nep-exp New Economics Papers
on Experimental Economics
Issue of 2021‒09‒06
twenty-two papers chosen by
Daniel Houser
George Mason University

  1. Welfare in Experimental News Markets By Albertazzi, Andrea; Ploner, Matteo; Vaccari, Federico
  2. Cooperation and Risk-sharing in Social Dilemmas with Noisy Payoffs: Theory and Experimental Evidence By Evans, Alecia; Sesmero, Juan Pablo
  3. The formation of risk preferences through small-scale events By Silvia Angerer; E. Glenn Dutcher; Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter
  4. Avoiding the Cost of your Conscience: Belief Dependent Preferences and Information Acquisition By Claire Rimbaud; Alice Soldà
  5. Relative Risk Taking and Social Curiosity By Jeremy Celse; Alexandros Karakostas; Daniel John Zizzo
  6. Asymmetric Shocks in Contests: Theory and Experiment By Daniel Houser; Jian Song
  7. Overcoming coordination failure in games with focal points: An experimental investigation By David Rojo-Arjona; R. Stefania Sitzia; Jiwei Zheng
  8. Limited Self-knowledge and Survey Response Behavior By Armin Falk; Thomas Neuber; Philipp Strack
  9. Decreasing Incomes Increase Selfishness By Nickolas Gagnon; Henrik W. Zaunbrecher
  10. Endowment effects at different time scenarios: the role of ownership and possession By Domenico Colucci; Chiara Franco; Vincenzo Valori
  11. Tackling the gender gap in mathematics with active learning methodologies By Maria Laura Di Tommaso; Dalit Contini; Dalila De Rosa; Francesca Ferrara; Daniela Piazzalunga; Ornella Robutti
  12. Nudging for cleaner air: experimental evidence from an RCT on wood stove usage By Ruiz-Tagle, Cristobal; Schueftan, Alejandra
  13. Feed the children By Laurens Cherchye; Pierre-André Chiappori; Bram De Rock; Charlotte Ringdal; Frederic Vermeulen
  14. How Large is the Endowment Effect in the Risky Investment Game? By Holden, Stein T.; Tilahun, Mesfin
  15. Non-exclusive Group Contests: An Experimental Analysis By Daniel Houser; Jian Song
  16. Costly Waiting in Dynamic Contests: Theory and Experiment By Daniel Houser; Jian Song
  17. Farmer preferences for adopting drought-tolerant maize varieties: evidence from a choice experiment in Nigeria. By Oyetunde-Usman, Zainab; Shee, Apurba
  18. Reference price respective grouping in a wine choice experiment – The impact of price expectations on choice behavior and demand By Kilders, Valerie; Caputo, Vincenzina
  19. Treatment and Selection Effects of Formal Workplace Mentorship Programs By Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
  20. Default-Setting and Default Bias: Does the Choice Architect Matter? By Hanh T. Tong; David J. Freeman
  21. The implications of self-reported body weight and height for measurement error in BMI By Davillas, Apostolos; Jones, Andrew M.
  22. A decision-making model with anticipation of surprise for explaining irrational economic behaviors By Ho Ka Chan; Taro Toyoizumi

  1. By: Albertazzi, Andrea; Ploner, Matteo; Vaccari, Federico
    Abstract: We perform a controlled experiment to study the welfare effects of competition in a strategic communication environment. Two equally informed senders with conflicting interests can misreport information at a cost that is increasing in the size of the lie. We compare a treatment where only one sender communicates with a treatment where both senders communicate simultaneously with a decision-maker. We find that the introduction of competition between senders decreases the welfare of all players. Competing senders reveal the truth less often and spend about twice the amount of resources to misreport information than their monopolistic counterpart. As a result, decision-makers take more informed choices when consulting one sender than when consulting both.
