nep-exp New Economics Papers
on Experimental Economics
Issue of 2019‒07‒15
35 papers chosen by

  1. Cost misperceptions and energy consumption: Experimental evidence for present bias and biased price beliefs By Werthschulte, Madeline; Löschel, Andreas
  2. Do physicians care about patients' utility? Evidence from an experimental study of treatment choices under demand-side cost sharing By Ge, Ge; Godager, Geir; Wang, Jian
  3. The Market for Talent: Competition for Resources and Self- Governance in Teams By Abhijit Ramalingam; Brock V. Stoddard; James M. Walker
  4. Demand-Driven Youth Training Programs: Experimental Evidence from Mongolia By Maria Laura Alzua; Soyolmaa Batbekh; Altantsetseg Batchuluun; Bayarmaa Dalkhjav; Jose Galdo
  5. Belief Error and Non-Bayesian Social Learning: An Experimental Evidence By Bogaçhan Çelen; Sen Geng; Huihui Li
  6. Experimental and self-reported measures of risk taking and digit ratio (2D:4D): evidence from a large, systematic study By Brañas-Garza, Pablo; Galizzi, Matteo M.; Nieboer, Jeroen
  7. How do Humans Interact with Algorithms? Experimental Evidence from Health Insurance By Kate Bundorf; Maria Polyakova; Ming Tai-Seale
  8. Asymmetric use of punishment in socioeconomic segregated societies leads to an unequal distribution of wealth By Riccardo Pansini; Marco Campenni; Lei Shi
  9. Are patient-regarding preferences stable? Evidence from a laboratory experiment with physicians and medical students from different countries By Wang, Jian; Iversen, Tor; Hennig-Schmidt, Heike; Godager, Geir
  10. Are Estimates of Early Education Programs Too Pessimistic? Evidence from a Large-Scale Field Experiment that Causally Measures Neighbor Effects By List, John A.; Momeni, Fatemeh; Zenou, Yves
  11. Steering in Online Markets: The Role of Platform Incentives and Credibility By Moshe A. Barach; Joseph M. Golden; John J. Horton
  12. Identify and understand pay-it-forward reciprocity using millions of online red packets By Yuan Yuan; Tracy Liu; Chenhao Tan; Qian Chen; Alex Pentland; Jie Tang
  13. Welfare Effects of a Non-Contributory Old Age Pension: Experimental Evidence for Ekiti State, Nigeria By Maria Laura Alzua; Natalia Cantet; Ana Dammert; Damilola Olajide
  14. Teams promise but do not deliver By Nielsen, Kirby; Bhattacharya, Puja; Kagel, John H.; Sengupta, Arjun
  15. Secure Survey Design in Organizations: Theory and Experiments By Sylvain Chassang; Christian Zehnder
  16. Freeing Financial Education via Tablets: Experimental Evidence from Colombia By Orazio Attanasio; Matthew Bird; Lina Cardona-Sosa; Pablo Lavado
  17. Do consumers understand PCP car finance? An experimental investigation By McElvaney, Terry; Lunn, Pete; McGowan, Féidhlim
  18. Testing preferences for basic income By Palermo Kuss, Ana Helena
  19. Market Allocations under Ambiguity: A Survey By Antoine Billot; Jean-Marc Tallon; Sujoy Mukerji
  20. Inaccurate Statistical Discrimination By J. Aislinn Bohren; Kareem Haggag; Alex Imas; Devin G. Pope
  21. Disincentives from Redistribution: Evidence on a Dividend of Democracy By Sausgruber, Rupert; Sonntag, Axel; Tyran, Jean-Robert
  22. Business Culture: The Role of Personal and Impersonal Business Relationships on Market Efficiency By Munoz-Herrera, Manuel; Reuben, Ernesto
  23. A Summary of Artefactual Field Experiments On The Who's, What's, Where's, and When's By John List
  24. Contests within and between groups By Bhattacharya, Puja; Rampal, Jeevant
  25. Remittances and vote buying By González-Ocantos, Ezequiel; de Jonge, Chad Kiewiet; Meseguer, Covadonga
  26. "Epic Fail: How Below-Bid Pricing Backfires in Multiunit Auctions" By Sanna Laksá; Daniel Marszalec; Alexander Teytelboym
  27. Effective policies and social norms in the presence of driverless cars: Theory and experiment By Cabrales, Antonio; Kendall, Ryan; Sánchez, Angel
  28. Decentralizing centralized matching markets: Implications from early offers in university admissions By Grenet, Julien; He, Yinghua; Kübler, Dorothea
  29. Equity and Efficiency in the Organization of Firms By Tanjim Hossain; Elizabeth Lyons; Aloysius Siow
  30. Assessing the Risk of Reporting Bias in a RCT for Adolescent Mothers By Jack Stevens; Dana Rotz; Brian Goesling
  31. Risk and Rationality:The Relative Importance of Probability Weighting and Choice Set Dependence By Adrian Bruhin; Maha Manai; Luis Santos-Pinto
  32. Costly auction entry, royalty payments, and the optimality of asymmetric designs By Bernhardt, Dan; Liu, Tingjun; Sogo, Takeharu
  33. Cryptocurrencies, central bank digital cash, traditional money: does privacy matter? By Emanuele Borgonovo; Stefano Caselli; Alessandra Cillo; Donato Masciandaro; Giovanno Rabitti
  34. Effects of Single and Integrated Water, Sanitation, Handwashing, and Nutrition Interventions on Child Soil-Transmitted Helminth and Giardia Infections: A Cluster-Randomized Controlled Trial in Rural Kenya By Amy J. Pickering; Sammy M. Njenga; Lauren Steinbaum; Jenna Swarthout; Audrie Lin; Benjamin F. Arnold; Christine P. Stewart; Holly N. Dentz; MaryAnne Mureithi; Benard Chieng; Marlene Wolfe; Ryan Mahoney; Jimmy Kihara; Kendra Byrd; Gouthami Rao; Theodora Meerkerk; Priscah Cheruiyot; Marina Papaiakovou; Nils Pilotte; Steven A. Williams; John M. Colford; Jr.; Clair Null
