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on Experimental Economics |
| By: | Robert S. Gazzale (Williams College); Julian Jamison (Yale University); Alexander Karlan (Williams College); Dean S. Karlan |
| Abstract: | We conduct a two-phase laboratory experiment, separated by several weeks. In the first phase, we conduct urn games intended to measure ambiguity aversion on a representative population of undergraduate students. In the second phase, we invite the students back with four different solicitation treatments, varying in the ambiguity of information regarding the task and the payout of the laboratory experiment. We find that those who return do not differ from the overall pool with respect to their ambiguity version. However, no solicitation treatment generates a representative sample. The ambiguous task treatment drives away the ambiguity averse disproportionally, and the detailed task treatment draws in the ambiguity averse disproportionally. |
| Keywords: | laboratory experimental methods, experimental economics, laboratory selection effects |
| JEL: | B40 C81 C90 C91 D80 D83 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2009-01&r=exp |
| By: | Robert S. Gazzale (Williams College); Lina Walker |
| Abstract: | We conduct a neutral-context laboratory experiment to systematically investigate the role of the hit-by-bus concern in explaining the annuitization puzzle: the low rate of retirement-asset annuitization relative to the predictions of standard models. We vary endowed asset (annuity vs. stock of wealth vs. no explicit endowment), and find a strong endowment effect. Furthermore, we find that the ordering of survival risks matters. Compared to a frame in which a single draw from a known distribution determines survival outcome, annuity choice is lower when subjects must sequentially survive early periods to reach periods in which the annuity dominates. We conclude with policy implications. |
| Keywords: | experimental economics, behavioral, retirement, annuities |
| JEL: | C91 D14 D81 G22 J26 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2009-02&r=exp |
| By: | Goppelsroeder, Marie |
| Abstract: | In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry. |
| Keywords: | Collusion; Entry; Experiments |
| JEL: | L13 C92 C72 L40 |
| Date: | 2009–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14707&r=exp |
| By: | Hoppe, Eva I.; Schmitz, Patrick W. |
| Abstract: | A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the principal trades off ex post efficiency in the bad state of nature against a larger profit in the good state of nature. We report about an experiment with 508 participants designed to test whether this fundamental trade-off is actually relevant. In particular, we investigate settings with both exogenous and endogenous information structures. We find that theory is indeed a useful predictor for the relative magnitudes of the principals' offers, the agents' information gathering decisions, and the occurrence of ex post inefficiencies. |
| Keywords: | adverse selection; agency theory; experiment; information gathering |
| JEL: | C72 C91 D82 D86 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7252&r=exp |
| By: | Abigail Barr; Chris Wallace; Jean Ensminger; Juan Camilo Cárdenas |
| Abstract: | Data from three bargaining games—the Dictator Game, the Ultimatum Game, and the Third-Party Punishment Game—played in 15 societies are presented. The societies range from US undergraduates to Amazonian, Arctic, and African hunter-gatherers. Behaviour within the games varies markedly across societies. The paper investigates whether this behavioural diversity can be explained solely by variations in inequality aversion. Combining a single parameter utility function with the notion of subgame perfection generates a number of testable predictions. While most of these are supported, there are some telling divergences between theory and data: uncertainty and preferences relating to acts of vengeance may have influenced play in the Ultimatum and Third- Party Punishment Games; and a few subjects used the games as an opportunity to engage in costly signalling. |
| Date: | 2009–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:005427&r=exp |
| By: | José Luis Ferreira; Praveen Kujal; Stephen Rassenti |
| Abstract: | We test the strategic motive to sell forward in experimental Cournot duopoly and quadropoly environments with either a finite (exogenous close) or an infinite (endogenous close) number of forward markets. In the exogenous close case experienced subjects do not avail themselves of the forward markets and production mostly occurs in the spot market phase. In a forward market duopoly experienced subjects achieve nearly the monopoly output level. For the quadropoly output levels are more competitive and are near the Cournot Nash equilibrium. In both cases output produced is much less than the Allaz-Vila (1993) prediction. The results with inexperienced subjects, however, are in line with theory and as reported in Le-Coq and Orzen (2006). We implement the case of infinitely many forward periods using the endogenous close rule. In this case the results both for a forward market duopoly and quadropoly are much more competitive both with inexperienced and experienced subjects. Unlike the exogenous stopping rule, under the endogenous rule subjects sell forward in the forward markets and find it hard to coordinate their actions. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we092616&r=exp |
