nep-exp New Economics Papers
on Experimental Economics
Issue of 2019‒04‒08
28 papers chosen by
Daniel Houser
George Mason University

  1. Behavioural Change and Alcohol-Fuelled Violence: A Field Experiment By Long, Iain W; Matthews, Kent; Sivarajasingam, Vaseekaran
  2. How Time Constraint Affects the Disposition Effect? By Niu, Xiaofei; Li, Jianbiao
  3. Individual Discount Rates: A Meta-Analysis of Experimental Evidence By Matousek, Jindrich; Havranek, Tomas; Irsova, Zuzana
  4. Theory of Mind and Strategic Decision-Making By Bose, Neha; Sgroi, Daniel
  5. Network Formation in Large Groups By Choi, S; Goyal, S.; Moisan, F.
  6. Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts By Paul D. Adams; Stefan Hunt; Christopher Palmer; Redis Zaliauskas
  7. The Role of Non-Binding Pledges in Social Dilemmas with Mitigation and Adaptation By David M. McEvoy; Tobias Haller; Esther Blanco
  8. Market power and information effects in a multi-unit auction By Andreas Hefti; Peiyao Shen; Regina Betz
  9. The Income Elasticity for Nutrition: Evidence from Unconditional Cash Transfers in Kenya By Ingvild Almås; Johannes Haushofer; Jeremy P. Shapiro
  10. Burden of Inspection Costs and Effectiveness of Environmental Regulations By Keisaku Higashida
  11. Our distrust is very expensive By Rahul Deb; Matthew Mitchell; Mallesh Pai
  12. Estimating Heterogeneous Reactions to Experimental Treatments By Christoph Engel
  13. Network Formation and Disruption - An Experiment - Are Efficient Networks too Complex? By Sonja Brangewitz; Behnud Mir Djawadi; Angelika Endres; Britta Hoyer
  14. Tax Morale and Fairness in Conflict - An Experiment By Christoph Engel; Luigi Mittone; Azzurra Morreale
  15. Abuse of Power – An experimental investigation of the effects of power and transparency on centralized punishment By Leonard Hoeft; Wladislaw Mill
  16. Bubbles and Financial Professionals By Utz Weitzel; Christoph Huber; Jürgen Huber; Michael Kirchler; Florian Lindner; Julia Rose
  17. The Pied Piper: Prizes, Incentives, and Motivation Crowding-in By Luigino Bruni; Vittorio Pelligra; Tommaso Reggiani; Matteo Rizzolli
  18. Three Layers of Uncertainty: an Experiment By Aydogan, Ilke; Berger, Loϊc; Bosetti, Valentina; Liu, Ning
  19. Effects of Timing and Reference Frame of Feedback By Fischer, Mira; Wagner, Valentin
  20. Persistence of Power: Repeated Multilateral Bargaining with Endogenous Agenda Setting Authority By Marina Agranov; Christopher Cotton; Chloe Tergiman
  21. Climate Policy Commitment Devices By Dengler, Sebastian; Gerlagh, Reyer; Trautmann, Stefan T.; van de Kuilen, Gijs
  22. What Is the Value Added by Using Causal Machine Learning Methods in a Welfare Experiment Evaluation? By Strittmatter, Anthony
  23. Information Design In Coalition Formation Games By Sareh Vosooghi
  24. Hard-to-Interpret Signals By Larry G. Epstein; Yoram Halevy
  25. The Strength of Weak Leaders - An Experiment on Social Influence and Social Learning in Teams By Büchel, Berno; Klößner, Stefan; Lochmüller, Martin; Rauhut, Heiko
  26. Synthetic learner: model-free inference on treatments over time By Davide Viviano; Jelena Bradic
  27. Why are relatively poor people not more supportive of redistribution? Evidence from a survey experiment across 10 countries By Christopher Hoy; Franziska Mager
  28. FINANCIAL ATTENTION AND THE DISPOSITION EFFECT By Nicolas Dierick; Dries Heyman; Koen Inghelbrecht; Hannes Stieperaere

  1. By: Long, Iain W (Cardiff Business School); Matthews, Kent (Cardiff Business School); Sivarajasingam, Vaseekaran
    Abstract: We conduct a field experiment to assess whether alcohol-induced behavioural changes explain participants' recent history of violence. We find that being in a drinking environment, rather than intoxication, reduces participants' cognitive ability but increases their overconfidence. Those who experience small reductions in ability or become much more overconfident tended to have been involved in more violent incidents. Since these behavioural changes were largely unanticipated, our results suggest that individuals underestimate their true likelihood of becoming involved in violence when making alcohol consumption decisions. This presents additional challenges when formulating policy designed to deter alcohol-fuelled violence.
