, ANOVA, Economic and Statistical Analysis, Experimental Economics |
| JEL: | C13 C50 C9 |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90949&r=all |
| By: | Benson, Alan (University of Minnesota); Sojourner, Aaron (Federal Reserve Bank of Minneapolis); Umyarov, Akhmed (University of Minnesota) |
| Abstract: | Just as employers face uncertainty when hiring workers, workers also face uncertainty when accepting employment, and bad employers may opportunistically depart from expectations, norms, and laws. However, prior research in economics and information sciences has focused sharply on the employer’s problem of identifying good workers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation systems and test its predictions in on Amazon Mechanical Turk, where employers may decline to pay workers while keeping their work product and workers protect themselves using third-party reputation systems, such as Turkopticon. We find that: (1) in an experiment on worker arrival, a good reputation allows employers to operate more quickly and on a larger scale without loss to quality; (2) in an experimental audit of employers, working for good-reputation employers pays 40 percent higher effective wages due to faster completion times and lower likelihoods of rejection; and (3) exploiting reputation system crashes, the reputation system is particularly important to small, good-reputation employers, which rely on the reputation system to compete for workers against more established employers. This is the first clean field evidence of the effects of employer reputation in any labor market and is suggestive of the special role that reputation-diffusing technologies can play in promoting gig work, where conventional labor and contract laws are weak. |
| Keywords: | Reputation; Labor; Job search; Screening; Contracts; Online ratings; Personnel; Online labor markets |
| JEL: | D82 J20 J41 K12 K42 L14 L86 M55 |
| Date: | 2018–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:0016&r=all |
| By: | Tristan Roger (DRM-Finance - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique); Wael Bousselmi (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz]); Patrick Roger (LARGE - Laboratoire de recherche en gestion et économie - UNISTRA - Université de Strasbourg - L'europe en mutation : histoire, droit, économie et identités culturelles - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) |
| Abstract: | Conventional finance models indicate that the magnitude of stock prices should not influence portfolio choices or future returns. This view is contradicted, however, by empirical evidence. In this paper, we report the results of an experiment showing that trading prices, in experimental markets, are processed differently by participants, depending on their magnitude. Our experiment has two consecutive treatments. One where the fundamental value is a small number (the small price market) and a second one where the fundamental value is a large number (the large price market). Small price markets exhibit greater mispricing than large price markets. We obtain this result both between-participants and within-participants. Our findings show that price magnitude influences the way people perceive the distribution of future returns. This result is at odds with standard finance theory but is consistent with: (1) a number of observations in the empirical finance and accounting literature; and (2) evidence in neuropsychology on the use of different mental scales for small and large numbers. |
| Keywords: | behavioral bias,experimental markets,mental scales,number perception,stock price magnitude |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01954921&r=all |
| By: | Kyropoulou, Maria; Ortega, Josué; Segal-Halevi, Erel |
| Abstract: | Using a lab experiment, we investigate the real-life performance of envy-free and proportional cake-cutting procedures with respect to fairness and preference manipulation. We nd that envy-free procedures, in particular Selfridge-Conway, are fairer and also are perceived as fairer than their proportional counterparts, despite the fact that agents very often manipulate them. Our results support the practical use of the celebrated Selfridge-Conway procedure, and more generally, of envy- free cake-cutting mechanisms. We also nd that subjects learn their opponents' preferences after repeated interaction and use this knowledge to improve their allocated share of the cake. Learning reduces truth-telling behavior, but also reduces envy. |
| Keywords: | cake-cutting,Selfridge-Conway,cut-and-choose,envy,perceived fairness,preference manipulation,experimentation and learning |
| JEL: | C71 C91 D63 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:18053&r=all |
| By: | Kellie Ottoboni; Jason Poulos |
| Abstract: | This paper extends a method of estimating population average treatment effects to settings with noncompliance. Simulations show the proposed compliance-adjusted estimator performs better than its unadjusted counterpart when compliance is relatively low and can be predicted by observed covariates. We apply the proposed estimator to measure the effect of Medicaid coverage on health care use for a target population of adults who may benefit from expansions to the Medicaid program. We draw randomized control trial data from a large-scale health insurance experiment in which a small subset of those randomly selected to receive Medicaid benefits actually enrolled. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1901.02991&r=all |
