nep-exp New Economics Papers
on Experimental Economics
Issue of 2019‒11‒11
twenty-two papers chosen by
Daniel Houser
George Mason University

  1. Decision Making under Uncertainty: An Experimental Study in Market Settings By Federico Echenique; Taisuke Imai; Kota Saito
  2. Does job search assistance reduce unemployment? Experimental evidence on displacement effects and mechanisms. By Cheung, Maria; Egebark, Johan; Forslund, Anders; Laun, Lisa; Rödin, Magnus; Vikström, Johan
  3. The Effects of Financial Aid Grant Offers on Postsecondary Educational Outcomes: New Experimental Evidence from the Fund for Wisconsin Scholars By Deven E. Carlson; Felix Elwert; Nicholas Hillman; Alex Schmidt; Barbara L. Wolfe
  4. A two-dimensional propensity score matching method for longitudinal quasi-experimental studies: A focus on travel behavior and the built environment By Haotian Zhong; Wei Li; Marlon G. Boarnet
  5. Informing employees in small and medium sized firms about training: results of a randomized field experiment By van den Berg, Gerard J.; Dauth, Christine; Homrighausen, Pia; Stephan, Gesine
  6. Attacking the weak or the strong? An experiment on the targets of parochial altruism By Varaine, S.; Benslimane, I.; Magni-Berton, R.; Crosetto, P.
  7. An experimental study of partnership formation in social networks By Francis Bloch; Bhaskar Dutta; Stéphane Robin; Min Zhu
  8. Breaking Up: Experimental Insights into Economic (Dis)Integration By Gabriele Camera; Lukas Hohl; Rolf Weder
  9. Persuasion Bias in Science: An Experiment on Strategic Sample Selection By Arianna Degan; Ming Li; Huan Xie
  10. Towards an Experimental Framework for Assessing Meta-Analysis Methods, with a Focus on Andrews-Kasy Estimators By Sanghyun Hong; W. Robert Reed
  11. How to increase the uptake of development interventions? Considering the Theory of Planned Behaviour By Kaplan, Lennart; Kuhnt, Jana; Richert, Katharina; Vollmer, Sebastian
  12. Endogenous Leverage and Default in the Laboratory By Cipriani, Marco; Fostel, Ana; Houser, Daniel
  13. Associative Memory and Belief Formation By Benjamin Enke; Frederik Schwerter; Florian Zimmermann
  14. Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment By Marcelo Bergolo; Rodrigo Ceni; Guillermo Cruces; Matias Giaccobasso; Ricardo Perez Truglia
  15. Choice via Social Influence By Abhinash Borah; Christopher Kops
  16. "Fighting Against Learning Crisis in Developing Countries: A Randomized Experiment of Self-Learning at the Right Level" By Masafumi Nakano; Akihiko Takahashi
  17. Visualizing Energy Efficiency: A Randomized Controlled Intervention By Maya Papineau; Nicholas Rivers
  18. Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine! By Hernán Bejarano; Brice Corgnet; Joaquín Gómez-Miñambres
  19. Does Affirmative Action in Politics Hinder Performance? Evidence from India By Sabyasachi Das; Abhiroop Mukhopadhyay; Rajas Saroy
  20. Assessing External Validity By Hao Bo; Sebastian Galiani
  21. Dominantly Truthful Multi-task Peer Prediction with a Constant Number of Tasks By Yuqing Kong
  22. The cancellation effect at the group level By Aslihan Akdeniz; Matthijs van Veelen

  1. By: Federico Echenique; Taisuke Imai; Kota Saito
    Abstract: We design and implement a novel experimental test of subjective expected utility theory and its generalizations. Our experiments are implemented in the laboratory with a student population, and pushed out through a large-scale panel to a general sample of the US population. We find that a majority of subjects' choices are consistent with maximization of {\em some} utility function, but not with subjective utility theory. The theory is tested by gauging how subjects respond to price changes. A majority of subjects respond to price changes in the direction predicted by the theory, but not to a degree that makes them fully consistent with subjective expected utility. Surprisingly, maxmin expected utility adds no explanatory power to subjective expected utility. Our findings remain the same regardless of whether we look at laboratory data or the panel survey, even though the two subject populations are very different. The degree of violations of subjective expected utility theory is not affected by age nor cognitive ability, but it is correlated with financial literacy.