    Date: 2021–08–26
  2. By: Evans, Alecia; Sesmero, Juan Pablo
    Keywords: Research Methods/Statistical Methods, Institutional and Behavioral Economics, International Development
    Date: 2021–08
  3. By: Silvia Angerer; E. Glenn Dutcher; Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter
    Abstract: Large, macroeconomic shocks in the past have been shown to influence economic decisions in the present. We study in an experiment with 743 subjects whether small-scale, seemingly negligible, events also affect the formation of risk preferences. In line with a reinforcement learning model, we find that subjects who won a random lottery took significantly more risk in a second lottery almost a year later. The same pattern emerges in another experiment with 136 subjects where the second lottery was played more than three years after the first lottery. So, small-scale, random, events affect the formation of risk preferences significantly.
    Keywords: Reinforcement learning, risk preferences, preference formation, experiment
    JEL: C91 D01 D83
    Date: 2021
  4. By: Claire Rimbaud (Univ Lyon, Universite Lumiere Lyon 2, GATE UMR 5824, F-69130 Ecully, France, France); Alice Soldà (Heidelberg University, Department of Economics, Bergheimer Str. 20, 69115 Heidelberg, Germany.)
    Abstract: Pro-social individuals face a trade-off between their monetary and moral motives. Hence, they may be tempted to exploit the uncertainty in their decision environment in order to reconcile this trade-off. In this paper, we investigate whether individuals with belief-dependent preferences avoid the monetary cost of behaving according to their moral standards by strategically acquiring information about others'expectations. We test the predictions of an information acquisition model in an online experiment. We use a modified trust-game in which we introduce uncertainty about the second movers' beliefs about first-movers' expectations. Our design enables to (i) identify participants with belief-based preferences and (ii) investigate their information acquisition strategy.Consistent with our predictions of subjective preferences, we find that most individuals classified as belief-dependent strategically select their source of information to avoid the cost of their conscience.
    Keywords: Belief-dependent preferences, illusory preferences, information acquisition, self-serving biases, experiment
    JEL: C91
    Date: 2021
  5. By: Jeremy Celse (School of Management ESSCA); Alexandros Karakostas (School of Economics, University of Queensland, Brisbane, Australia); Daniel John Zizzo (School of Economics, University of Queensland, Brisbane, Australia)
    Abstract: We present an experiment providing (a) a horse race among different models combining social preferences and risk preferences, and (b) a test of whether agents are socially curious, that is wanting to know about the risk taking of others and the outcomes of their risk taking. We distinguish outcome driven models (that is, models where agents care about the earning outcomes for themselves and others) from action driven models (that is, models where agents care about one’s risk taking actions relative to the actions of others). We embed outcome and action driven competitive preferences, inequality aversion, conformism, and social loss aversion, within a single general theoretical framework. We find that competitive preferences models best explain investment decisions in our setting, with almost 50% of subjects influenced both by their co-participants’ actions and outcomes. About 90% of subjects seek social information when it is free. When it is costly, 30% of subjects seek social information if the information is instrumental for their own investment decision and about 15% seek social information even if it is not. Competitive preferences can help explain social curiosity.
    Keywords: Risk, curiosity, peer effects, social preferences, competitive preferences, social comparison.
    JEL: C91 D81 D91 G11 G22
    Date: 2021–08–26
  6. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jian Song (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: Under optimal tournament design, we would expect agents to exert identical effort regardless of the shape of the contest function’s error component. We report data from laboratory experiments that provide a first test of this prediction. We find that efforts do not significantly differ when the shock distribution exhibits negative skewness versus a uniform distribution; however, subjects react substantially differently to random shock realizations under different treatments. Specifically, tournament winners demonstrate stronger reactions, economically and statistically, to negatively-skewed shocks than to uniform shocks. Meanwhile, tournament losers are less likely to be affected by negatively-skewed shocks. Our results highlight the importance of accounting for the influence of the shape of the shock distribution on a contest participant’s effort.