    Keywords: Intoxication, over-optimism, violence
    JEL: C93 D91 I18
    Date: 2019–03
  2. By: Niu, Xiaofei; Li, Jianbiao
    Abstract: Time constraint is a central aspect of financial decision making. This paper experimentally examines the effect of time constraint on the disposition effect, which refers to the empirical fact that investors have a higher propensity to sell stocks with capital gains compared to stocks with capital losses. We distinguish time pressure from time constraint by implementing three treatments: no time constraint (NTC), 20 seconds time constraint (20TC), and 10 seconds time constraint (10TC). The experimental results show that time constraint affects the disposition effect at some conditions, i.e. the 10TC treatment, in which subjects perceive more time pressure, significantly reduces the disposition effect; this treatment effect, however, vanishes in 20TC treatment, where feelings of stress do not differ from the NTC treatment. Self-control is one of the psychological mechanisms that explains why time pressure reduces the disposition effect.
    Keywords: time pressure,disposition effect
    Date: 2019
  3. By: Matousek, Jindrich; Havranek, Tomas; Irsova, Zuzana
    Abstract: A key parameter estimated by lab and field experiments in economics is the individual discount rate---and the results vary widely. We examine the extent to which this variance can be attributed to observable differences in methods, subject pools, and potential publication bias. To address the model uncertainty inherent to such an exercise, we employ Bayesian model averaging. We find occasional but widespread publication bias against unintuitive results: in consequence, the mean reported discount rate is inflated twofold. Our results suggest that estimates decrease with the time horizon, a finding consistent with hyperbolic discounting. Discount rates are similar for money and health questions, but people tend to be less patient in exotic contexts (e.g., when offered a kiss from a movie star). Africans are less patient than people from other continents. Finally, the results of lab and field experiments differ systematically, and it also matters whether the experiment relies on students or uses broader samples of the population.
    Keywords: Discount rate,experiment,publication bias,meta-analysis,Bayesian model averaging
    JEL: D01 C83 C90
    Date: 2019
  4. By: Bose, Neha (University of Warwick); Sgroi, Daniel (University of Warwick, CAGE and IZA)
    Abstract: In a laboratory experiment, 338 participants were asked to communicate in pairs and then play two games with their partners: the 11-20 money request game (a tool for assessing level-k reasoning) and a public goods game. The communication occurred prior to any knowledge of what was to follow but played an important role in allowing them to develop theories or mental models of their partners (“theory of mind”) which proved to be crucial explanatory factors for decision-making. We examine the players’ beliefs about the personality and intelligence of their partner, how they play in the games and analysed the language used during communication. The results indicate that beliefs about partner’s type is biased by own-type. In particular, extraverts, characterised by positive affect, projected their positivity onto their partners. The level-k strategy chosen in the 11-20 game increased with the perceived similarity between players and in the public goods game, players cooperated more when they believed their partners to be extraverted. An analysis of the text used during communication explains how it was possible for participants to draw inferences about other’s type: for instance, use of more words and more dominant words were associated with being an extravert.
    Keywords: theory of mind ; cheap talk ; communication ; level-k reasoning ; public goods game ; cooperation ; extraversion ; perceived similarity ; self-projection bias ; laboratory experiment ; text analysis.