  35. Biased Beliefs About Random Samples: Evidence from Two Integrated Experiments By Daniel J. Benjamin; Don A. Moore; Matthew Rabin

  1. By: Werthschulte, Madeline; Löschel, Andreas
    Abstract: The aim of this study is to link variation in energy cost misperceptions to variation in households' energy consumption. The focus is on two sorts of misperceptions: First, present biased discounting of future energy costs and second, biased energy price beliefs. By running an artefactual field experiment with a representative sample of 711 participants, we gather incentivized measures of these two misper- ceptions and observe participant's revealed electricity consumption. Our main finding is that participants with present bias are predicted to consume on average 9% more electricity than participants with time-consistent discounting. Our results further suggest that neither the true marginal electricity price nor the expected marginal electricity price can predict electricity consumption. Taken together our results raise doubt in the effectiveness of classical price based policies in reducing households' energy consumption.
    Keywords: energy consumption,present bias,price beliefs,field experiment
    JEL: C93 D81 D91 Q49
    Date: 2019
  2. By: Ge, Ge (Department of Health Management and Health Economics); Godager, Geir (Department of Health Management and Health Economics); Wang, Jian (Department of Health Management and Health Economics)
    Abstract: We ask whether the physician's treatment choices are affected by demand-side cost sharing. In order to identify and quantify preferences under demand-side cost sharing, we design and conduct an incentivized laboratory experiment where only medical students are recruited to participate. In our experiment we achieve saliency of all three attributes of treatment alternatives, profit, health benefit and patient consumption: The choices in the laboratory experiment determine the amount of medical treatment and the future consumption level of a real patient admitted to the nearest hospital. In our experiment we vary demand-side cost sharing while preferences and bargaining power of the patient is fixed. We estimate decision-makers' preference parameters in a variety of random utility models. We find strong evidence suggesting that the amount of demand-side cost sharing affects medical decisions.
    Keywords: Physician preferences; Demand-side cost sharing; Incentivized laboratory experiment
    JEL: C91 I11 J33
    Date: 2019–05–13
  3. By: Abhijit Ramalingam (University of East Anglia); Brock V. Stoddard (Appalachian State University); James M. Walker (Indiana University)
    Abstract: In a laboratory setting, we investigate the effect of competition for the resources of team members with ‘divided loyalties’, and the role of such competition in overcoming the free-rider problem associated with the provision of team-level public goods. We find that competition alone creates ‘winners’ and ‘losers’. However, if groups have access to more information on the actions of team members, or are able to determine their membership through ostracism, they are more successful in attracting the ‘loyalties’ of team members. By eschewing the study of additional mechanisms that require external intervention or alterations of payoff functions, our work highlights the potential of implicit competition in promoting cooperation.
    Keywords: public goods, experiment, divided loyalties, competition, resources, endogenous membership
    JEL: C72 C91 C92 H41
  4. By: Maria Laura Alzua; Soyolmaa Batbekh; Altantsetseg Batchuluun; Bayarmaa Dalkhjav; Jose Galdo
    Abstract: Because of its high incidence and potential threat to social cohesion, youth unemployment is a global concern. This study uses a randomized controlled trial to analyze the effectiveness of a demand-driven vocational training program for disadvantaged youth in Mongolia. Mongolia, a transitional country whose economic structure shifted from a communist, centrally planned economy to a free-market economy over a relatively short period, offers a new setting in which to test the effectiveness of standard active labor market policies. This study reports positive and statistically significant short-term effects of vocational training on monthly earnings, skills matching, and self-employment. Substantial heterogeneity emerges as relatively older, richer, and better-educated individuals drive these positive effects. A second intervention that randomly assigns participants to receive repetitive weekly newsletters with information on market returns to vocational training shows positive impacts on the length of exposure to and successful completion of the program. These positive effects, however, are only observed at the intensive margin and do not lead to higher employment or earnings outcomes.