    Keywords: Asymmetric random shock, Tournament, Winner, Loser, Laboratory experiment
    JEL: D90 M52 C90
    Date: 2021–07
  7. By: David Rojo-Arjona (The George L Argyros School of Business and Economics, Chapman University.); R. Stefania Sitzia (School of Economics and Centre for Behavioural and Experimental Social Science, University of East Angle, Norwich.); Jiwei Zheng (School of Economics and Centre for Behavioural and Experimental Social Science, University of East Anglia, Norwich)
    Abstract: Focal points (Schelling, 1960) have shown limitations as coordination devices in games with conflict, such as the battle of the sexes games. We experimentally test whether an increase in their salience can counteract the negative impact of conflict on coordination. The intuition is that, in the presence of conflict, the solution to the coordination dilemma offered by the focal point loses importance. Increasing its salience increases its relevance and therefore coordination success. Our results provide strong support for this conjecture. Furthermore, when games feature outcomes with different degrees of payoffs’ inequality (i.e. the difference of players’ payoffs) and efficiency (i.e. the sum of players’ payoffs), increasing salience does not lead to an obvious increase in coordination, unless the salience of the focal point is maximal.
    Keywords: coordination games, focal points, salience, conflict of interests, battle-of-thesexes, intermixed-blocked effect.
    JEL: C72 C78 C91 D91
    Date: 2021–08
  8. By: Armin Falk; Thomas Neuber; Philipp Strack
    Abstract: We study response behavior in surveys and show how the explanatory power of self-reports can be improved. First, we develop a choice model of survey response behavior under the assumption that the respondent has imperfect self-knowledge about her individual characteristics. In panel data, the model predicts that the variance in responses for different characteristics increases in self-knowledge and that the variance for a given characteristic over time is non-monotonic in self-knowledge. Importantly, the ratio of these variances identifies an individual’s level of self-knowledge, i.e., the latter can be inferred from observed response patterns. Second, we develop a consistent and unbiased estimator for self-knowledge based on the model. Third, we run an experiment to test the model’s main predictions in a context where the researcher knows the true underlying characteristics. The data confirm the model’s predictions as well as the estimator’s validity. Finally, we turn to a large panel data set, estimate individual levels of self-knowledge, and show that accounting for differences in self-knowledge significantly increases the explanatory power of regression models. Using a median split in self-knowledge and regressing risky behaviors on self-reported risk attitudes, we find that the R2 can be multiple times larger for above-than below-median subjects. Similarly, gender differences in risk attitudes are considerably larger when restricting samples to subjects with high self-knowledge. These examples illustrate how using the estimator may improve inference from survey data.
    Keywords: survey research, rational inattention, lab experiment, non-cognitive
    JEL: C83 D83 C91 D91 J24
    Date: 2021
  9. By: Nickolas Gagnon (Department of Strategy and Innovation, Vienna University of Economics and Business and Institute for Markets and Strategy Riccardo D. Saulle; Department of Economics and Management, University of Padova); Henrik W. Zaunbrecher (Department of Economics, Maastricht University)
    Abstract: We use a controlled laboratory experiment to study the causal impact of income de- creases within a time period on redistribution decisions at the end of that period, in an environment where we keep fixed the sum of incomes over the period. First, we investigate the effect of a negative income trend (intra-personal decrease), which means a decreasing income compared to one’s recent past. Second, we investigate the effect of a negative income trend relative to the income trend of another person (inter-personal decrease). If intra-personal or inter-personal decreases create dissatisfaction for an individual, that person may become more selfish to obtain compensation. We formalize both effects in a multi-period model augmenting a standard model of inequality aversion. Overall, conditional on exhibiting sufficiently-strong social preferences, we find that individuals indeed behave more selfishly when they experience decreasing incomes. While many studies examine the effect of income inequality on redistribution decisions, we delve into the history behind one’s income to isolate the effect of income changes.