    Date: 2019–11
  2. By: Cheung, Maria; Egebark, Johan (Swedish Public Employment Service); Forslund, Anders (IFAU - Institute for Evaluation of Labour Market and Education Policy); Laun, Lisa (IFAU - Institute for Evaluation of Labour Market and Education Policy); Rödin, Magnus (; Vikström, Johan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: This paper uses a large-scale two-level randomized experiment to study direct and displacement effects of job search assistance. Our findings show that the assistance reduces unemployment among the treated, but also creates substantial displacement leading to higher unemployment for the non-treated. By using detailed information on caseworker and job seeker behavior we show that vacancy referrals passed on from caseworkers to job seekers is the driving mechanism behind the positive direct effect. We also examine explanations for the displacement effect and show that displacement is not due to constrained resources, but arises in the labor market. A comparison between different meeting formats suggests that face-to-face meetings and distance meetings are more effective than group meetings. Despite the existence of displacement effects, when we incorporate our results into an equilibrium search model we find that a complete roll-out of the program would lead to lower unemployment and slightly reduced government spending.
    Keywords: vacancy referrals; counseling; job search; randomized experiment
    JEL: C93 J64 J68
    Date: 2019–11–05
  3. By: Deven E. Carlson; Felix Elwert; Nicholas Hillman; Alex Schmidt; Barbara L. Wolfe
    Abstract: In this pre-registered study, we analyze the effects of need-based financial aid grant offers on the educational outcomes of low-income college students based on a large-scale randomized experiment (n=48,804). We find evidence that the grant offers increase two-year persistence by 1.7 percentage points among four-year college students. The estimated effect on six-year bachelor’s degree completion is of similar size—1.5 percentage points—but is not statistically significant. Among two-year students, we find positive—but not statistically significant—effects on persistence and bachelor’s degree completion (1.2 and 0.5 percentage points, respectively). We find little evidence that effects vary by cohort, race, gender or the prior receipt of food stamps. However, further exploratory results do suggest that the offers reduce associate’s degree completion rates for two-year community college students by around 3 percentage points, with no statistically significant evidence of effects on technical college students. We also estimate that the effects of actually receiving grant money are very similar, though slightly greater than the effects of merely receiving a grant offer. Overall, our results show only very small effects of the need-based grant offers on college students’ trajectories towards degree completion.
    JEL: I20 I24
    Date: 2019–11
  4. By: Haotian Zhong; Wei Li; Marlon G. Boarnet
    Abstract: The lack of longitudinal studies of the relationship between the built environment and travel behavior has been widely discussed in the literature. This paper discusses how standard propensity score matching estimators can be extended to enable such studies by pairing observations across two dimensions: longitudinal and cross-sectional. Researchers mimic randomized controlled trials (RCTs) and match observations in both dimensions, to find synthetic control groups that are similar to the treatment group and to match subjects synthetically across before-treatment and after-treatment time periods. We call this a two-dimensional propensity score matching (2DPSM). This method demonstrates superior performance for estimating treatment effects based on Monte Carlo evidence. A near-term opportunity for such matching is identifying the impact of transportation infrastructure on travel behavior.
    Date: 2019–11
  5. By: van den Berg, Gerard J.; Dauth, Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Homrighausen, Pia (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Stephan, Gesine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We analyze a labor market program that subsidizes skill-upgrading occupational training for workers employed in small and medium sized enterprises. The program covers a substantial share of training costs. Nonetheless, take-up has been low. In an experimental setup, we mailed 10,000 brochures to potentially eligible workers, informing them about the importance of skill-upgrading occupational training in general and about the subsidy program in particular. Using combined survey and register data, we analyze the impact of receiving the brochure on workers' knowledge of the program, on take-up of subsidized and unsubsidized training, and on job characteristics. The survey data reveal that the brochure more than doubled workers' awareness of the program. We do not find effects on program take-up or short-run labor market outcomes in the register data. However, the information treatment positively affected participation in other (unsubsidized) training among employees under 45 years." (Author's abstract, IAB-Doku) ((en))
    Keywords: Klein- und Mittelbetrieb, Weiterbildungsförderung, Subvention, arbeitsmarktpolitische Maßnahme, Projekt WeGebAU, Informationsangebot - Auswirkungen, Weiterbildungsbeteiligung, Beschäftigungseffekte, Niedrigqualifizierte, ältere Arbeitnehmer, IAB-Betriebspanel, Integrierte Erwerbsbiografien