    Keywords: vocational training programs, labor market, randomized controlled trial, employment, earnings, job quality
    JEL: J18 J08 J24 J38 C93
    Date: 2019
  5. By: Bogaçhan Çelen (University of Melbourne); Sen Geng (Xiamen University); Huihui Li (Xiamen University)
    Abstract: This paper experimentally studies whether individuals hold a first-order belief that others apply Bayes’ rule to incorporate private information into their beliefs, which is a fundamental assumption in many Bayesian and non-Bayesian social learning models. We design a novel experimental setting in which the first-order belief assumption implies that social information is equivalent to private information. Our main finding is that participants’ reported reservation prices of social information are significantly lower than those of private information, which provides evidence that casts doubt on the first-order belief assumption. We also build a novel belief error model in which participants form a random posterior belief with a Bayesian posterior belief kernel to explain the experimental findings. The structural estimation of the model suggests that participants’ sophisticated consideration of others’ belief error and their exaggeration of the error both contribute to the difference in reservation prices.
    Keywords: private information, social information, belief error, non-Bayesian social learning
    JEL: C91 C92 D83
  6. By: Brañas-Garza, Pablo; Galizzi, Matteo M.; Nieboer, Jeroen
    Abstract: Using a large (n=704) sample of laboratory subjects, we systematically investigate the links between the digit ratio - a biomarker for pre-natal testosterone exposure - and two measures of individual risk taking: (i) risk preferences over lotteries with real monetary incentives, and (ii) self-reported risk attitude. The digit ratio (also called 2D:4D) is the ratio of the length of the index finger to the length of the ring finger, and we consider both hands’ digit ratios. Previous studies have found that the digit ratio correlates with risk taking in some subject samples, but not others. In our sample, we find that both the right-hand and the left-hand digit ratio are significantly associated with risk preferences: subjects with lower digit ratios tend to choose riskier lotteries. Neither digit ratio, however, is associated with self-reported risk attitude.
    Keywords: testosterone; 2D:4D ratio; risk preferences; risk attitudes; ES/K001965/1
    JEL: C90 C92 D44 D81
    Date: 2018–02–27
  7. By: Kate Bundorf; Maria Polyakova; Ming Tai-Seale
    Abstract: Algorithms increasingly assist consumers in making their purchase decisions across a variety of markets; yet little is known about how humans interact with algorithmic advice. We examine how algorithmic, personalized information affects consumer choice among complex financial products using data from a randomized, controlled trial of decision support software for choosing health insurance plans. The intervention significantly increased plan switching, cost savings, time spent choosing a plan, and choice process satisfaction, particularly when individuals were exposed to an algorithmic expert recommendation. We document systematic selection - individuals who would have responded to treatment the most were the least likely to participate. A model of consumer decision-making suggests that our intervention affected consumers’ signals about both product features (learning) and utility weights (interpretation).
    JEL: D1 D12 D8 D81 D82 D83 D9 D90 D91 G22 H51 I13
    Date: 2019–06
  8. By: Riccardo Pansini (Kunming Institute of Zoology); Marco Campenni (Yunnan University of Finance and Economics); Lei Shi (Arizona State University)
    Abstract: Investigating hierarchical class segregation and the use of punishment applied downward in a hierarchy acts as a key aspect to ascertain how dominant and subordinate partners cooperate to achieve mutual profit. In countries with an uneven wealth distribution, this mutual profit may be reduced, especially for the lower socioeconomic classes. In this experiment, we implemented an Iterated Prisoner’s Dilemma Game in one such country with a starkly high Gini index, China. We split relatively richer and poorer subjects into separate classes and gave only one the authority to punish the other. When rich subjects could unidirectionally punish poor subjects (as in a segregated society), rich subjects decreased their cooperation effort while punishing poor subjects. When rich and poor subjects, instead, could punish each other in random combinations (as in an integrated society) they de- creased defections so they could punish more. In the segregated society model, the punishing classes earned twice as much as the non-punishers. Conversely, in the integrated society model, weak differences in earnings were found, leading to a decrease in inequality. An Agent Based simulation confirmed these results when the interacting agents became thousands rather than the over three hundred human participants. From our research, we conclude that, especially in developing economies, stimulating the wealthier and poorer individuals towards a socioeconomic integration of their cooperative exchanges may ultimately lead to a redistribution of wealth.
    Keywords: cooperation, punishment, Iterated Prisoner’s Dilemma game, socioeconomic class segregation, Agent Based Modelling
  9. By: Wang, Jian (Department of Health Management and Health Economics); Iversen, Tor (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (Department of Health Management and Health Economics); Godager, Geir (Department of Health Management and Health Economics)
    Abstract: We quantify patient-regarding preferences by fitting a bounded rationality model to data from incentivized laboratory experiments, where Chinese medical doctors, German medical students and Chinese medical students participate. We find a remarkable stability in patient-regarding preferences when comparing subject pools and we cannot reject the hypothesis of equal patient regarding preferences in the three groups. The results suggest that health economic experiments can provide knowledge that reach beyond the student subject pool, and that knowledge on preferences of decision-makers in one cultural context can be of relevance for very different cultural contexts.