    JEL: D91 D83 C92
    Date: 2019
  5. By: Choi, S; Goyal, S.; Moisan, F.
    Abstract: We conduct an experiment to understand the principles that govern network formation. The design of the experiment builds on a model of linking and efforts taken from Galeotti and Goyal [2010]. In order to reduce cognitive complexity facing human subjects and facilitate learning, we develop a new experimental platform that integrates a network visualization tool using an algorithm of Barnes and Hut [1986] with an interactive tool of asynchronous choices in continuous time. Our experiment provides strong support for macroscopic predictions of the theory: there is specialization in linking and efforts across all treatments. Moreover, and in line with the theory, the specialization is more pronounced in larger groups. Thus subjects abide by the law of the few. Information on payoffs provided to subjects affects their behavior and yields differential welfare consequences. In the treatment where subjects see only their own payoffs, in large groups, the most connected individuals compete fiercely-they exert large efforts and have small earnings. By contrast, when a subject sees everyone's payoffs, in large groups, the most connected individuals engage in less intense competition-they exert little effort and have large earnings. The effects of information are much more muted in small groups.
    JEL: C92 D83 D85 Z13
    Date: 2019–03–28
  6. By: Paul D. Adams; Stefan Hunt; Christopher Palmer; Redis Zaliauskas
    Abstract: Disclosure—the practice of providing information to support decision making—has been widely mandated in public policy but is routinely ignored by consumers and subject to obfuscation by firms. Yet most evidence on the effectiveness of consumer financial disclosure stems from lab experiments where subjects do not have competing demands on their attention or from analysis of borrowing decisions where optimality is hard to characterize. In this paper, we provide field evidence from randomized-controlled trials with 124,000 savings account holders at five UK depositories. Treated consumers received varying degrees of salient information about alternative products, including one with their current provider that strictly dominated their current savings product. Motivated by work on search frictions, switching costs, and inattention, our experimental variation is designed to allow us to examine the importance of each in inhibiting effective disclosure. Despite the switching process taking 15 minutes on average and the moderate size of average potential gains (£123 in the first year), attention to disclosure is low, significantly limiting its potential effectiveness, motivating explicit disclosure-design rules, and demonstrating the nature of deposit stickiness.
    JEL: D14 D83 E21 G28 M38
    Date: 2019–03
  7. By: David M. McEvoy; Tobias Haller; Esther Blanco
    Abstract: This study presents experimental results on the role that non-binding pledges have on the ability of resource users to manage the threat of probabilistic group damages in two separate environments. First, an environment where agents can work collectively to try to mitigate the root cause of the damage (mitigation), which is a form of public good. Second, an environment where in addition to collective mitigation, agents can work autonomously to protect themselves from the damages if they occur (adaptation). The tension is that mitigation and adaptation investments are strategic substitutes. We begin with a model that points to how non-binding pledges could be more effective in a world with both mitigation and adaptation strategies, compared to mitigation only. First-period results show that (i) consistent with previous literature, pledges in a mitigation-only envi- ronment do not increase average investments in collective mitigation, but (ii) when both mitigation and adaptation opportunities exist, pledges lead to higher investment in col- lective mitigation, lower investment in adaptation and increased efficiency. Although the average treatment effect disappears over time as the amount pledged decreases, pledges remain significant predictors of mitigation investments over the course of the experiment.
    Keywords: social dilemmas, economic experiments, behavioral economics, public goods, mitigation, adaptation, environmental damages
    JEL: D9 Q54 H4 C92
    Date: 2019–04
  8. By: Andreas Hefti; Peiyao Shen; Regina Betz
    Abstract: We study the effects of different information structures (full information, supply uncertainty and demand uncertainty) on equilibrium prices, allocative efficiency and bidding behavior in a (supply-side) uniform-price multi-unit auction, using supply function competition and a novel experimental design. Our setup integrates different types of market power and a varying level of competition. We empirically find that average prices tend to be higher under full information compared to the cases where bidders either have limited information about about the demand level or rivals’ technologies or; the latter even leading to strictly lower average prices as the exertion of market power and bid shading is strongly reduced. We explain this finding with a behavioral equilibrium concept, where bidders behave as if competing against the average market situation. Further, we address the problem of multiplicity of equilibria by exploiting the equilibrium conditions to obtain an empirical selection of the average equilibrium supply function. The respective predictions of the average prices exceed those by standard OLS in all information treatments.