    JEL: J24 J65
  6. By: Varaine, S.; Benslimane, I.; Magni-Berton, R.; Crosetto, P.
    Abstract: Studies on parochial altruism have insofar focused on the causes leading individuals to attack any out-group on the behalf of one’s group. Yet, we have no clue to understand why parochial altruists target specific groups, such as big firms in some contexts and refugees in other contexts. The present paper introduces an experiment to analyse the conditions under which individuals costly attack strong versus weak out-groups. In our study, 300 participants played a repeated Inter-group Prisonner Dilemma (IPD) involving multiple groups and inter-group differences in resources. The results show that individuals have a basic preference for targeting strong out-groups, but that attacks decrease when the inequality in destructive capacity between groups is high. Besides, individuals target weak out-groups when they are threatening their in-group status. Decisions in the game correlate with participants’ political ideology and social dominance orientation. Overall, the results give clues to understand historical variations in the targets of political violence.
    JEL: C92 D74 H41
    Date: 2019
  7. By: Francis Bloch (Université Paris 1 and Paris School of Economics); Bhaskar Dutta (University of Warwick and Ashoka University); Stéphane Robin (Université de Lyon); Min Zhu (Beijing Normal University)
    Abstract: This paper reports on laboratory experiments on the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership where they commit to provide the favor when requested. The formation of a partnership is modeled as a sequential game, which admits a unique subgame perfect equilibrium resulting in the formation of the maximum number of partnerships. Experimental results show that a large fraction of the subjects (75%) play according to their subgame perfect equilibrium strategy and reveals that the efficient maximum matching is formed over 78% of the times. When subjects deviate from their best responses, they accept to form partnerships too early. The incentive to accept when it is optimal to reject is positively correlated with subjects’ risk aversion, and players employ simple heuristics – like the presence of a captive partner – to decide whether they should accept or reject the formation of a partnership.
    Keywords: social networks, partnerships, matchings in networks, non-stationary networks, laboratory experiments
    Date: 2018–08
  8. By: Gabriele Camera (Economic Science Institute, Chapman University and University of Bologna); Lukas Hohl (University of Basel); Rolf Weder (University of Basel)
    Abstract: Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration in?uence outcomes and individuals’ inclination to embrace integration. We ?nd that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores.
    Keywords: Endogenous institutions; Globalization; Indefinitely repeated games; Social dilemmas
    JEL: C70 C90 F02
    Date: 2019
  9. By: Arianna Degan; Ming Li; Huan Xie
    Abstract: We experimentally test a game theoretical model of researcher-evaluator interaction à la Di Tillio, Ottaviani, and Sørensen (2017a). Researcher may strategically manipulate sample selection using his private information in order to achieve favourable research outcomes and thereby obtain approval from Evaluator. Our experimental results confirm the theoretical predictions for Researcher’s behaviour but find significant deviations from them about Evaluator’s behaviour. However, comparative statics are mostly consistent with the theoretical predictions. In the welfare analysis, we find that Researcher always benefits from the possibility of manipulation, in contrast to the theoretical prediction that he sometimes is hurt by it. Consistent with theoretical predictions, Evaluator benefits from the possibility of Researcher’s manipulation when she leans towards approval or is approximately neutral but is hurt by that possibility when she leans against approval.