    Keywords: Laboratory experiment; Bounded rationality; Payment mechanism; Physician behavior
    JEL: C92 D82 H40 I11 J33
    Date: 2019–04–17
  10. By: List, John A. (Department of Economics); Momeni, Fatemeh (Department of Economics); Zenou, Yves (Monach University)
    Abstract: We estimate the direct and spillover effects of a large-scale early childhood intervention on the educational attainment of over 2,000 disadvantaged children in the United States. We show that failing to account for spillover effects results in a severe underestimation of the impact. The intervention induced positive direct effects on test scores of children assigned to the treatment groups. We document large spillover effects on both treatment and control children who live near treated children. On average, spillover effects increase a child's non-cognitive (cognitive) scores by about 1.2 (0.6 to 0.7) standard deviations. The spillover effects are localized, decreasing with the spatial distance to treated neighbors. Our evidence suggests the spillover effect on non-cognitive scores are likely to operate through the child's social network. Alternatively, parental investment is an important channel through which cognitive spillover effects operate. We view our results as speaking to several literatures, perhaps most importantly the role of public programs and neighborhoods on human capital formation at an early age.
    Keywords: Early education; Neighborhood; Field experiment; Spillover effects; Non-cognitive skills
    JEL: C93 I21 R10
    Date: 2019–07–02
  11. By: Moshe A. Barach; Joseph M. Golden; John J. Horton
    Abstract: Platform marketplaces can potentially steer buyers to certain sellers by recommending or guaranteeing those sellers. Money-back guarantees—which create a direct financial stake for the platform in seller performance—might be particularly effective at steering, as they align buyer and platform interests in creating a good match. We report the results of an experiment in which a platform marketplace—an online labor market—guaranteed select sellers for treated buyers. The presence of a guarantee strongly steered buyers to these guaranteed sellers, but offering guarantees did not increase sales overall, suggesting financial risk was not determinative for the marginal buyer. This preference for guaranteed sellers was not the result of their lower financial risk, but rather because buyers viewed the platform’s decision to guarantee as informative about relative seller quality. Indeed, a follow-up experiment showed that simply recommending the sellers that the platform would have guaranteed was equally effective at steering buyers.
    JEL: D02 D22 D82
    Date: 2019–06
  12. By: Yuan Yuan; Tracy Liu; Chenhao Tan; Qian Chen; Alex Pentland; Jie Tang
    Abstract: Pay-it-forward reciprocity encourages the spread of prosocial behavior. However, existing empirical evidence of pay-it-forward behavior has been largely based on laboratory experiments, which are limited in sample size and external validity. Extending this research, our study uses a natural experiment to examine pay-it-forward reciprocity in a real-life context with a large-scale dataset of 3.4 million users of an online platform. Our natural experiment is enabled by the randomness in the mechanism that WeChat, a Chinese online social networking platform, uses to split an online monetary gift (also known as a "red packet") to its recipients. Our results show that recipients on average pay forward 10.34% of the amount they receive. We further find that "Luckiest draw" recipients, or those who obtain the largest shares of their corresponding red packets, are 1.5 times more likely to pay it forward than other recipients. Our analyses indicate that in a multiple recipient setting, users' pay-it-forward behavior is enforced by a group norm that luckiest draw recipients should send the first subsequent gift and promoted by their distributional social preferences of the random amounts split by the platform. Finally, our study shows that those recipients without any in-group friends do pay it forward, even though their pay-it-forward behavior is less likely to be driven by their reputational concerns among acquaintances. Overall, our work provides insights into mechanisms and conditions that encourage pay-it-forward reciprocity, which have implications for fostering prosocial behavior.
    Date: 2019–06
  13. By: Maria Laura Alzua; Natalia Cantet; Ana Dammert; Damilola Olajide
    Abstract: Many countries in the developing world have implemented non-contributory old-age pensions. Evidence of the impact of such policies on the elderly in Sub-Saharan Africa is scarce, however. In this paper, we provide the first evidence from a randomized evaluation of an unconditional, non-contributory pension scheme targeted at the elderly in Ekiti State, Nigeria. Our findings show that treated beneficiaries self-reported better quality of life, more stable mental health, and better general health. We also provide evidence of spillover effects on labor outcomes and on household expenditure patterns as well as support for demand- side interventions aimed at improving the welfare of elderly poor citizens and other household members.