    Keywords: Multi-unit auctions, limited information, market power, supply function competition, supply uncertainty, demand uncertainty, restricted least squares
    JEL: C92 D43 D44 D82 L11 L94 Q41
    Date: 2019–03
  9. By: Ingvild Almås; Johannes Haushofer; Jeremy P. Shapiro
    Abstract: We use a randomized controlled trial to study the effect of large income changes, through unconditional cash transfers, on the food share of expenditures and consumption of calories among poor households in rural Kenya. Our preferred estimate of the food elasticity following USD 709 transfers is 0.78 for expenditure, 0.60 for calories, and 1.29 for protein. Experimental elasticities are lower than cross-sectional estimates. These estimates are unaffected by spillovers or price changes at the village level: results are similar with vs. without an almost ideal demand system, and with a control group in treatment vs. control villages.
    JEL: C93 D12 D13 D14 O12
    Date: 2019–03
  10. By: Keisaku Higashida (School of Economics, Kwansei Gakuin University)
    Abstract: Using a laboratory experimental approach, this study examines the effect of institutional changes in the responsibility for paying inspection costs for environmental regulations on the behavior of polluters and authorities. In particular, we compare two schemes: one is that authorities always bear the inspection cost and the other is that polluters bear the cost in a given situation. We find that polluters comply with regulations more frequently in the latter than the former scheme, while the inspection behavior of authorities does not change significantly. Moreover, the cost-bearing change in the scheme induces income redistribution between polluters and authorities (pollutees or society). In addition, we introduce uncertainty about the occurrence of environmental damage, and find that the frequency of inspection is greater in the latter than the former scheme. Because both inspection and compliance costs increase, total payoff may decrease by the partial shift of responsibility for inspection cost from authorities to polluters.
    Keywords: Compliance, environmental regulation, inspection cost, laboratory experiment
    JEL: K32 Q52 Q58
    Date: 2019–03
  11. By: Rahul Deb; Matthew Mitchell; Mallesh Pai
    Abstract: Motivated by reputation management in a variety of different markets for ``expertise'' (such as online content providers and experts in organizations), we develop a novel repeated-game framework in which a principal screens a strategic agent whose type determines the rate at which he privately receives payoff relevant information. The stage game is a bandit setting, where the principal chooses whether or not to experiment with a risky arm which is controlled by an agent who privately knows its type. Irrespective of type, the agent strategically chooses output from the arm to maximize the duration of experimentation. Experimentation is only potentially valuable to the principal if the arm is of the high type. Our main insight is that reputational incentives can be exceedingly strong: the agent makes inefficient output choices in all equilibria (subject to a mild refinement) and that this can result in market breakdown even when the uncertainty about the agent's type is arbitrarily small. We show that (one-sided) transfers do not prevent this inefficiency and we suggest alternate ways to improve the functioning of these markets.
    Keywords: reputation, repeated games of imperfect public monitoring, relational contracting, strategic experimentation, markets for expertise, media
    JEL: D82 D83 D86
    Date: 2019–03–22
  12. By: Christoph Engel (Max Planck Institute for Research on Collective Goods)
    Abstract: Frequently in experiments there is not only variance in the reaction of participants to treatment. The heterogeneity is patterned: discernible types of participants react differently. In principle, a finite mixture model is well suited to simultaneously estimate the probability that a given participant belongs to a certain type, and the reaction of this type to treatment. Yet often, finite mixture models need more data than the experiment provides. The approach requires ex ante knowledge about the number of types. Finite mixture models are hard to estimate for panel data, which is what experiments often generate. For repeated experiments, this paper offers a simple two-step alternative that is much less data hungry, that allows to find the number of types in the data, and that allows for the estimation of panel data models. It combines machine learning methods with classic frequentist statistics.
