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on Experimental Economics |
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Issue of 2020‒01‒20
twenty-one papers chosen by |
| By: | Sebastian Butschek; Roberto González Amor; Patrick Kampkötter; Dirk Sliwka |
| Abstract: | We study the performance effects of payment schemes for freelancers offering services on an online platform in an RCT. Under the initial scheme, the firm pays workers a pure sales commission. The intervention reduces the commission rate and adds a fixed payment per processed order to insure workers against earnings risk. Our experiment tests predictions from a formal model on labor supply and performance for individuals with different degrees of risk aversion and intrinsic motivation for the task. The treatment did not affect labor supply and even though the commission rate was reduced by 50% we find no sizeable loss in sales per order. However, there is strong evidence for heterogeneous treatment effects. The treatment reduced performance for less intrinsically motivated workers. For more intrinsically motivated workers, however, we observe the opposite pattern as performance increased even though commission rates were reduced. |
| Keywords: | incentives, risk aversion, intrinsic motivation, sales compensation, multitasking, field experiment, gig economy, on demand economy, platform economy |
| JEL: | D23 J33 M52 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7983&r=all |
| By: | Tim Lohse; Salmai Qari |
| Abstract: | We study the role of face-to-face interaction for gender differences in deceptive behavior and perceived honesty. In the first part, we compare women’s to men’s deceptive behavior using data from an incentivized income reporting experiment in which lies can be detected in the course of an audit. Between the three treatments of that experiment, (i) the degree, and (ii) the impact of the face-to-face interaction vary from none (computerized baseline treatment) to a little (treatment in which face-to-face communication triggers psychological effects such as greater lying aversion) to much (treatment in which the perception by others also enters as a strategic effect determining the probability of detecting a lie). In the computerized baseline treatment men and women lie alike. Women’s truthfulness increases when psychological effects of face-to-face interaction come into play. In contrast, male deceptive behavior does not change until the strategic effect of perceived honesty matters and men’s truthfulness rises way beyond the level of women. To elaborate on these gender differences, in the second part, participants are asked to assess the honesty of videotaped statements from an experimental setting identical to the third treatment. We find that more men are assessed as rather dishonest. Men’s dishonest perception is independent of whether they are actually truthful or not and whether they are assessed by men or women. We conclude that men anticipate their low perceived honesty in a face-to-face setting and, therefore, deceive less compared to women. |
| Keywords: | gender differences, lying, face-to-face interaction, honesty assessment, perception, video analysis, laboratory experiment |
| JEL: | C91 D91 J16 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7995&r=all |
| By: | Kenju Kamei (Business School, Durham University, United Kingdom); Thomas Markussen (Department of Economics, University of Copenhagen, Denmark) |
| Abstract: | A novel laboratory experiment is used to show that mismatching between task preferences and task assignment undermines worker productivity and leads to free riding in teams. We elicit task preferences from all workers. Workers’ endogenous sorting into tasks significantly improves productivity under individual-based remuneration (performance pay). Under team-based remuneration (revenue sharing), free riding is significant, but almost exclusively among those working on undesired tasks. Task selection by majority voting in teams alleviates free riding, but only partly so, because some workers are still assigned to undesired tasks. Our findings have broad implications for research using real effort tasks. |
| Keywords: | free riding, team, workplace democracy, experiment, real effort |
| JEL: | C92 C91 H41 D82 J01 |
| Date: | 2020–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1914&r=all |
| By: | William Morrison; Bradley J. Ruffle |
| Abstract: | We design a series of laboratory experiments to investigate the effects of purchasing insurance and of pre-filled claim forms on dishonesty in loss reporting. In our experiment, participants report the outcome of privately rolling two dice where the numbers rolled map to a payoff distribution with the possibility of losses in earned income. Prior to this reporting task, participants bid for a limited number of insurance contracts which issue an indemnity payment equal to each insured individual’s reported loss. We find that dishonest reporting is significantly more prevalent among insured individuals relative to the uninsured, consistent with an ‘entitlement bias’. Further we find that prefilling the reporting form with the most probable outcome only modestly constrains dishonest reporting among both insured and uninsured individuals. We explore reasons why pre-filled forms should be applied with caution. |