    Keywords: Randomized controlled trials, Aging, Non-contributory pensions, Health, Developing Countries
    JEL: C21 C93 H31 H55 H75 I38
    Date: 2019
  14. By: Nielsen, Kirby; Bhattacharya, Puja; Kagel, John H.; Sengupta, Arjun
    Abstract: Individuals and two-person teams play a hidden - action trust game with pre - play communication. We replicate previous results for individuals that non-binding promises increase cooperation rates. But this does not extend to teams. Wh ile teams make non-binding promises to cooperate at the same rate as individuals, they consistently renege on those promises. Additional treatments begin to explore the basis for the team outcome, ruling out explanations that team payoff structures drive b ehavior. Analysis of within-team discussions provides insight into the decision-making processes of first and second movers.
    Keywords: trust game,hidden-action,non-binding communication,teams versus individuals
    JEL: C72 C91 C92 D83
    Date: 2019
  15. By: Sylvain Chassang; Christian Zehnder
    Abstract: We study the impact of secure survey designs ensuring plausible deniability on information transmission in organizations. We are interested in settings in which fear of retaliation makes potential informants reluctant to reveal the truth. Theory predicts that: (i) popular randomized-response designs fail to induce informative reports, because they are strategically equivalent to non-secure direct-elicitation designs; (ii) hard-garbling designs that exogenously distort survey responses improve information transmission; and (iii) unbiased estimates of the impact of survey design on information transmission can be obtained in equilibrium. Laboratory experiments qualify these predictions. While hard-garbling does improve information transmission over direct-elicitation, other predictions fail: randomized response performs much better than expected; and false accusations lead to a small but persistent bias in treatment effect estimates. We show that these deviations from equilibrium can be accounted for in an off-the-shelf model of boundedly rational play, and that this model of play makes specific predictions over the bias of treatment effect estimators. Additional experiments reveal that play converges to equilibrium if players can (socially) learn from cross-sectional data. These results suggest that randomized response cannot be used systematically in organizational settings, whereas hard garbling improves survey quality even under long-run equilibrium conditions.
    JEL: C72 C81 C92 D23 D73 D74 D82 D86
    Date: 2019–06
  16. By: Orazio Attanasio; Matthew Bird; Lina Cardona-Sosa; Pablo Lavado
    Abstract: Financial knowledge is critical for making sound decisions that foster financial health and protect consumers from predation. A widely-used tool for building this capability is financial education. Yet evidence suggests that conventional approaches which teach concepts in classroom-style settings are ineffective and expensive at scale, especially for lower-income users. More recent findings indicate that customizing financial education to the needs, interests, and location of participants may increase impact, though doing so in a cost-effective and scalable way remains challenging. This randomized evaluation of a tablet-based financial education program with mostly female recipients of a conditional cash transfer (CCT) program in Colombia offers evidence for how to design and scale an effective digital-based financial education program. Results indicate that the LISTA Initiative had significant positive impacts on financial knowledge, attitudes, practices, and performance, increasing for poorer, less educated, and more rural populations, with users exhibiting increased financial health over two years later. Critical mechanisms included well-designed content and a social learning component. Yet the longer-term impact on formal financial inclusion was limited, suggesting the possible benefits of combining supply-side solutions with financial education interventions.
    JEL: D14 D18 G21 I22 I38 O15
    Date: 2019–06
  17. By: McElvaney, Terry; Lunn, Pete; McGowan, Féidhlim
    Date: 2018
  18. By: Palermo Kuss, Ana Helena
    Abstract: Inspired by Fröhlich and Oppenheimer (1990), an experimental survey in the lab was designed to find out if preferences for three different redistribution schemes differ under a veil of ignorance. The three schemes are a stylized version of the status quo German welfare state (A), a control scheme without income taxation and redistribution (B) and one in which a flat tax-financed basic income is paid to all (C). Furthermore, the study investigates whether the introduction of a basic income induces a decrease in the time allocation to paid and unpaid work. The results point to no significant difference in allocated working hours between A and C. Concerning preferences, access to information on implications of schemes and self-interest played a central role in their definition.
    Keywords: lab experiment,basic income,welfare state,Germany,time allocation,constitutional economics,labor supply
    JEL: C91 I38 J22
    Date: 2019
  19. By: Antoine Billot (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités); Jean-Marc Tallon (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Sujoy Mukerji (QMUL - Queen Mary University of London)
    Abstract: We review some of the (theoretical) economic implications of David Schmeidler's models of decision under uncertainty (Choquet expected utility and maxmin expected utility) in competitive market settings. We start with the portfolio inertia result of Dow and Werlang (1992), show how it does or does not generalize in an equilibrium setting. We further explore the equilibrium implications (indeterminacies, non revelation of information) of these decision models. A section is then devoted to the studies of Pareto optimal arrangements under these models. We conclude with a discussion of experimental evidence for these models that relate, in particular, to the implications for market behaviour discussed in the preceding sections.
