nep-exp New Economics Papers
on Experimental Economics
Issue of 2021‒04‒05
sixteen papers chosen by

  1. In-group versus Out-group Preferences in Intergroup Conflict: An Experiment By Chowdhury, Subhasish; Mukherjee, Anwesha; Sheremeta, Roman
  2. Information Regime Changes and Path Dependence - An Experimental Analysis of Public Goods Contributions in Heterogeneous Groups By Gerlinde Fellner-Röhling; Sabine Kröger; Erika Seki
  3. Do homo sapiens know their prices? Insights on dysfunctional price mechanisms from a large field experiment By Nolan Ritter; Julia Anna Bingler
  4. Gender Differences in Repeated Dishonest Behavior: Experimental Evidence By Chowdhury, Subhasish; Jeon, Joo Young; Kim, Chulyoung; Kim, Sang-Hyun
  5. Can increased tax transparency curb corporate tax avoidance? By Michael Razen; Alexander Kupfer
  6. Do truth-telling oaths improve honesty in crowd-working? By Nicolas Jacquemet; Alexander James; Stéphane Luchini; James Murphy; Jason Shogren
  7. Tolerant moral judgment drives evolution of collective action By Radzvilavicius, Arunas
  8. Reducing Parent-School Information Gaps and Improving Education Outcomes: Evidence from High-Frequency Text Messages By Samuel Berlinski; Matias Busso; Taryn Dinkelman; Claudia Martínez A.
  10. When the rich do (not) trust the (newly) rich: Experimental evidence on the effects of positive random shocks in the trust game By Bejarano, Hernan; Gillet, Joris; Lara, Ismael Rodríguez
  11. Characterizing ambiguity attitudes using model uncertainty By Loïc Berger; Valentina Bosetti
  12. Robust Experimentation in the Continuous Time Bandit Problem By Farzad Pourbabaee
  13. Measuring subjective decision confidence By Arts, Sara; Ong, Qiyan; Qiu, Jianying
  14. Ignorance is Strength By Nitzan, Jonathan; Bichler, Shimshon
  15. Higher-Order Orthogonal Causal Learning for Treatment Effect By Yiyan Huang; Cheuk Hang Leung; Xing Yan; Qi Wu
  16. Absolute vs. relative success: Why overconfidence is an inefficient equilibrium By Soldà, Alice; Ke, Changxia; von Hippel, William; Page, Lionel

  1. By: Chowdhury, Subhasish; Mukherjee, Anwesha; Sheremeta, Roman
    Abstract: Individuals participating in a group conflict have different preferences, e.g., maximizing their own payoff, maximizing the group’s payoff, or defeating the rivals. When such preferences are present simultaneously, it is difficult to distinctly identify the impact of those preferences on conflict. In order to separate in-group and out-group preferences, we conduct an experiment in which human in-group or out-group players are removed while keeping the game strategically similar. Our design allows us to study (i) how effort in a group conflict vary due to in-group and out-group preferences, and (ii) how the impact of these preferences vary when the two groups have explicitly different social identities. The results of our experiment show that the presence of in-groups enhances concern about individual payoffs. A further presence of out-groups moderates the concern for individual payoffs through an additional concern for own group payoffs. The negative effect of the in-group preferences and the positive effect of the out-group preferences are weaker when group members have a common social identity.
    Keywords: Group conflict; Contest; Identity; Social preferences.
    JEL: C91 C92 D72 D74
    Date: 2021–01–31
  2. By: Gerlinde Fellner-Röhling; Sabine Kröger; Erika Seki
    Abstract: We experimentally investigate the path dependence of voluntary contributions in a public good game with heterogeneous agents who vary in their ability to increase the public good. More specifically, we analyze whether contribution norms observed in a first phase of the experiment under a specific information regime carry over to a second phase with a more or a less transparent regime. We find evidence of path dependence that varies by the ability of agents. Efficient contribution norms establish under common knowledge about heterogeneity and transparency of contributors' ability, and they carry over to another game with less transparency. Other contribution norms that emerged under less transparency are also initially sticky, but they eventually evolve toward an efficient norm under a more transparent information regime. Thus, path dependence may impede but does not prevent efficient contribution norms to prevail in fully transparent settings.