| By: | Le Yaouanq, Yves (LMU Munich); Schwardmann, Peter (LMU Munich) |
| Abstract: | How can naivete about present bias persist despite experience? To answer this question, our experiment investigates participants\' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naivete cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms. |
| Keywords: | naivete; present bias; learning.; |
| JEL: | D83 D90 |
| Date: | 2019–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:140&r=all |
| By: | Eszter Czibor; David Jimenez-Gomez; John List |
| Abstract: | What was once broadly viewed as an impossibility - learning from experimental data in economics - has now become commonplace. Governmental bodies, think tanks, and corporations around the world employ teams of experimental researchers to answer their most pressing questions. For their part, in the past two decades academics have begun to more actively partner with organizations to generate data via field experimentation. While this revolution in evidence-based approaches has served to deepen the economic science, recently a credibility crisis has caused even the most ardent experimental proponents to pause. This study takes a step back from the burgeoning experimental literature and introduces 12 actions that might help to alleviate this credibility crisis and raise experimental economics to an even higher level. In this way, we view our "12 action wish list" as discussion points to enrich the field. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:feb:artefa:00648&r=all |
| By: | Utz Weitzel (Utrecht University School of Economics); Christoph Huber (University of Innsbruck, Department of Banking & and Finance); Jürgen Huber (University of Innsbruck, Department of Banking & and Finance); Michael Kirchler (University of Innsbruck, Department of Banking and Finance); Florian Lindner (Max Planck Institute for Research on Collective Goods, Bonn); Julia Rose (University of Innsbruck, Department of Banking & and Finance) |
| Abstract: | The efficiency of financial markets and their potential to produce bubbles are central topics in academic and professional debates. Yet, surprisingly little is known about the contribution of financial professionals to price efficiency. To close this gap, we run 86 experimental markets with 294 professionals and 384 students. We report that professional markets with bubble-drivers—capital inflows or high initial capital supply—are susceptible to bubbles, but they are significantly more efficient than student markets. In a survey with 245 professionals and students we show that cognitive skills and risk attitudes do not explain subject pool differences in bubble formation. |
| Keywords: | Experimental finance, financial professionals, price efficiency, financial bubbles |
| JEL: | C92 D84 G02 G14 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2018_09&r=all |
| By: | Steffen Q. Mueller (Chair for Economic Policy, University of Hamburg); Patrick Ring (Social and Behavioral Approaches to Global Problems, Kiel Institute for the World Economy); Maria Schmidt (Department of Psychology, Kiel University) |
| Abstract: | We investigate various statistical methods for forecasting risky choices and identify important decision predictors. Subjects (n=44) are presented a series of 50/50 gambles that each involves a potential gain and a potential loss, and subjects can choose to either accept or reject a displayed lottery. From this data, we use information on 8800 individual lottery gambles and specify four predictor-sets that include different combinations of input categories: lottery design, socioeconomic characteristics, past gambling behavior, eye-movements, and various psychophysiological measures that are recorded during the first three seconds of lottery-information processing. The results of our forecasting experiment show that choice-process data can effectively be used to forecast risky gambling decisions; however, we find large differences among models’ forecasting capabilities with respect to subjects, predictor-sets, and lottery payoff structures. |
| Keywords: | Forecasting, lottery, risk, choice-process tracing, experiments, machine learning, decision theory |
| JEL: | C44 C45 C53 D87 D91 |
| Date: | 2019–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hce:wpaper:066&r=all |
| By: | Tim Kaiser; Lukas Menkhoff |
| Abstract: | We study the literature on school financial education programs for children and youth via a quantitative meta-analysis of 37 (quasi-) experiments. We find that financial education treatment has, on average, a significant and sizeable impact on financial knowledge (+0.25 SD), similar to educational interventions in other domains. Additionally, we document small but still significant effects on financial behaviors (+0.05 SD). These results are robust to restricting the sample to 18 randomized experiments and they hold irrespective of the meta-analytic method used. Metaregressions show the beneficial effect of more intensive treatments and smaller class size, albeit with decreasing marginal returns. |
| Keywords: | financial education, financial literacy, financial behavior, meta-analysis |