| Keywords: | experimental economics; pre-filled forms; pre-populated fields; insurance; dishonesty; claim build-up |
| JEL: | C91 D82 G22 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2020-01&r=all |
| By: | Jonathan Oxley (Department of Economics, Florida State University) |
| Abstract: | This paper utilizes experimental methods to determine how religious affiliation of charities drives donor preference and giving. Subjects choose from one of eight charities, with each charity varying in religious affiliation. Masked and unmasked sessions differ in the knowledge of the religious affiliation of half the charities, with masked sessions omitting the religious affiliation of aforementioned charities. My results show that adding additional religious language decreases contributions on the extensive margin for all unmasked charities. Additionally, adding religious language decreases share of the donation distribution for Christian and Islamic charities, but increases share for secular charities. Subjects significantly prefer charity religious affiliation to match their own religious identity; however, strength of religiosity matters significantly more in this regard than religious affiliation of the donor. My results indicate that religiously affiliated charities have significant financial incentive to selectively display their affiliation. |
| Keywords: | Religious Affiliation, Charitable Giving, Laboratory Experiment |
| JEL: | C91 D20 L30 Z12 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2020_01_01&r=all |
| By: | Andrea Civelli; Cary Deck; Antonella Tutino |
| Abstract: | We present a model where rationally inattentive agents decide how much to save while imperfectly tracking interest rate changes. Suitable assumptions on agents’ preferences and interest rate distribution allow us to derive testable theoretical predictions and their implications for monetary policy. We probe these predictions using a laboratory experiment with induced inattention that closely reflects the theoretical assumptions. We find that, empirically, the laboratory data corroborates the results of the theoretical model. In particular, we show that experimental subjects respond to changes in the interest rate policy environment with: (1) a decrease in savings when the utility gain from savings does not compensate for the cognitive cost of tracking the interest rate; (2) more informed and deliberate consumption/investment choices when the monetary authority stabilizes the economy by lowering the volatility of the policy rate, implementing a version of Delphic forward guidance; (3) a slight decrease in information processing but no behavioral changes in consumption when the monetary authority signals current monetary policy stance, implementing a version of Odyssean forward guidance; (4) a sizable decrease in investment when their perception of the outlook deteriorates. These experimental and theoretical findings agree with the empirical literature on the effect of monetary policy on households’ consumption behavior in U.S. data and abroad. |
| Keywords: | Rational Inattention; Experimental Evidence; Informational Processing Capacity; Consumption |
| JEL: | C91 D11 D8 E20 |
| Date: | 2019–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:86730&r=all |
| By: | James J. Heckman (University of Chicago) |
| Abstract: | This paper examines the case for randomized controlled trials in economics. I revisit my previous paper--"Randomization and Social Policy Evaluation"--and update its message. I present a brief summary of the history of randomization in economics. I identify two waves of enthusiasm for the method as "Two Awakenings" because of the near-religious zeal associated with each wave. The First Wave substantially contributed to the development of microeconometrics because of the flawed nature of the experimental evidence. The Second Wave has improved experimental designs to avoid some of the technical statistical issues identified by econometricians in the wake of the First Wave. However, the deep conceptual issues about parameters estimated, and the economic interpretation and the policy relevance of the experimental results have not been addressed in the Second Wave. |
| Keywords: | field experiments, randomized control trials |
| JEL: | C93 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2020-001&r=all |
| By: | Henning Hermes (NHH Norwegian School of Economics); Daniel Schunk (Johannes Gutenberg University Mainz) |
| Abstract: | We develop a new design for the experimental beauty-contest game (BCG) that is suitable for children in school age and test it with 114 schoolchildren aged 9–11 years. In addition, we collect measures on cognitive skills and perspective-taking abilities to identify determinants of successful performance in the game. Results demonstrate that children can successfully understand and play a BCG. Choices start at a slightly higher level than those of adults but learning over time and depth of reasoning are largely comparable with the results of studies run with adults. Cognitive skills are predictive only of whether children choose weakly dominated strategies, whereas measures of perspective-taking abilities are strongly linked to successful performance in the BCG. These ?ndings emphasize the importance of perspective-taking abilities for strategic interaction and economic decision-making. Our new design for the experimental BCG allows further study of the development of strategic interaction skills starting already in school age. |