    Keywords: Voluntary Contribution Mechanism,Heterogeneous MPCR,Information Transparency,Sticky Behavior,Behavioral Change,Social Norms,
    JEL: C92 D04 D63 D79 D89 D91 H41 H49
    Date: 2021–03–24
  3. By: Nolan Ritter (Mercator Research Institute on Global Commons and Climate Change (MCC), and Potsdam Institute for Climate Impact Research (PIK), Germany); Julia Anna Bingler (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We use a large, randomized field experiment that exogenously varies prices to test their effect on consumption. Full information is available at zero costs. However, households state prices that are, on average, ten times larger than actual. But ignorant households cannot react to prices and so the price mechanism becomes dysfunctional. Our results explain small or zero price effects from previous research. We show that researchers must provide evidence for a functional price mechanism before ascribing causal effects or risk biased conclusions. The same applies to price instruments that are often regarded as first best solutions.
    Keywords: households, information, price experiment
    JEL: D12 D83 L95 Q41 Q54
    Date: 2021–03
  4. By: Chowdhury, Subhasish; Jeon, Joo Young; Kim, Chulyoung; Kim, Sang-Hyun
    Abstract: We investigate gender difference in lying behavior when the opportunity to tell lies is repeated. In specific, we distinguish the situations in which such an opportunity can be planned versus when it comes as a surprise. We use data from an existing study (Chowdhury et al., 2021) and show that when the opportunity to tell a lie comes as a surprise, then on the first occasion, males lie more than females. However, when telling lies can be planned, there is no gender difference in telling a lie. When planning is possible, females tell more lies in the first occasion than when it is not. Males do not show such behavior. On the second and final occasion, males lie more than females only when they either could not plan but had an opportunity to lie before or could plan but did not have to tell a lie before.
    Keywords: Dishonesty; Lying; Pre-planning; Gender
    JEL: C91 D01 D91 J16
    Date: 2021–01–29
  5. By: Michael Razen; Alexander Kupfer
    Abstract: Tax avoidance among large multinational corporations has considerably increased in recent years, triggering an intense discussion about how to ensure tax justice. We propose a novel experimental design to incentive-compatibly model the firm-consumer relationship in a consumer goods market. This new paradigm allows us to analyze the effect of increased tax transparency on consumer and firm behavior in a dynamic framework. We find that absent the threat of being exposed as a tax avoiding firm, only 26% of the firms decide to pay taxes. Once tax avoiding firms are identifiable in the market, this rate rises to 58%. Providing market participants additionally with information about the social costs of tax avoidance increases the fraction of tax paying firms further to 74%. We show that these improvements are the consequence of firms proactively adopting tax responsible behavior and, at the highest level of transparency, consumers showing a stronger proclivity to boycott tax avoiding firms, even if these firms offer cheaper prices. Our results confirm the effectiveness of increased transparency to curb corporate tax avoidance.
    Keywords: economic experiment, tax avoidance, public good dilemma, consumer behavior, firm behavior
    JEL: C9 C92 H26
    Date: 2021–10
  6. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Alexander James (University of Alaska [Anchorage]); Stéphane Luchini (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); James Murphy (University of Alaska [Anchorage]); Jason Shogren (UW - University of Wyoming)
    Abstract: This study explores whether an oath to honesty can reduce both shirking and lying among crowd-sourced internet workers. Using a classic coin-flip experiment, we first confirm that a substantial majority of Mechanical Turk workers both shirk and lie when reporting the number of heads flipped. We then demonstrate that lying can be reduced by first asking each worker to swear voluntarily on his or her honor to tell the truth in subsequent economic decisions. Even in this online, purely anonymous environment, the oath significantly reduced the percent of subjects telling "big" lies (by roughly 27%), but did not affect shirking. We also explore whether a truth-telling oath can be used as a screening device if implemented after decisions have been made. Conditional on flipping response, MTurk shirkers and workers who lied were significantly less likely to agree to an ex-post honesty oath. Our results suggest oaths may help elicit more truthful behavior, even in online crowd-sourced environments
    Keywords: Experimental Economics,Honesty,Solemn Oath,Mechanical Turk,Lying,Shirking
    Date: 2021–01
  7. By: Radzvilavicius, Arunas (University of Sydney)
    Abstract: In public goods games, the benefit of collective action is shared among all participants, and this creates strong incentives to defect. Theoretical studies and economic experiments predict that without enforcement mechanisms, cooperation in public goods games should collapse. But human societies have repeatedly resolved collective action dilemmas through social norms and institutions. Humans condition their social behavior on the moral reputations of other individuals, and the reputations themselves reflect their past behavior. Here I show how Indirect Reciprocity mechanisms based on group reputations and group-level norms can evolve to promote collective action in public goods games. Individual reputations reflect moral judgments of social behavior within groups, according to the prevailing social norm. Only three norms previously studied as part of Indirect Reciprocity in pairwise games can sustain public goods investments, and their performance depends on how tolerant individuals are to occasional antisocial behavior within groups. When members of the society have predominantly tolerant moral views towards groups, only the norm that abstains from judgment in morally ambiguous interactions (known as ``Staying'') can sustain collective action.