    Keywords: Choquet Expected Utility,Maxmin Expected Utility,No-trade,Risk Sharing,Indeterminacy,Experimental evidence
    Date: 2019–07
  20. By: J. Aislinn Bohren; Kareem Haggag; Alex Imas; Devin G. Pope
    Abstract: Discrimination has been widely studied in economics and other disciplines. In addition to identifying evidence of discrimination, economists often categorize the source of discrimination as either taste-based or statistical. Categorizing discrimination in this way can be valuable for policy design and welfare analysis. We argue that a further categorization is important and needed. Specifically, in many situations economic agents may have inaccurate beliefs about the expected productivity or performance of a social group. This motivates our proposed distinction between accurate (based on correct beliefs) and inaccurate (based on incorrect beliefs) statistical discrimination. We do a thorough review of the discrimination literature and argue that this distinction is rarely discussed. Using an online experiment, we illustrate how to identify accurate versus inaccurate statistical discrimination. We show that ignoring this distinction – as is often the case in the discrimination literature – can lead to erroneous interpretations of the motives and implications of discriminatory behavior. In particular, when not explicitly accounted for, inaccurate statistical discrimination can be mistaken for taste-based discrimination, accurate statistical discrimination, or a combination of the two.
    JEL: D90 J71
    Date: 2019–06
  21. By: Sausgruber, Rupert; Sonntag, Axel; Tyran, Jean-Robert
    Abstract: We experimentally study the disincentive effect of taxing work and redistributing tax revenues when redistribution is imposed vs. democratically chosen in a vote. We find a "dividend of democracy" in the sense that the disincentive effect is substantially smaller when redistribution is chosen in a vote than when it is imposed. Redistribution seems to be more legitimate, and hence less demotivating, when accepted in a vote.
    Keywords: disincentive effect; Lab Experiment; Legitimacy; Real effort task; redistribution; voting
    JEL: C92 D31 D72 H23
    Date: 2019–06
  22. By: Munoz-Herrera, Manuel (New York University, Abu Dhabi); Reuben, Ernesto (New York University, Abu Dhabi)
    Abstract: In this paper, we study the effects of business culture on market efficiency. We exogenously vary the type of business culture between business-is-business cultures, which consist on impersonal relationships where financial matters are paramount, and business-is-family cultures, which comprise of cohesive personal relationships where financial matters and personal attachments are intertwined. We use a laboratory experiment to assess the effect of business cultures in environments with different degrees of contract enforceability and competition. Our main results indicate that business-is-family cultures are more effective when contracts are unverifiable because they help market participants overcome problems of trust. On the other hand, we find that business-is-business cultures are more effective in competitive settings because they facilitate the severance of ties with unproductive partners.
    Keywords: trust, contracts, competition, business culture, communication, social ties
    JEL: D91 L22 M14
    Date: 2019–06
  23. By: John List
    Abstract: A summary of artefactual field experiments on
    Date: 2019
  24. By: Bhattacharya, Puja; Rampal, Jeevant
    Abstract: This paper examines behavior (the oretically and experimentally) in a two-stage group contest where the fi rst stage comprises of intra - group contests, followed by an inter-group contest in the second stage. Rewards accrue only to the members of the winning group in the inter-group contest, with the winners of the intra-group contest within that group receiving a greater reward. The model generates a discouragement effect, where losers from the first stage exert less effort in the second stage than winners. In contrast to previous frameworks of sequential contests, we show that a prior win may be disadvantageous, generating lower profits for first stage winners as compared to losers. We also consider asymmetry between groups arising from a biased contest success function in the second stage. We show that although the asymmetry occurs in the second stage, the effect of the asymmetry plays out in the first stage, with the intra-group contest being more intense within the advantaged group. Experimental results find broad support for the qualitative predictions of the model. However, we find that relative overcontribution in the second stage by losers is higher than by winners of the first stage, implying that losers bear a higher burden of the group contribution than deemed strategic.
    Keywords: Contests,Group Behavior,Collective Action,Asymmetry
    JEL: C72 C92 D72
    Date: 2019
  25. By: González-Ocantos, Ezequiel; de Jonge, Chad Kiewiet; Meseguer, Covadonga
    Abstract: How does the presence of a large group of remittance recipients in the electorate affect the way political parties in Latin America plan their vote-buying operations during electoral campaigns? Existing research claims that remittances bolster the political autonomy of recipients, allowing them to escape clientelistic networks and making them less attractive targets from the point of view of party machines. Although in the long run remittances may undermine the effectiveness of clientelistic inducements, parties still have strong incentives to distribute gifts and favors among these voters. Cross-national survey evidence and an original list experiment fielded in the aftermath of El Salvador’s 2014 presidential race support the view that remittances alter key attitudes and patterns of political behavior among recipients in ways that are relevant for the electoral strategies of party machines. In particular, remittance recipients are appealing targets for clientelistic exchanges due to the uncertainty of their turnout propensity and their distributive preferences.