    Keywords: Income Inequality, Income Change, Social Preferences, Social Comparison, Income Redistribution
    JEL: C91 D31 D63
    Date: 2021–07
  10. By: Domenico Colucci; Chiara Franco; Vincenzo Valori
    Abstract: The central issue of the wide literature about the endowment effect is the search for an explanation of the fact that the selling price of a good will be higher than that at which a person is willing to buy that same good, once they own it. The experimental evidence is not unanimous in replicating the results found by Kahneman et al. (1990 and 1991). The challenge is that of disentangling the several determinants that may be at work in generating the final effect, as the loss aversion is not considered the only explanation. We dig deeper by examining two of these likely determinants which remain understudied: the first is the impact that the amount of time of ownership can have on the endowment effect. The second is the type of item (non-material good and exchange goods) used to test the effect. Through an online questionnaire we investigate these aspects by using three different goods: a mug, an Amazon Gift Card and a quarterly subscription to Spotify. We also test whether the endowment effect occurs in different time scenarios, that is if participants imagine to own the good for one day, one week or one month. We find that the endowment effect clearly appears for all types of goods while less clear results take shape when considering the duration of the ownership.
    Keywords: WTA/WTP gap, endowment effect, ownership experience, fungible goods, services, exchange goods
    JEL: D12 D91
    Date: 2021–08–01
  11. By: Maria Laura Di Tommaso; Dalit Contini; Dalila De Rosa; Francesca Ferrara; Daniela Piazzalunga; Ornella Robutti
    Abstract: We implement a teaching methodology aimed at improving primary school children’s mathematical skills. The methodology, grounded in active and cooperative learning, focuses on peer interaction, sharing of ideas, learning from mistakes, and problem solving. We evaluate the causal effect of the intervention on the gender gap in mathematics in Italy with a randomized controlled trial. The treatment significantly improves girls’ math performance (0.14 s.d.), with no impact on boys, and reduces the math gender gap by more than 40%. The effect is stronger for girls with high pre-test scores.
    Keywords: Gender gap, Mathematics, School achievement, Primary school, Active learning, Teaching methodologies, Randomized controlled trial
    JEL: I21 I24 J16 C93
    Date: 2021
  12. By: Ruiz-Tagle, Cristobal; Schueftan, Alejandra
    Abstract: Air pollution from wood burning is a serious problem in the developing world. In the cities of south-central Chile, households experience extremely high ambient air pollution levels due to massive combustion of wood as fuel for residential heating. To address this problem, in recent years new residential wood stoves—equipped with improved combustion technologies that are designed to be less-polluting—have replaced high-polluting ones. However, users’ behaviour in operating these improved stoves is a key factor that drives actual emissions. When users ‘choke the damper’ to extend the burning time of their wood fuel, it constrains the air flow in the wood stoves and creates a highly polluting combustion process. To address this issue, a behavioural intervention was designed to provide users with real-time feedback on their wood stoves’ air pollution emissions with the goal of ‘nudging’ them to use their stoves in a less polluting way. The intervention consists of an information sign that aligns with the wood stove’s damper lever and informs users about pollution emission levels according to the chosen setting of the wood stove’s damper. The information sign is complemented by the visit of a field assistant that explains the sign and provides an informational flyer (fridge magnet). To assess the effectiveness of this behavioural intervention a randomized controlled trial was conducted with selected households in the city of Valdivia, Chile. Results from this intervention show that households that were provided with the information sign reduced the frequency with which they used the most polluting settings of their stoves, inducing a behavioural change that results in a 10.8% reduction in residential pollution emissions.