    Date: 2021–01–29
  8. By: Samuel Berlinski; Matias Busso; Taryn Dinkelman; Claudia Martínez A.
    Abstract: Grade retention and early dropout are two of the biggest challenges facing education systems in middle-income countries today, representing waste in school resources. We investigate whether reducing parent-school information gaps can improve outcomes that are early-warning signals for grade retention and dropout. We conducted an experiment in low-income schools in Chile to test the effects and behavioral changes triggered by a program that sends attendance, grade, and classroom behavior information to parents via weekly and monthly text messages. Our 18-month intervention raised average math GPA by 0.09 of a standard deviation and increased the share of students satisfying attendance requirements for grade promotion by 4.5 percentage points. Treatment effects were larger for students at higher risk of later grade retention and dropout. We find some evidence of positive classroom spillovers. Leveraging existing school inputs to implement a light-touch, cost-effective information intervention can improve education outcomes in lower-income settings.
    JEL: D8 I25 N36
    Date: 2021–03
  9. By: Stolte, John Dr.
    Abstract: BACKGROUND. Experimental vignette research methods have been used to study a diverse range of theoretical and practical issues. Vignettes are designed to create hypothetical cultural/normative contexts for the study of variation in self-reported attitudes. A key problem in such research, however, is potential social desirability response bias. METHOD. A vignette experimental test of an hypothesis derived from a dual-process theory (the MODE framework initially developed by Fazio) linking explicit vs. implicit self-reported attitude measurement and social desirability response bias is reported here. RESULTS. The data show that measuring the social approval of a central vignette character explicitly results in greater social desirability responding than measuring such approval implicitly, supporting MODE theory. CONCLUSIONS. Vignette research methodologies provide a rich, flexible toolkit for studying many important social psychological topics, including issues of inequality and equity. However, researchers can and should design a measurement strategy that carefully manages inferences drawn in light of conditions likely to produce social desirability response bias.
    Date: 2021–03–24
  10. By: Bejarano, Hernan; Gillet, Joris; Lara, Ismael Rodríguez
    Abstract: We study behavior in a trust game where first-movers initially have a higher endowment than second-movers but the occurrence of a positive random shock can eliminate this inequality by increasing the endowment of the second-mover before the decision of the first-mover. We find that second-movers return less (i.e., they are less trustworthy) when they have a lower endowment than first-movers, compared with the case in which first and second-movers have the same endowment. Second-movers who received the positive shock return more than those who did not; in fact, second-movers who received the positive shock return more than second-movers who had the same endowment as the first-mover from the outset. First-movers do not seem to anticipate this behavior from second-movers. They send less to second-movers who benefited from a shock. These findings suggest that in addition to the distribution of the endowments the source of this distribution plays an important role in determining the levels of trust and trustworthiness. This, in turn, implies that current models of inequality aversion should be extended to accommodate for reference points if random positive shocks are possible in the trust game.
    Date: 2021–01–23
  11. By: Loïc Berger (IÉSEG School Of Management [Puteaux], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna], LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Valentina Bosetti (Bocconi University [Milan, Italy])
    Abstract: We report the results of an experiment eliciting individuals' attitudes toward risk and model uncertainty. Using a joint elicitation procedure, we then precisely quantify the strength of individuals' attitude toward ambiguity in the context of the smooth model and characterize its main properties. Our results provide empirical evidence of decreasing absolute ambiguity aversion (DAAA) and constant relative ambiguity aversion (CRAA). These results shed new light on the way ambiguity attitudes may affect important decisions, such as the choice of health insurance policies or the optimal investment strategy in the face of climate change.