    Keywords: heterogeneous treatment effect, finite mixture model, panel data, two-step approach, machine learning, CART
    JEL: C14 C23 C91
    Date: 2019–01
  13. By: Sonja Brangewitz; Behnud Mir Djawadi; Angelika Endres; Britta Hoyer
    Abstract: We experimentally study the emergence of networks under a known external threat. To be more specific, we deal with the question if subjects in the role of a strategic Designer are able to form safe and efficient networks while facing a strategic Adversary who is going to attack their networks. This investigation relates theoretical predictions by Dziubinski and Goyal (2013) to actual observed behaviour. Varying the costs for protecting nodes, we designed and tested two treatments with different predictions for the equilibrium network. Furthermore, the influence of the subjects' farsightedness on their decision-making process was elicited and analysed. We find that while subjects are able to build safe networks in both treatments, equilibrium networks are only built in one of the two treatments. In the other treatment, predominantly safe networks are built but they are not efficient. Additionally, we find that farsightedness -as measured in our experiment- has no influence on whether subjects are able to build safe or efficient networks.
    Keywords: Research Methods/ Statistical Methods
    Date: 2017–06–23
  14. By: Christoph Engel (Max Planck Institute for Research on Collective Goods); Luigi Mittone (University of Trento); Azzurra Morreale (LUT University, Finland)
    Abstract: Arguably, for many citizens the perceived expected disutility from sanctions is smaller than the monetary gain from tax evasion. Nevertheless most people pay their taxes most of the time. In a lab experiment, we show that the willingness to pay taxes even absent enforcement is indeed pronounced. Yet voluntary compliance is reduced if participants learn that income is heterogeneous. The effect is driven by participants with the lowest income. The reduction obtains irrespective of the tax regime. If the tax is proportional to income, or progressive, participants become more skeptical about the willingness of participants with high income to comply.
    Keywords: tax evasion, tax morale, heterogeneity, income inequality, lump sum tax, proportional tax, progressive tax, beliefs, path model
    JEL: C30 C91 D01 D02 D31 D63 D91 H26 K34 K42
    Date: 2019–02
  15. By: Leonard Hoeft (Max Planck Institute for Research on Collective Goods, Bonn); Wladislaw Mill (International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World, School of Economics and Business Administration, Jena)
    Abstract: We investigate power abuse of a single punisher in a public-goods-game subject to variations in punishment power and contribution transparency. We find a high amount of abuse across all conditions. More power led to more abuse over time, while transparency could only curb abuse in the high power conditions. These findings highlight the dangers of power centralization, but suggest a more complex relation of power and transparency
    Keywords: Punishment, Public-Goods-Game, Designated Punishment, Abuse, Transparency, Power
    JEL: H41 C92 K42
    Date: 2017–07
  16. 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
  17. By: Luigino Bruni (LUMSA University); Vittorio Pelligra (University of Cagliari); Tommaso Reggiani (Masaryk University); Matteo Rizzolli (LUMSA University)
    Abstract: In mainstream business and economics, prizes such as the Presidential Medal of Freedom are understood as special types of incentives, with the peculiar features of being awarded in public, and of having largely symbolic value. Informed by both historical considerations and philosophical instances, our study defines fundamental theoretical differences between incentives and prizes. The conceptual factors highlighted by our analytical framework are then tested through a laboratory experiment. The experimental exercise aims to analyze how prizes and incentives impact actual individuals’ behavior differently. Our results show that both incentives (monetary and contingent) and prizes (non-monetary and discretional rewards) boost motivation to perform if awarded publicly, but only prizes crowd-in motivation promoting virtuous attitude.