| JEL: | I21 A21 D14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7395&r=all |
| By: | Laura Abramovsky (Centre for the Evaluation of Social Policies); Britta Augsburg (Centre for the Evaluation of Social Policies); Melanie L\"uhrmann (Royal Holloway Department of Economics; Centre for the Evaluation of Social Policies); Francisco Oteiza (UCL Institute of Education); Juan Pablo Rud (Royal Holloway Department of Economics; Centre for the Evaluation of Social Policies) |
| Abstract: | We study the effectiveness of a community-level information intervention aimed at reducing open defecation (OD) and increasing sanitation investments in Nigeria. The results of a cluster-randomized control trial conducted in 246 communities between 2014 and 2018 suggest that average impacts are exiguous. However, these results hide important community heterogeneity, as the intervention has strong and lasting effects on OD habits in poorer communities. This result is robust across several measures of community socio-economic characteristics, and is not driven by baseline differences in toilet coverage. In poor communities, OD rates decreased by 9pp from a baseline level of 75\%, while we find no effect in richer communities. The reduction in OD is achieved mainly through increased toilet ownership (+8pp from a baseline level of 24\%). The intervention appears to have raised the social status attached to toilet ownership among the poorer treated communities, and not in rich communities. Finally, we combine our study with data from five other trials of similar interventions to show that estimated impacts are stronger in poorer contexts, rationalizing the wide range of estimates in the literature and providing plausible external validity. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1901.03544&r=all |
| By: | Sébastien Duchêne (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Eric Guerci (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Nobuyuki Hanaki (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Charles N. Noussair (University of Arizona) |
| Abstract: | This paper studies the influence of allowing borrowing and short selling on market prices and traders' forecasts in an experimental asset market. We verify, although not statistically significantly so, that borrowing tends to increase asset overvaluation and price orecasts, while short selling tends to reduce these measures. We also show that a number of results on beliefs, traders' types, cognitive sophistication, and earnings obtained in earlier experimental studies in which borrowing and short selling are not possible, generalize to markets with borrowing and short sales. |
| Keywords: | bubble,experimental asset market,margin buying,short sales |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01954924&r=all |
| By: | Tristan Roger (DRM-Finance - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique); Wael Bousselmi (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz]); Patrick Roger (LARGE - Laboratoire de recherche en gestion et économie - UNISTRA - Université de Strasbourg - L'europe en mutation : histoire, droit, économie et identités culturelles - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) |
| Abstract: | Recent research in finance shows that the magnitude of stock prices influences analysts' price forecasts (Roger et al., 2018). In this paper, we report the results o fa novel experiment where some of the participants in a continuous double auction market act as analysts and forecast future prices. Participants engage in two successive markets: one in which the fundamental value is a small price and one in which the fundamental value is a large price. Our results indicate that analysts' forecasts are more optimistic in small price markets compared to large price markets. We also find that analysts strongly anchor on past price trends when building their price forecasts. Overall, our findings support the existence of a small price bias. |
| Date: | 2018–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01954919&r=all |
| By: | Christoph Engel; Alexandra Fedorets; Olga Gorelkina |
| Abstract: | Individuals often have to decide to which degree of risk they want to expose others, or how much risk to accept if their choice has an externality on third parties. One typical application is a household. We run an experiment in the German Socio-Economic Panel with two members from 494 households. Participants have a good estimate of each other’s risk preferences, even if not explicitly informed. They do not simply match this preference when deciding on behalf of the other household member, but shy away from exposing others to risk. We model the situation, and we find four distinct types of individuals, and two distinct types of households. |
| Keywords: | risk preference, household, reticence to expose others to risk, trade-off between individual and foreign risk preference |
| JEL: | C45 D13 D81 D91 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1000&r=all |
| By: | Anthony Strittmatter |