    Keywords: Ambiguity aversion,Laboratory experiment,Non-expected utility,Subjective probabilities,Decreasing absolute ambiguity aversion
    Date: 2020
  12. By: Farzad Pourbabaee
    Abstract: We study the experimentation dynamics of a decision maker (DM) in a two-armed bandit setup (Bolton and Harris (1999)), where the agent holds ambiguous beliefs regarding the distribution of the return process of one arm and is certain about the other one. The DM entertains Multiplier preferences a la Hansen and Sargent (2001), thus we frame the decision making environment as a two-player differential game against nature in continuous time. We characterize the DM value function and her optimal experimentation strategy that turns out to follow a cut-off rule with respect to her belief process. The belief threshold for exploring the ambiguous arm is found in closed form and is shown to be increasing with respect to the ambiguity aversion index. We then study the effect of provision of an unambiguous information source about the ambiguous arm. Interestingly, we show that the exploration threshold rises unambiguously as a result of this new information source, thereby leading to more conservatism. This analysis also sheds light on the efficient time to reach for an expert opinion.
    Date: 2021–03
  13. By: Arts, Sara; Ong, Qiyan; Qiu, Jianying
    Abstract: Information on decision confidence provides important insights into decision-making. In place of self-reported confidence statements in earlier studies, this study examines an incentivized approach to elicit quantitative decision confidence experimentally and theoretically. This approach allows the individual to choose randomization probabilities according to which she receives each option instead of committing to one option as in standard binary choices. We demonstrate theoretically that randomization probabilities reveal the individual's decision confidence level. In an experiment that elicited both randomization probabilities and confidence statements about standard binary choices from subjects, we find that randomization probabilities varied systematically with decision confidence and are a viable measure of decision confidence. Our study contributes to the discussion of convex preference by relating preference for randomization to an intuitive psychological concept of decision confidence.
    Keywords: decision confidence, randomization, incentivized approach
    JEL: B41 C91 D81
    Date: 2020–08
  14. By: Nitzan, Jonathan; Bichler, Shimshon
    Abstract: Colin Harrison's novel The Finder (2008) uncovers the hidden hierarchy of differential information. We live in a knowledge economy, or so they say. And in the world of finance, knowledge is power: the power to buy assets before their price appreciates. This knowledge-as-power, though, is profitable only when exclusive. Common knowledge – no matter how sophisticated and complex – is never profitable. Only differential knowledge – i.e., knowledge that is unavailable to others or superior to what they have – can yield a ‘return’. This differential prerequisite explains why every entity in the pyramid of financial information – whether a person or an organization – has no more than a partial vista, with the remaining view blurred by enforced opaqueness and power-backed misinformation. The different vistas are also deeply formative. Individual ‘actors’ may feel empowered by what they know, but in practice, what they know serves to frame their thoughts and direct their actions – usually without them ever knowing it. Even those at the very top – indeed, especially those at the very top – are slaves to their knowledge, however superior.
    Keywords: finance,differential information,literature,power
    JEL: P16 D8
    Date: 2021
  15. By: Yiyan Huang; Cheuk Hang Leung; Xing Yan; Qi Wu
    Abstract: Most existing studies on the double/debiased machine learning method concentrate on the causal parameter estimation recovering from the first-order orthogonal score function. In this paper, we will construct the $k^{\mathrm{th}}$-order orthogonal score function for estimating the average treatment effect (ATE) and present an algorithm that enables us to obtain the debiased estimator recovered from the score function. Such a higher-order orthogonal estimator is more robust to the misspecification of the propensity score than the first-order one does. Besides, it has the merit of being applicable with many machine learning methodologies such as Lasso, Random Forests, Neural Nets, etc. We also undergo comprehensive experiments to test the power of the estimator we construct from the score function using both the simulated datasets and the real datasets.
    Date: 2021–03
  16. By: Soldà, Alice; Ke, Changxia; von Hippel, William; Page, Lionel
    Abstract: Overconfidence is one of the most ubiquitous biases in the social sciences, but the evidence regarding its overall costs and benefits is mixed. To test the possibility that overconfidence might yield important relative benefits that offset its absolute costs, we conducted an experiment (N=298 university students) in which pairs of participants bargain over the unequal allocation of a prize that was earned via a joint effort. We manipulated confidence using a binary noisy signal to investigate the causal effect of negotiators’ beliefs about their relative contribution on the outcome of the negotiation. Our results provide evidence that high levels of confidence lead to relative benefits (how much one earns compared to one’s partner) but absolute costs (how much money one receives overall). These results suggest that overconfidence creates an inefficient equilibrium whereby overconfident negotiators benefit over their partners even as they bring about joint losses.
    Keywords: overconfidence; motivated beliefs; negotiation
    Date: 2021–03–31

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.