    Keywords: incentives, prizes, awards, crowding-in, meaning, intrinsic motivation
    JEL: B1 D03 J33
    Date: 2019–03–26
  18. By: Aydogan, Ilke; Berger, Loϊc; Bosetti, Valentina; Liu, Ning
    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: Risk and Uncertainty
    Date: 2018–07–10
  19. By: Fischer, Mira (WZB Berlin); Wagner, Valentin (University of Mainz)
    Abstract: Information about past performance has been found to sometimes improve and sometimes worsen subsequent performance. Two factors may help to explain this puzzle: which aspect of one\'s past performance the information refers to and when it is revealed. In a field experiment in secondary schools, students received information about their absolute rank in the last math exam (level feedback), their change in ranks between the second-last and the last math exam (change feedback), or no feedback. Feedback was given either 1-3 days (early) or immediately (late) before the final math exam of the semester. Both level feedback and change feedback significantly improve students\' grades in the final exam when given early and tend to worsen them when given late. The largest effects are found for negative change feedback and are concentrated on male students, who adjust their ability beliefs downwards in response to feedback.
    Keywords: timing of feedback; type of feedback; beliefs; education; field experiment;
    JEL: D83 D91 I21
    Date: 2019–03–26
  20. By: Marina Agranov (California Institute of Technology); Christopher Cotton (Queen's University); Chloe Tergiman (Penn State University)
    Abstract: In models of dynamic multilateral bargaining, the literature tends to focus on stationary subgame perfect or stationary Markov perfect equilibria, which restrict attention to forward-looking, history-independent strategies. Evidence supporting such refinements come from environments in which proposal power is exogenous and the incentives for players to develop cooperative relationships are minimized. However, in many environments including legislative bargaining, agenda-setting power is endogenous and it is commonplace for players to form coalitions and establish reputations. Through a series of lab experiments, we show that in repeated environments, standard equilibrium refinements may predict some aspects of the data when outcomes when proposal power is randomly assigned, but do not predict outcomes when proposal power is endogenous.
    Keywords: legislative bargaining, laboratory experiment, history independence, repeated games
    JEL: C78 D02 C92
    Date: 2019–03
  21. By: Dengler, Sebastian; Gerlagh, Reyer; Trautmann, Stefan T.; van de Kuilen, Gijs
    Abstract: We develop a dynamic resource extraction game that mimics the global multi-generation planning problem for climate change and fossil fuel extraction. We implement the game under different conditions in the laboratory. Compared to a ‘libertarian’ baseline condition, we find that policy interventions that provide a costly commitment device or reduce climate threshold uncertainty reduce resource extraction. We also study two conditions to assess the underlying social preferences and the viability of ecological dictatorship. Our results suggest that climate-change policies that focus on investments that lock the economy into carbon-free energy sources provide an important commitment device in the intertemporal cooperation problem.
    Keywords: Research Methods/ Statistical Methods
    Date: 2017–09–25
  22. By: Strittmatter, Anthony
    Abstract: Recent studies have proposed causal machine learning (CML) methods to estimate conditional average treatment effects (CATEs). In this study, I investigate whether CML methods add value compared to conventional CATE estimators by re-evaluating Connecticut's Jobs First welfare experiment. This experiment entails a mix of positive and negative work incentives. Previous studies show that it is hard to tackle the effect heterogeneity of Jobs First by means of CATEs. I report evidence that CML methods can provide support for the theoretical labor supply predictions. Furthermore, I document reasons why some conventional CATE estimators fail and discuss the limitations of CML methods.
    Keywords: Labor supply, individualized treatment effects, conditional average treatment effects, random forest
    JEL: H75 I38 J22 J31 C21
    Date: 2019
  23. By: Sareh Vosooghi
    Abstract: I examine a setting, where an information sender conducts research into a payoff-relevant state variable, and releases information to agents, who consider joining a coalition. The agents' actions can cause harm by contributing to a public bad. The sender, who has commitment power, by designing an information mechanism (a set of signals and a probability distribution over them), maximises his payoff, which depends on the action taken by the agents, and the state variable. I show that the coalition size, as a function of beliefs of agents, is an endogenous variable, induced by the information sender. The optimal information mechanism from the general set of public information mechanisms, in coalition formation games is derived. I also apply the results to International Environmental Agreements (IEAs), where a central authority, as an information sender, attempts to reduce the global level of greenhouse gases (GHG) by communication of information on social cost of GHG.