| Keywords: | children, experimental beauty-contest game, guessing game, strategic interaction, decision-making, perspective-taking, theory of mind, empathy, noncognitive skills |
| JEL: | C72 C92 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:1913&r=all |
| By: | Ilke Aydogan; Loic Berger; Valentina Bosetti |
| Abstract: | We report on a laboratory experiment measuring the preferences of a unique pool of risk professionals over various sources of uncertainty that entail different degrees of complexity. We then compare these preferences with those of a control group composed of social science students to obtain a deeper understanding of the mechanisms driving behaviors under risk and ambiguity. We find that (1) ambiguity aversion is robust to subjects’ degree of sophistication in probabilistic reasoning and background. (2) An association exists between attitudes toward ambiguity and compound risk for students/less sophisticated subjects, and is mainly explained by their attitudes toward complexity. Such an association does not exist for risk professionals/more sophisticated subjects. (3) The failure to reduce compound risk emerges as a sufficent, but not necessary, condition for ambiguity non-neutrality. These findings suggest that decision making under ambiguity cannot be reduced to decision making under risk. Keywords: Ambiguity aversion, reduction of compound lotteries, non-expected utility, model uncertainty, model misspecification JEL Codes: D81 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:653&r=all |
| By: | Sophia du Plessis (Department of Economics, Stellenbosch University); Bjoern Hartig (Royal Holloway, University of London); Ada Jansen (Department of Economics); Krige Siebrits (Department of Economics, Stellenbosch University) |
| Abstract: | The effective enforcement of traffic laws is critical for improved road safety outcomes. Decisions to follow traffic rules and pay fines are influenced by formal institutions (e.g. laws, court summons, and fines) as well as informal institutions (e.g. norms and aspects of culture). Formal and informal institutions create incentives that should be designed to steer individuals’ behaviour towards desired outcomes. Unfortunately, there is no reason to believe that the institutions to deal with traffic violations in South Africa currently create effective incentives. This paper discusses the findings of a controlled laboratory experiment that tested the efficacy of different financial incentives which may influence the payment of traffic fines. An early payment discount similar to the incentive under AARTO was compared to a late payment penalty (used in other countries, for example, some states in the USA), and to the absence of any incentives. Furthermore, we examined whether the willingness to settle fines is sensitive to the likelihood of detection by the authorities. We found that introducing financial incentives significantly increases voluntary payment of fines, irrespective of whether immediate payment is encouraged with a discount or late payment is discouraged with a surcharge. In addition, subjects are more sensitive to the likelihood of detection when financial incentives are present. |
| Keywords: | Traffic laws, law enforcement, South Africa, laboratory experiments, human behaviour |
| JEL: | B52 C91 D02 D04 K42 L91 L98 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers332&r=all |
| By: | Tiziana Assenza; Alberto Cardaci; Domenico Delli Gatti |
| Abstract: | By means of a laboratory experiment, we show that, contrary to standard consumer theory, financially equivalent balance sheet profiles may be perceived as non fungible in a controlled frictionless environment with no probabilistic attributes. A large majority of subjects indeed have a bias in the perception of wealth, such that balance sheet composition matters: for a given net worth with values of assets and debt that are financially certain and risk-free, a greater asset-debt ratio implies greater perceived wealth. The predominance of this bias is explained by low cognitive sophistication and great inattention. Moreover, biased subjects are less patient, less debt averse, more likely to increase spending out of unexpected gains and report greater propensities to consume. A standard optimal consumption choice model, enriched with a rational but inattentive agent à la Gabaix (2014, 2019), aligns our key experimental findings. |
| Keywords: | perceived wealth, cognitive sophistication, behavioral inattention, laboratory experiment, household debt, consumption |
| JEL: | C91 D91 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7992&r=all |
| By: | Fenske, James (University of Warwick); Castagnetti, Alessandro (University of Warwick); Sharma, Karmini (University of Warwick) |