    Keywords: air pollution; behavioural intervention; environment and development; field experiment; wood stoves; Springer deal
    JEL: C93 D90 O13 Q53 Q56
    Date: 2021–08
  13. By: Laurens Cherchye; Pierre-André Chiappori; Bram De Rock; Charlotte Ringdal; Frederic Vermeulen
    Abstract: To understand the household decision-making process regarding food expenditures for children in poor households in Nairobi, we conduct an experiment with 424 married couples. In the experiment, the spouses (individually and jointly) allocated money between themselves and nutritious meals for one of their children. First, we find strong empirical support for individual rationality and cooperative behavior. Second, our results suggest that women do not have stronger preferences for children’s meals than men. Third, the spouses’ respective bargaining positions derived from consumption patterns strongly correlate with more traditional indicators. Finally, we document significant heterogeneity both between individuals and intra-household decision processes.
    Keywords: collective model, intra-household allocation, experiment, Kenya, children
    Date: 2021–08–24
  14. By: Holden, Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tilahun, Mesfin (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: The risky investment game of Gneezy and Potters (1997) has been a popular tool used to estimate risk tolerance and myopic loss aversion. Holden and Tilahun (2021) tested and found that the simple one-shot version of this game that is attractive as a simple tool to elicit risk tolerance among respondents with limited education, produce significant endowment effects in two variants of the game where alternatively safe and risky initial monetary endowments are allocated. In this paper, we use an alternative treatment that does not induce endowment effects. This allows us to establish a benchmark to assess the relative size of the endowment effects when initial safe and risky endowments are provided (contribution 1). While Prospect Theory could predict endowment effects in the game, it fails to explain the dominance of interior choices (partial investment). We propose an alternative endowment effect theory that gives predictions that are more consistent with the observed partial investment behavior (contribution 2).
    Keywords: Risky investment game; Endowment effects; Loss aversion; Utility curvature; Field experiment; Ethiopia
    JEL: C93 D91 H23
    Date: 2021–09–02
  15. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jian Song (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We experimentally study a non-exclusive group contest in which contestants actively participate in multiple groups simultaneously. We compare the results of this contest to those of an exclusive group contest in which each contestant belongs to a single group. In contrast to theoretical predictions, we find that the non-exclusive group contest generates less aggregate effort than the equivalent exclusive group contest. We hypothesize that groups in the non-exclusive group contest are less responsive to their rival group’s effort than those in the exclusive group contest. Likewise, on the individual level, players in the non-exclusive group contest are more likely to free-ride on their group members’ contributions. Our data indicate that non-free-riders in the non-exclusive group contest are more likely, over time, to allocate their effort toward a single group. This finding is consistent with previous findings that players facing a complex strategy space tend to focus on specific winning combinations. Moreover, given that players are affected by their group members’ contributions, they tend to exert their effort primarily toward a single group. Taken together, our findings suggest that a non-exclusive group contest may evolve, over time, into an exclusive group contest.
    Keywords: Group contest, Non-exclusive, Inter-group competition, Free-rider, Effort allocation
    JEL: C9 D7
    Date: 2021–08
  16. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jian Song (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We extend the war of attrition by studying a three-period dynamic contest game. In our game, players can fight against their opponents at certain period of the contest and can flee at any time. Waiting is costly. We focus on the role of waiting costs and show that the value of waiting costs is a key factor in determining the type of equilibrium in such dynamic contests. Specifically, as waiting costs increase, contests end earlier, battles are less likely to occur, and the weaker player in a pair is more likely to flee. A lab experiment verifies most key features of our model. However, unlike theoretical predictions, we find that as waiting costs increase, the duration of contests and the frequency of battles fail to drop as significantly as theory predicted. Moreover, we find that in each treatment, individual players exit the contest significantly earlier than predicted.