    JEL: F3 G3
    Date: 2018–12–20
  26. By: Sanna Laksá (University of Liverpool); Daniel Marszalec (Faculty of Economics, The University of Tokyo); Alexander Teytelboym (Department of Economics, St Catherine’s College, and the Institute for New Economic Thinking at the Oxford Martin School, University of Oxford)
    Abstract: Ascending (or second-price) and uniform-price multiunit auctions have appealing theoretical properties if bidders are symmetric and bid competitively. However, auction designers have long been skeptical about their use in practice. First, asymmetries due to value advantage in ascending (or second-price) auctions with a large common-value component can generate asymmetric equilibria with low revenues. Second, both ascending and uniform auctions are susceptible to collusion. Sequential ascending auctions make it especially easy to form and coordinate bidding rings. Third, uniform auctions are susceptible to low-price equilibria in which bidders can commit to coordinate on high bids for initial units and low bids for final, price-setting units in equilibrium what we call crank-handle bidding. All three of these patterns have been observed separately in certain settings among sophisticated and experienced bidders. We document what we believe is the first case of all three of these phenomena happening among the same, inexperienced bidders across related auctions for shing quota in Faroe Islands. Our findings indiciate that the under performance of ascending and uniform-price auctions are not just theoretical curiosities, but a pervasive phenomenon in practical auction design. We suggest straightforward improvements to auction design that could have mitigated these problems.
    Date: 2018–10
  27. By: Cabrales, Antonio; Kendall, Ryan; Sánchez, Angel
    Abstract: We consider a situation where driverless cars operate on the same roads as human-driven cars. What policies effectively discourage unsafe (fast) drivers in this mixed-agency environment? We develop a game theoretic model where driverless cars are the slowest and safest choice whereas faster driving speeds lead to higher potential payoffs but higher probabilities of accidents. Faster speeds also have a negative externality on the population. The model is used to create four experimental policy conditions. We findt hat the most effective policy is a mechanism where the level of punishment (to fast drivers) is determined endogenously within the driving population.
    JEL: C90 D62 D63
    Date: 2019–06
  28. By: Grenet, Julien; He, Yinghua; Kübler, Dorothea
    Abstract: The matching literature commonly rules out that market design itself shapes agent preferences. Underlying this premise is the assumption that agents know their own preferences at the outset and that preferences do not change throughout the matching process. Under this assumption, a centralized matching market can often outperform a decentralized one. Using a quasi-experiment in Germany's university admissions, we provide evidence against this assumption. We study a centralized clearinghouse that implements the early stages of the university-proposing Gale-Shapley deferred-acceptance mechanism in real time, resembling a decentralized market with continuous offers, rejections, and acceptances. With data on the exact timing of every decision, we show that early offers are more likely to be accepted than (potential) later offers, despite early offers not being made by more desirable universities. Furthermore, early offers are only accepted after some time rather than immediately. These results and direct survey evidence are consistent with a model of information acquisition: it is costly for students to learn about universities and accepting a university that turns out to be inferior causes regret. We discuss and rule out some alternative hypotheses. Our findings motivate a hybrid mechanism that balances centralization and decentralization. By allowing sequential learning, it improves welfare, especially in markets with substantial learning costs.
    Keywords: Centralized Matching Market,Gale-Shapley Deferred Acceptance Mechanism,University Admissions,Early Offers,Information Acquisition
    JEL: C78 I23 D81 D83
    Date: 2019
  29. By: Tanjim Hossain (University of Toronto); Elizabeth Lyons (University of California, San Diego); Aloysius Siow (University of Toronto)
    Abstract: Using a series of laboratory experiments, this paper shows that fairness concerns of potential co- founders may lead to failure to undertake profitable joint production opportunities. Inefficiency occurs more often when equal division of the firm’s profit would leave one co-founder worse- off relative to her outside option. We find that framing an opportunity as an employment relationship rather than a partnership significantly reduces these inefficiencies and increases subjects’ welfare. Evidence from division of profits and communication logs from free-form negotiations between subjects suggest that only some subjects incorporate outside options to define fairness. Based on this, we provide a theoretical model of how fairness concerns affect the formation of new firms.
    Keywords: Organizational Design, Firm Formation, Fairness Concerns, Cooperative Bargaining
    JEL: C92 D91 L14 D83
  30. By: Jack Stevens; Dana Rotz; Brian Goesling
    Abstract: The current study investigated the risk of reporting bias that may result from using such surveys to measure outcomes in randomized controlled trials (RCTs).