| Abstract: | In many settings, economic outcomes depend on the competence and effort of the agents involved, and also on luck. When principals assess agents’ performance they can suffer from attribution bias by gender: male agents may be assessed more favorably than female agents because males will be rewarded for good luck, while women are punished for bad luck. We conduct a laboratory experiment to test whether principals judge agents’ outcomes differently by gender. Agents perform tasks for the principals and the realized outcomes depend on both the agents’ performance and luck. Principals then assess agents’ performance and decide what to pay the agents. Our experimental results do not show evidence consistent with attribution bias by gender. While principals’ payments and beliefs about agent performance are heavily influenced by realized outcomes, they do not depend on the gender of the agent. We find suggestive evidence that the interaction between the gender of the principal and the agent plays a role. In particular, principals are more generous to agents of the opposite gender. |
| Keywords: | JEL Classification: |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:452&r=all |
| By: | Tommaso Denti; Massimo Marinacci; Aldo Rustichini |
| Abstract: | We study the relation between two alternative representations for the cost of acquiring information: a cost that depends on the experiment that the decision maker performs, as in Wald's statistical decision theory, and a cost that depends on the distribution of posterior beliefs that the decision maker ends up with, as in Sims' theory of rational inattention. We show that in many cases of interests, such as Sims' entropy cost, the two representations are inconsistent with each other. Our main contribution is a systematic analysis of experimental cost functions, which are cost functions over distributions of posteriors that are consistent with an underlying model of costly experimentation. We also develop a regularization scheme to bridge the gap between experimental and non-experimental cost functions. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:657&r=all |
| By: | Bruner, Justin; Kopec, Matthew |
| Abstract: | A driving force behind much of the literature on the non-identity problem is the widely shared intuition that actions or policies that change who comes into existence don't, as a result, lose their morally problematic features. We hypothesize that this intuition isn’t entirely shared by the general public, which might have widespread implications concerning how to best motivate public support for large-scale, identity-affecting policies like those involved in climate change mitigation. To test our hypothesis, we ran a behavioural economic experiment, a version of the well-known dictator game, designed to mimic the public's morally loaded behaviour in identity-affecting choice problems. As predicted, we found that the public does seem to behave more selfishly when making identity-affecting choices. We further hypothesised that one possible mechanism involved in this change is the notion of harm that plays a role in the public’s normatively loaded decision making. So, during our study, we also solicited subjects’ attitudes about harm, in particular about whether the “dictators” had done harm through their choices. The data suggest that substantial portions of the population each employ distinct notions of harm in their normative thinking, which raises some puzzling features about the public’s normative thinking that call out for further empirical examination. |
| Date: | 2018–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:aw9fm&r=all |
| By: | Christoph March; Marco Sahm |
| Abstract: | We investigate overlapping contests in multi-divisional organizations in which an individual’s effort simultaneously determines the outcome of several contests on different hierarchical levels. We show that individuals in smaller units are advantaged in the grand (organization-wide) contest for two reasons: First, the incentive to free-ride is smaller in inter-divisional contests. Second, competition in the intra-divisional contest is less fierce. Both effects induce a higher marginal utility of effort provision. We test the model in a laboratory experiment and confirm its main predictions. Our results have important consequences for the provision of incentives in organizations and the design of sports competitions. |
| Keywords: | contest, rent-seeking, hierarchy, teams, experiment |
| JEL: | C72 C92 D72 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7994&r=all |
| By: | Lamar Pierce; Alex Rees-Jones; Charlotte Blank |
| Abstract: | Behavioral economists have proposed that loss-averse employees increase productivity when bonuses are "loss framed"—prepaid then clawed back if targets are unmet. We theoretically document that loss framing raises incentives for costly risk mitigation and for inefficient multitasking, potentially leading to large negative performance effects. We empirically document evidence of these concerns in a nationwide field experiment among 294 car dealers. Dealers randomized into loss-framed (but financially identical) contracts sold 5% fewer vehicles than control dealers, generating a revenue loss of $45 million over 4 months. We discuss implications regarding the use of behavioral economics to motivate both employees and firms. |
| JEL: | D03 D81 J22 J31 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26619&r=all |
| By: | Andreas, Drichoutis; Rodolfo, Nayga |
| Abstract: | This study further examines the failure of game form recognition in preference elicitation (Cason and Plott, 2014) by making elicitation more cognitively demanding through a cognitive load manipulation. We hypothesized that if subjects misperceive one game for another game, then by depleting their cognitive resources, subjects would misconceive the more-cognitively demanding task for the less-cognitively demanding task at a higher rate. We find no evidence that subjects suffer from a first-price-auction game-form misconception but rather that once cognitive resources are depleted, subjects' choices are better explained by random choice. More cognitively able subjects are more immune to deviations from sub-optimal play than lower cognitively able subjects. |