    Keywords: Persuasion Bias,Research Conduct,Manipulation,Sample Selection,Randomized Controlled Trials,
    JEL: C72 C92 D83
    Date: 2019–10–28
  10. By: Sanghyun Hong; W. Robert Reed (University of Canterbury)
    Abstract: The study contributes towards the development of a systematic experimental framework for evaluating meta-analysis methods. Towards that goal, we reproduce the Monte Carlo experiments from three studies: Stanley & Doucouliagos (2017); Stanley, Doucouliagos, & Ioannidis (2017); and Alinaghi & Reed (2018) – S&D, SD&I, and A&R, respectively. We demonstrate that the relative performance of estimators depends on whether the researcher is concerned with unbiasedness, mean squared error (MSE), or coverage rates. We also show how estimator performance varies systematically with the number of estimates in the meta-analyst’s sample and the degree of effect heterogeneity as measured by I2. This demonstrates the possibility that researchers can select a “best estimator” based on the observable characteristics of their meta-analysis samples. We further show that the design of simulation experiments makes a difference: Different simulation designs by S&D and SD&I applied to the same “types” of meta-analysis samples select different “best” estimators. Different designs in A&R also produce different results. This highlights the need to know more about which aspects of simulation designs are important for estimator performance. Finally, our results indicate that the recent Andrews & Kasy (2019) estimators perform well in a number of research environments, frequently outperforming the popular PET-PEESE and WAAP estimators, though more research is needed.
    Keywords: Meta-analysis, Estimator performance, Publication bias, Simulation design, WAAP, PET-PEESE, Andrews-Kasy, Monte Carlo, Experiments
    JEL: B41 C15 C18
    Date: 2019–10–01
  11. By: Kaplan, Lennart; Kuhnt, Jana; Richert, Katharina; Vollmer, Sebastian
    Abstract: A crucial prerequisite for the success of development interventions is their uptake by the targeted population. We use the set-up of interventions conducted in Indonesia and Pakistan to investigate dis-/incentivising factors for a programme's uptake and support. Making use of a framework grounded on psychological theory - The Theory of Planned Behaviour - we consider three determinants for intervention uptake: personal attitudes; subjective norms (influenced by important others); and the perceived ease of performing the desired behaviour. As most development interventions are characterised by a cooperation between local and international agents, we investigate a potentially important dis-/incentivising factor further: the salience of the implementer's background. Our findings show that attitudes, subjective norms, and ease of use are indeed associated with increased uptake in our two culturally different settings. Conducting a framed field experiment in Indonesia, we go on to show that the study population in the Acehnese context exhibits higher levels of support for the project if the participation of international actors is highlighted. We find that previous experience with the respective actor is pivotal. To strengthen supportive behaviour by the target population for locally led projects, it is essential to foster local capabilities to create positive experiences. Hence, our results encourage development research and cooperation, first, to consider personal attitudes, subjective norms, and the perceived ease of use in the design of interventions in order to increase uptake. Second, and depending on the country context, implementers should consider previous experience with and attitude towards partners - either local or international - when aiming to achieve behavioural change.
    Keywords: Theory of Planned Behaviour,Framed Field Experiment,Implementation Research,Public Health
    Date: 2019
  12. By: Cipriani, Marco (Federal Reserve Bank of New York); Fostel, Ana (University of Virginia); Houser, Daniel (George Mason University)
    Abstract: We study default and endogenous leverage in the laboratory. To this purpose, we develop a general equilibrium model of collateralized borrowing amenable to laboratory implementation and gather experimental data. In the model, leverage is endogenous: agents choose how much to borrow using a risky asset as collateral, and there are no ad hoc collateral constraints. When the risky asset is financial—namely, its payoff does not depend on ownership (such as a bond)— collateral requirements are high and there is no default. In contrast, when the risky asset is nonfinancial—namely, its payoff depends on ownership (such as a firm)—collateral requirements are lower and default occurs. The experimental outcomes are in line with the theory's main predictions. The type of collateral, whether financial or not, matters. Default rates and loss from default are higher when the risky asset is nonfinancial, stemming from laxer collateral requirements. Default rates and collateral requirements move closer to the theoretical predictions as the experiment progresses.
    Keywords: collateral; default; double auction; experimental economics; leverage
    JEL: A10 C90 G12
    Date: 2019–11–01
  13. By: Benjamin Enke; Frederik Schwerter; Florian Zimmermann
    Abstract: This paper experimentally studies the role of associative memory for belief formation. Real-world information signals are often embedded in memorable contexts. Thus, today’s news, and the contexts they are embedded in, may cue the selective retrieval of similar past news and hence contribute to the widely documented pattern of expectation overreaction. Based on a stylized version of models of associative memory in the literature, we develop a simple and tightly controlled experimental setup in which participants observe sequences of news about the stock market value of hypothetical companies. Here, identical types of news are associated with identical stories and images. In this setup, participants’ expectations strongly overreact to recent news. We successfully verify the model’s predictions about how the magnitude of overreaction should depend on the history of news. For example, once today’s news are associated with the stories and images of previous opposite news, expectations systematically underreact. By exogenously manipulating the scope for imperfect and associative recall in our setup, we further provide direct causal evidence for the role of memory in belief formation and overreaction. Finally, we use our experimental data to estimate the model parameters that govern the strength of imperfect and associative recall over different time horizons.