    Keywords: Research Methods/ Statistical Methods
    Date: 2017–06–23
  24. By: Larry G. Epstein; Yoram Halevy
    Abstract: Decisions under uncertainty are often made with information that is difficult to interpret because multiple interpretations are possible. Individuals may perceive and handle uncertainty about interpretation differently and in ways that are not directly observable to a modeler. This paper identifies and experimentally examines behavior that can be interpreted as reflecting an individual's attitude towards such uncertainty.
    Keywords: Ambiguity, updating, information, experiment
    JEL: D81 D91 C91
    Date: 2019–03–31
  25. By: Büchel, Berno; Klößner, Stefan; Lochmüller, Martin; Rauhut, Heiko
    Abstract: We investigate how the selection process of a leader affects team performance with respect to social learning. We use a lab experiment in which an incentivized guessing task is repeated in a star network with the leader at the center. Leader selection is either based on competence, on self-confidence, or made at random. Teams with random leaders do not underperform compared to competent leaders, and they even outperform teams whose leader is selected based on self-confidence. The reason is that random leaders are better able to use the knowledge within the team. We can show that it is the declaration of the selection procedure which makes non-random leaders overly influential. We set up a horse race between several rational and naïve models of social learning to investigate the micro-level mechanisms. We find that overconfidence and conservatism contribute to the fact that overly influential leaders mislead their team.
    Keywords: Research Methods/ Statistical Methods
    Date: 2018–02–26
  26. By: Davide Viviano; Jelena Bradic
    Abstract: Understanding of the effect of a particular treatment or a policy pertains to many areas of interest -- ranging from political economics, marketing to health-care and personalized treatment studies. In this paper, we develop a non-parametric, model-free test for detecting the effects of treatment over time that extends widely used Synthetic Control tests. The test is built on counterfactual predictions arising from many learning algorithms. In the Neyman-Rubin potential outcome framework with possible carry-over effects, we show that the proposed test is asymptotically consistent for stationary, beta mixing processes. We do not assume that class of learners captures the correct model necessarily. We also discuss estimates of the average treatment effect, and we provide regret bounds on the predictive performance. To the best of our knowledge, this is the first set of results that allow for example any Random Forest to be useful for provably valid statistical inference in the Synthetic Control setting. In experiments, we show that our Synthetic Learner is substantially more powerful than classical methods based on Synthetic Control or Difference-in-Differences, especially in the presence of non-linear outcome models.
    Date: 2019–04
  27. By: Christopher Hoy (Australian National University, Australia); Franziska Mager (Oxfam Great Britain)
    Abstract: We test a key assumption of conventional theories about preferences for redistribution, which is that relatively poor people should be the most in favor of redistribution. We conduct a randomized survey experiment with over 30,000 participants across 10 countries, half of whom are informed of their position in the national income distribution. Contrary to prevailing wisdom, people who are told they are relatively poorer than they thought are less concerned about inequality and are not more supportive of redistribution. This finding is driven by people using their own living standard as a "benchmark" for what they consider acceptable for others.
    Keywords: Inequality, social mobility, redistribution, political economy.
    JEL: D31 D63 D72 D83 O50 P16 H23
    Date: 2019–01
  28. By: Nicolas Dierick; Dries Heyman; Koen Inghelbrecht; Hannes Stieperaere (-)
    Abstract: Using a novel brokerage dataset covering individual investors' login and stock trading behavior, we investigate the severity of the disposition effect as a function of attention. Our results show that more attentive investors trade less in line with the disposition effect, suggesting a comparative advantage in incorporating information into financial decision making. Furthermore, we find that high attention is related to a stronger tendency to sell moderate losses, as compared to large ones, while low attention increases an investor's likelihood to sell extreme, rather than moderate, profits. These results are in line with the theory of cognitive dissonance and saliency effects.
    Keywords: Investor behavior, Disposition effect, Attention allocation
    JEL: G11
    Date: 2019–03

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