| Keywords: | Game form recognition; game form misconception; Becker-DeGroot-Marschak mechanism; first price auction; preference elicitation; cognitive load; cognitive resources; Raven test; fluid intelligence |
| JEL: | C80 C91 D44 |
| Date: | 2019–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:97980&r=all |
| By: | Fe, Eduardo (University of Manchester); Gill, David (Purdue University); Prowse, Victoria (Purdue University) |
| Abstract: | We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes. In particular, we emphasize the importance of childhood theory-of-mind as a cognitive skill. We collected experimental data from more than seven hundred children in a variety of strategic interactions. First, we find that theory-of-mind ability and cognitive ability both predict level-k behavior. Second, older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Third, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different measures of cognitive skill correspond to different cognitive processes in strategic situations that involve understanding intentions. Using the ALSPAC birth-cohort study, we find that childhood theory-of-mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory-of-mind in childhood. |
| Keywords: | Cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; children; experiment; strategic sophistication; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; ALSPAC; social skills; adult outcomes; life outcomes; education; fertility; labor market; wages; employment; school spending; childhood intervention. JEL Classification: C91; D91; J24 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:448&r=all |
| By: | Julia Rose (Department of Banking and Finance, University of Innsbruck); Michael Kirchler (Department of Banking and Finance, University of Innsbruck); Stefan Palan (Institute of Banking and Finance, University of Graz) |
| Abstract: | Status and reputation concerns are conjectured to be important especially in markets with information asymmetries between buyers and sellers, such as in credence goods markets. To investigate the effects of status and reputation on reciprocal behavior of sales personnel in a financial credence goods market, we run a natural field experiment. We send e-mail requests to insurance brokers asking for an appointment. We find that status nudging and, with a larger effect size, reputation nudging in the e-mails increase brokers’ response rates compared to a neutral request. Both effects are robust across all responses, only counting affirmative responses, and in urban and rural areas. |
| Date: | 2019–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpsses:2019-03&r=all |
| By: | Gallo, Edoardo; Riyanto, Yohanes E.; Roy, Nilanjan; Teh, Tat-How |
| Abstract: | We investigate how reputational uncertainty and the rate of change of the social environment interact to influence cooperation in social networks. Reputational uncertainty significantly decreases cooperation and welfare, induces more forgiveness toward defectors, and promotes opportunistic play. Compared to reputational uncertainty, a fast-changing social environment only causes a second-order qualitative increase in cooperation by making individuals more lenient in imposing a network-punishment (link removal). The interaction between reputational uncertainty and a fast-changing social environment induces more lenient strategies by reducing the frequency of action-punishment (retaliatory defection). Although neither of them affects the aggregate network metrics, their interaction decreases homophily among cooperators. |
| Keywords: | Cooperation, experiments, prisoner's dilemma, uncertainty, repeated games, networks |
| JEL: | C72 C73 C92 D8 |
| Date: | 2019–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:97878&r=all |
| By: | L Maaya; M Meulders; N Surmont; Martina Vandebroek |
| Abstract: | Sustainability labels on food products provide information to consumers that the product has been produced in an ethical way. We explore the knowledge and purchasing behaviour of the organic label and fair trade label. Secondly, we investigate the willingness-to-pay (WTP) for food products bearing organic and fair trade labels. Thirdly, we evaluate the correlation in WTP for organic and fair trade. Lastly, we examine the effect of environmental and altruistic attitudes on WTP for both sustainability labels. We draw our conclusions by analyzing a stated choice experiment on consumers coffee buying behaviour in Flanders, Belgium. Our results suggest that knowledge for the fair trade label is higher than that of the organic label. The importance of the organic and fair trade labels on coffee purchase decisions and their WTP estimates were similar. We found a high correlation in WTP for both labels. Our results indicate significant effects of environmental and altruistic attitudes in WTP for both organic and fair trade labels. |
| Keywords: | Coffee, Organic, Fair trade, Willingness-to-pay, Attitudes |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:ete:kbiper:627923&r=all |