    Keywords: beliefs, expectations, memory, bounded rationality
    JEL: D01
    Date: 2019
  14. By: Marcelo Bergolo (IECON-UDELAR); Rodrigo Ceni (IECON-UDELAR); Guillermo Cruces (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS), IIE-FCE, Universidad Nacional de La Plata and University of Nottingham); Matias Giaccobasso (University of California, Los Angeles); Ricardo Perez Truglia (University of California, Los Angeles)
    Abstract: The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.
    JEL: C93 H26 K34 K42 Z13
    Date: 2019–11
  15. By: Abhinash Borah (Department of Economics, Ashoka University); Christopher Kops (Heidelberg University)
    Abstract: We introduce a theory of socially influenced individual choices. The source of social influence on an individual are his reference groups in society, formed of societal members he psychologically or contextually relates to. Choices made within an individual’s reference groups have an influence on the choices he makes. Speciï¬ cally, we propose a choice procedure under which, in any choice problem, he considers only those alternatives that he can identify with at least one of his reference groups. From this “consideration set,†he chooses the best alternative according to his preferences. The procedure is an interactive one and captures the steady state of a process of mutual social influence. We behaviorally characterize this choice procedure. We also highlight the empirical content of the procedure by relating it to both experimental evidence and real world applications.
    Keywords: Individual choice, social influence, reference groups, consideration sets, interactive behavioral choices
    Date: 2018–12
  16. By: Masafumi Nakano (Graduate School of Economics, The University of Tokyo); Akihiko Takahashi (Faculty of Economics, The University of Tokyo)
    Abstract: This paper proposes a novel approach to the portfolio management using an AutoEncoder. In particular, the features learned by an AutoEncoder with ReLU are directly exploited to the portfolio construction. Since the AutoEncoder extracts the characteristics of the data through the non-linear activation function ReLU, its realization is generally difficult due to the non-linear transformation procedure. In the current paper, we solve this problem by taking full advantage of the similarity of the ReLU and the option payoff. Especially, this paper shows that the features are successfully replicated by applying so-called the dynamic delta hedging strategy. An out of sample simulation with crypto currency dataset shows the effectiveness of our proposed strategy. Furthermore, we investigate the background of our proposed methodology, which suggests that the rst principal component is quite important.
    Date: 2019–10
  17. By: Maya Papineau (Department of Economics, Carleton University); Nicholas Rivers (Graduate School of Public and International Affairs, University of Ottawa)
    Abstract: We test the energy consumption impact of providing visual information on residential home heat loss with a social norm that informs households of their heat loss rate relative to their neighbours, and compare this to the impact of a traditional home energy report. Heat loss is visualized using infrared images taken from above approximately 14,000 households using a thermal image sensor mounted on a small aircraft during the winter heating season. Infrared images showing roof heat loss were provided to approximately 4,500 randomly selected households in on-bill messaging. A similarly-sized randomly selected group received bill messaging with a ’traditional’ social norm comparing their consumption to similar homes. Both treatment groups were also shown a personalized estimate of the annual savings from reducing their consumption. Electricity and natural gas consumption are compared between treatment and control households during heating season over a one year period following the beginning of the intervention. After controlling for the estimated annual savings customers could achieve, natural gas consumption in the heat loss treatment falls by more than double the reduction in the traditional social norm, relative to control households. We conclude that home heat loss imaging and framing consumption in terms ofheat loss hold promise in increasing the savings achieved from home energy reports.
    Keywords: Energy efficiency, nudge
  18. By: Hernán Bejarano (CIDE, Department of Economics); Brice Corgnet (Emlyon Business School); Joaquín Gómez-Miñambres (Lafayette College, Department of Economics and Economic Science Institute, Chapman University)
    Abstract: We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the giftexchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions are unstable.