    Keywords: Dynamic contest, Waiting cost, Frequency of battles, Lab experiment
    JEL: D82 D90 C90
    Date: 2021–08
  17. By: Oyetunde-Usman, Zainab; Shee, Apurba
    Keywords: Institutional and Behavioral Economics, Research Methods/Statistical Methods, International Development
    Date: 2021–08
  18. By: Kilders, Valerie; Caputo, Vincenzina
    Keywords: Research Methods/Statistical Methods, Research Methods/Statistical Methods, Marketing
    Date: 2021–08
  19. By: Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
    Abstract: While formal mentorship programs are ubiquitous, less is known about who gains from receiving mentorship. In this paper, we report the outcome of a Randomized Controlled Trial (RCT) carried out in a US-based inbound sales call center where one branch of the experiment assigned a random subset of new hires to mentors (Broad-Mentoring), whereas a second branch (Selective-Mentoring) gave new hires the opportunity to opt into a mentoring relationship before assigning a random subset to mentors. In the Broad-Mentoring branch, mentored sales agents outperformed non-mentored agents by over 18% in the first six months on the job. Among agents who opt into the program in the Selective-Mentoring branch, those who received mentorship had negligible performance gains. The differences between the two branches indicates that formal mentorship program treatment effects are largest for workers who would otherwise opt out of these programs. Demographic and personality characteristics are relatively weak predictors of selection into the program, suggesting broad-based programs are likely more effective than alternative targeting rules.
    JEL: J24 L23 L84 M5 M53
    Date: 2021–08
  20. By: Hanh T. Tong (Theory+Practice); David J. Freeman (Simon Fraser University)
    Abstract: We experimentally study players' initial beliefs about non-strategic play that an- chors their strategic reasoning in the traveler's dilemma, a game in which each player chooses a number and has the incentive to undercut their opponent by the minimal amount possible. In a within-subject design, each subject repeatedly plays variations of the traveler's dilemma game without feedback. To identify their strategic reasoning, we vary the upper and lower bounds of the strategy space in each round, and also vary the reward/penalty for undercutting. We nd that players are both heterogeneous in the amount that they reason, and in their beliefs about non-strategic play. Notably, few players anchor their strategic reasoning on non-strategic uniform random play. We also nd ample evidence of non-strategic play. Our results caution against the common practice of assuming the same anchor of initial reasoning for all players when estimating players' depths of strategic reasoning.
    Date: 2021–08
  21. By: Davillas, Apostolos; Jones, Andrew M.
    Abstract: We designed an experiment to explore the extent of measurement error in body mass index (BMI), when based on self-reported body weight and height. We find that there is a systematic age gradient in the reporting error in BMI, while there is limited evidence of systematic associations with gender, education and income. This is reassuring evidence for the use of self-reported BMI in studies that use it as an outcome, for example, to analyse socioeconomic gradients in obesity. However, our results suggest a complex structure of non-classical measurement error in BMI, depending on both individuals' and within-household peers' true BMI. This may bias studies that use BMI based on self-reported data as a regressor. Common methods to mitigate reporting error in BMI using predictions from corrective equations do not fully eliminate reporting heterogeneity associated with individual and withinhousehold true BMI. Overall, the presence of non-classical error in BMI highlights the importance of collecting measured body weight and height data in large social science datasets.
    Keywords: BMI,Experiment,Measurement error,Reporting bias
    JEL: I10 C18 C50
    Date: 2021
  22. By: Ho Ka Chan; Taro Toyoizumi
    Abstract: Many experimental observations have shown that the expected utility theory is violated when people make decisions under risk. Here, we present a decision-making model inspired by the prediction of error signals reported in the brain. In the model, we choose the expected value across all outcomes of an action to be a reference point which people use to gauge the value of different outcomes. Action is chosen based on a nonlinear average of anticipated surprise, defined by the difference between individual outcomes and the abovementioned reference point. The model does not depend on non-linear weighting of the probabilities of outcomes. It is also straightforward to extend the model to multi-step decision-making scenarios, in which new reference points are created as people update their expectation when they evaluate the outcomes associated with an action in a cascading manner. The creation of these new reference points could be due to partial revelation of outcomes, ambiguity, or segregation of probable and improbable outcomes. Several economic paradoxes and gambling behaviors can be explained by the model. Our model might help bridge the gap between theories on decision-making in quantitative economy and neuroscience.
    Date: 2021–08

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