| Abstract: | I investigate causal machine learning (CML) methods to estimate effect heterogeneity by means of conditional average treatment effects (CATEs). In particular, I study whether the estimated effect heterogeneity can provide evidence for the theoretical labour supply predictions of Connecticut's Jobs First welfare experiment. For this application, Bitler, Gelbach, and Hoynes (2017) show that standard CATE estimators fail to provide evidence for theoretical labour supply predictions. Therefore, this is an interesting benchmark to showcase the value added by using CML methods. I report evidence that the CML estimates of CATEs provide support for the theoretical labour supply predictions. Furthermore, I document some reasons why standard CATE estimators fail to provide evidence for the theoretical predictions. However, I show the limitations of CML methods that prevent them from identifying all the effect heterogeneity of Jobs First. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.06533&r=all |
| By: | Booth, Alison L. (Australian National University); Meng, Xin (Australian National University); Fan, Elliott (National Taiwan University); Zhang, Dandan (Peking University) |
| Abstract: | Social scientists have long been interested in the effects of social-political upheavals on a society subsequently. A priori, we would expect that, when traumas are brought about by outsiders, within-group behaviour would become more collaborative, as society unites against the common foe. Conversely, we would expect the reverse when the conflict is generated within-group. In our paper we are looking at this second form of upheaval, and our measure of within-group conflict is the 1966-1976 Cultural Revolution (CR) that seriously disrupted many aspects of Chinese society. In particular, we explore how individuals' behavioural preferences are affected by within-group traumatic events experienced by their parents or grandparents. Using data from a laboratory experiment in conjunction with survey data, we find that individuals with parents or grandparents affected by the CR are less trusting, less trustworthy, and less likely to choose to compete than their counterparts whose predecessors were not direct victims of the CR. |
| Keywords: | preferences, behavioural economics, cultural revolution |
| JEL: | C91 N4 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11991&r=all |
| By: | Mira Frick (Cowles Foundation, Yale University); Ryota Iijima (Cowles Foundation, Yale University); Yuhta Ishii (Centro de Investigación Económica, ITAM) |
| Abstract: | We study to what extent information aggregation in social learning environments is robust to slight misperceptions of others’ characteristics (e.g., tastes or risk attitudes). We consider a population of agents who obtain information about the state of the world both from initial private signals and by observing a random sample of other agents’ actions over time, where agents’ actions depend not only on their beliefs about the state but also on their idiosyncratic types. When agents are correct about the type distribution in the population, they learn the true state in the long run. By contrast, our first main result shows that even arbitrarily small amounts of misperception can generate extreme breakdowns of information aggregation, wherein the long run all agents incorrectly assign probability 1 to some fixed state of the world, regardless of the true underlying state. This stark discontinuous departure from the correctly specified benchmark motivates independent analysis of information aggregation under misperception. Our second main result shows that any misperception of the type distribution gives rise to a specific failure of information aggregation where agents’ long-run beliefs and behavior vary only coarsely with the state, and we provide systematic predictions for how the nature of misperception shapes these coarse long-run outcomes. Finally, we show that how sensitive information aggregation is to misperception depends on how rich agents’ payoff-relevant uncertainty is. A design implication is that information aggregation can be improved through interventions aimed at simplifying the agents’ learning environment. |
| Keywords: | Misspecification, Social learning, Information aggregation, Fragility |
| JEL: | C70 D80 D83 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2160&r=all |
| By: | Lena Detlefsen (University of Kiel and Kiel Institute for the World Economy); Andreas Friedl (Friedrich-Alexander University Erlangen-Nürnberg); Katharina Lima de Miranda (Kiel Institute for the World Economy); Ulrich Schmidt (University of Kiel, University of Johannesburg and Kiel Institute for the World Economy); Matthias Sutter (Max Planck Institute for Research on Collective Goods Bonn and University of Cologne) |
| Abstract: | The formation of economic preferences in childhood and adolescence has long-term consequences for life-time outcomes. We study in an experiment with 525 teenagers how both birth order and siblings’ sex composition affect risk, time and social preferences. We find that second born children are typically less patient, less risk averse, and more trusting. However, siblings’ sex composition interacts importantly with birth order effects. Second born children are more risk taking only with same-sex siblings. For trust and trustworthiness, birth order effects are larger with mixed-sex siblings than in the single-sex case. Only for patience, siblings’ sex composition does not matter. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2018_12&r=all |