    Keywords: Adolescent, Pregnancy, Survey, Birth certificate, Underreporting, Bias, Randomized trial
    JEL: I
  31. By: Adrian Bruhin; Maha Manai; Luis Santos-Pinto
    Abstract: The existing literature on choice under risk suggests that probability weighting and choice set dependence both influence risky choices. However, they have not been tested jointly. We design an incentivized laboratory experiment to assess the relative importance of probability weighting and choice set dependence both non-parametrically and with a structural model. Our design uses binary choices between lotteries that may trigger Allais Paradoxes. To reliably discriminate between probability weighting and choice set dependence, we manipulate the lotteries’ correlation structure while keeping their marginal distributions constant. The non-parametric analysis reveals that probability weighting and choice set dependence jointly play a role in describing aggregate choices. To take potential heterogeneity into account parsimoniously, we estimate a structural model based on a finite mixture approach. The model classifies subjects into three distinct types: a Cumulative Prospect Theory (CPT) type whose choices are primarily driven by probability weighting, a Salience Theory (ST) type whose choices are predominantly driven by choice set dependence, and an Expected Utility Theory (EUT) type. The structural model uncovers substantial heterogeneity in risk preferences: 38% of subjects are CPT-types, 34% are ST-types, and 28% are EUT-types. This classification of subjects into types also predicts preference reversals out-of-sample. Overall, these results show that probability weighting and choice set dependence play a similarly important role in describing risky choices. Beyond the domain of choice under risk, they may also help to improve our understanding of consumer, investor, and judicial choices.
    Keywords: Choice under Risk, Choice Set Dependence, ProbabilityWeighting, Salience Theory, Preference Reversals
    JEL: D81 C91 C49
    Date: 2019–06
  32. By: Bernhardt, Dan (University of Illinois & University of Warwick); Liu, Tingjun (The University of Hong Kong); Sogo, Takeharu (Osaka University of Economics)
    Abstract: We analyze optimal auction mechanisms when bidders base costly entry decisions on their valuations, and bidders pay with a fixed royalty rate plus cash. With sufficient valuation uncertainty relative to entry costs, the optimal mechanism features asymmetry so that bidders enter with strictly positive but different (ex-ante) probabilities. When bidders are ex-ante identical, higher royalty rates—which tie payments more closely to bidder valuations—increase the optimal degree of asymmetry in auction design, further raising revenues. When bidders differ ex-ante in entry costs, the seller favors the low cost entrant ; whereas when bidders have different valuation distributions, the seller favors the weaker bidder if entry costs are low, but not if they are high. Higher royalty rates cause the seller to favor the weaker bidder by less, and the strong bidder by more.
    Keywords: Auctions with participation costs : Royalty payments ; Optimal auctions ; Asymmetric auctions ; Heterogeneous bidders
    JEL: D44 G3
    Date: 2019
  33. By: Emanuele Borgonovo; Stefano Caselli; Alessandra Cillo; Donato Masciandaro; Giovanno Rabitti
    Abstract: The aim of this paper is to analyze the demand of both traditional and new media of exchange – as cryptocurrencies and central bank digital currencies – proposing a novel specification of the demand for money. In this specification, the medium of payment (MOP) has three properties: the first two are the MOP’s standard functions as a medium of exchange and as a store of value, while the third is a novel function as a store of privacy (anonymity value). The proposed framework is tested using a laboratory experiment. Our results show that anonymity matters, but less of the other two properties; at the same time, the presence of anonymity increases the overall appeal of a MOP, particularly if the individuals are risk prone; given anonymity, the sacrifice ratio between liquidity risk and opportunity cost are relatively high.
    Keywords: Money, Cryptocurrencies, Central bank Digital Currency, Cash, Baumol, Friedman, Experimental economics
    JEL: B22 D72 E41 E42 E52 E58 G38 K42
    Date: 2018
  34. By: Amy J. Pickering; Sammy M. Njenga; Lauren Steinbaum; Jenna Swarthout; Audrie Lin; Benjamin F. Arnold; Christine P. Stewart; Holly N. Dentz; MaryAnne Mureithi; Benard Chieng; Marlene Wolfe; Ryan Mahoney; Jimmy Kihara; Kendra Byrd; Gouthami Rao; Theodora Meerkerk; Priscah Cheruiyot; Marina Papaiakovou; Nils Pilotte; Steven A. Williams; John M. Colford; Jr.; Clair Null
    Abstract: Helminth and protozoan infections affect more than 1 billion children globally. Improving water quality, sanitation, handwashing, and nutrition could be more sustainable control strategies for parasite infections than mass drug administration, while providing other quality of life benefits.
    Keywords: Sanitation, Kenya, infections
    JEL: F Z
  35. By: Daniel J. Benjamin (University of Southern California and NBER); Don A. Moore (University of California at Berkeley); Matthew Rabin (Harvard University)
    Abstract: We report two incentivized experiments on four errors in reasoning about random samples: the Law of Small Numbers, Non-Belief in the Law of Large Numbers, exact representativeness, and “bin effects.” We control for a variety of confounds that constrain prior work, test predictions of existing models, and assess the magnitudes of the biases. By asking each participant many different questions about the same data, we disentangle the biases from possible rational alternative interpretations. We find that no coherent model could jointly rationalize people’s beliefs about random sequences with their beliefs about distributions of outcomes.
    Keywords: Law of Small Numbers, Gambler’s Fallacy, Non-Belief in the Law of Large Numbers, Big Data, Support Theory
    JEL: B49

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