    Keywords: Gift-exchange; Incentives; Self-serving Biases; Reference-dependent Utility; Laboratory Experiments; Labor Conflicts
    JEL: C92 D23 M54
    Date: 2019
  19. By: Sabyasachi Das (Department of Economics, Ashoka University); Abhiroop Mukhopadhyay (Indian Statistical Institute, Delhi); Rajas Saroy (Indian Statistical Institute, Delhi)
    Abstract: We examine how performance of elected representatives, as measured by delivery of public goods, is affected by affirmative action in elections, i.e., imposing quota in elections for one population group. We show both theoretically and empirically, using randomized electoral quotas for a caste group (OBCs) in India, that when group identities are salient and group sizes are asymmetric, affirmative action may in fact increase electoral competition and consequently, improve leader’s performance. The result challenges the notion that equity promotion must necessarily come at the cost of “efficiency.†It further justiï¬ es the electoral quota policy in India of targeting the jurisdictions where the group is numerous
    Keywords: Electoral competition, Reservation, Public goods, Gram Panchayat
    Date: 2018–08
  20. By: Hao Bo; Sebastian Galiani
    Abstract: In designing any causal study, steps must be taken to address both internal and external threats to its validity. Researchers tend to focus primarily on dealing with threats to internal validity. However, once they have conducted an internally valid analysis, that analysis yields an established set of findings for the specific case in question. As for the future usefulness of that result, however, what matters is its degree of external validity. In this paper we provide a formal, general exploration of the question of external validity and propose a simple and generally applicable method for evaluating the external validity of randomized controlled trials.
    JEL: C18 C52 C93
    Date: 2019–11
  21. By: Yuqing Kong
    Abstract: In the setting where participants are asked multiple similar possibly subjective multi-choice questions (e.g. Do you like Panda Express? Y/N; do you like Chick-fil-A? Y/N), a series of peer prediction mechanisms are designed to incentivize honest reports and some of them achieve dominantly truthfulness: truth-telling is a dominant strategy and strictly dominate other "non-permutation strategy" with some mild conditions. However, a major issue hinders the practical usage of those mechanisms: they require the participants to perform an infinite number of tasks. When the participants perform a finite number of tasks, these mechanisms only achieve approximated dominant truthfulness. The existence of a dominantly truthful multi-task peer prediction mechanism that only requires a finite number of tasks remains to be an open question that may have a negative result, even with full prior knowledge. This paper answers this open question by proposing a new mechanism, Determinant based Mutual Information Mechanism (DMI-Mechanism), that is dominantly truthful when the number of tasks is at least 2C and the number of participants is at least 2. C is the number of choices for each question (C=2 for binary-choice questions). In addition to incentivizing honest reports, DMI-Mechanism can also be transferred into an information evaluation rule that identifies high-quality information without verification when there are at least 3 participants. To the best of our knowledge, DMI-Mechanism is the first dominantly truthful mechanism that works for a finite number of tasks, not to say a small constant number of tasks.
    Date: 2019–11
  22. By: Aslihan Akdeniz (University of Amsterdam); Matthijs van Veelen (University of Amsterdam)
    Abstract: Group selection models combine selection pressure at the individual level with selection pressure at the group level (Sober and Wilson, 1998; Traulsen and Nowak, 2006; Wilson and Wilson, 2007; Boyd and Richerson, 2009; Simon, 2010; Simon et al., 2013; Luo, 2014; van Veelen et al., 2014; Luo and Mattingly, 2017). Cooperation can be costly for individuals, but beneficial for the group, and therefore, if individuals are sufficiently much assorted, and cooperators find themselves in groups with disproportionately many other cooperators, cooperation can evolve. The existing literature on group selection generally assumes that competition between groups takes place in a well-mixed population of groups, where any group competes with any other group equally intensely. Competition between groups however might very well occur locally; groups may compete more intensely with nearby than with far-away groups. We show that if competition between groups is indeed local, then the evolution of cooperation can be hindered significantly by the fact that groups with many cooperators will mostly compete against neighbouring groups that are also highly cooperative, and therefore harder to outcompete. The existing empirical method for determining how conducive a group structured population is to the evolution of cooperation also implicitly assumes global between group competition, and therefore gives (possibly very) biased estimates.
    Keywords: Group selection, cancellation effect
    JEL: C73
    Date: 2019–11–01

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