| By: | Khan, Hayat |
| Abstract: | Taking note of the wide variety and growing list of models in the literature to explain patterns of behavior observed in laboratory experiments, this paper identifies two tests, the Variety Test (ability of a model to explain outcomes under variety or alternative scenarios) and the Psychological Test (ability of a model to conform to psychological intuition), that can be used to judge any model of other regarding preferences. It is argued that for a mathematical model to qualify as a social welfare function, it must simultaneously pass the two tests. It is shown that none of the models proposed to date passes these two tests simultaneously. The paper proposes a generalized model of inequity aversion which parsimoniously explains interior solution in the dictator game and dynamics of outcomes in other games. The paper postulates that ones idea of equitable distribution is state dependent where the state is determined by psychological and structural parameters. The state could be fair, superior or inferior. Individuals in a fair state have zero equity-bias and split the pie evenly. Those in a superior (inferior) state have positive (negative) equity-bias and value more (less) than fair distribution as equitable distribution. Given psychological tendencies of an individual, every experimental design/structure assigns one of the three states to players which lead to individual specific valuation of equity. Prediction about outcomes across different experiments and designs can be made through predicting its impact on equity-bias. All aspects of an individual’s behavior, such as altruism, fairness, reciprocity, self-serving bias, kindness, intentions etc, manifest itself in equity-bias. The model therefore is all-encompassing. |
| Keywords: | Experimental Economics; Social Preferences; Other Regarding Preferences; Inequity aversion |
| JEL: | D63 A13 C92 C0 D64 C91 |
| Date: | 2009–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14701&r=exp |
| By: | Yin-Wong Cheung (University of California, Santa Cruz); Daniel Friedman (University of California, Santa Cruz) |
| Abstract: | We examine speculative attacks in a controlled laboratory environment featuring continuous time, size asymmetries, and varying amounts of public information. Attacks succeeded in 233 of 344 possible cases. When speculators have symmetric size and access to information: (a) weaker fundamentals increase the likelihood of successful speculative attacks and hasten their onset, and (b) contrary to some theory, success is enhanced by public access to information about either the net speculative position or the fundamentals. The presence of a larger speculator further enhances success, and experience with large speculators increases small speculators¡¦ response to the public information. However, giving the large speculator increased size or better information does not significantly strengthen his impact. |
| Keywords: | Currency Crisis, Speculative Attack, Laboratory Experiment, Coordination Game, Pre-emption, Large Player |
| JEL: | F30 C73 C92 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:072009&r=exp |
| By: | Almenberg, Johan (Dept. of Economics, Stockholm School of Economics); Dreber, Anna (Dept. of Economics, Stockholm School of Economics) |
| Abstract: | We designed an experiment that examines how knowledge about the price of a good, and the time at which the information is received, affects how the good is experienced. The good in question was wine, and the price was either high or low. Our results suggest that hosts offering wine to guests can safely reveal the price: much is gained if the wine is expensive, and little is lost if it is cheap. Disclosing the high price before tasting the wine produces considerably higher ratings, although only from women. Disclosing the low price, by contrast, does not result in lower ratings. Our finding indicates that price not only serves to clear markets, it also serves as a marketing tool; it influences expectations that in turn shape a consumer’s experience. In addition, our results suggest that men and women respond differently to attribute information. |
| Keywords: | Price-Quality Heuristic; Attribute Information; Role of Expectations; Marketing; Blind Tasting; Wine. |
| JEL: | C91 D83 M31 |
| Date: | 2009–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0717&r=exp |
| By: | Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Qin, Ping (Department of Economics, School of Business, Economics and Law, Göteborg University); Sutter, Matthias (Department of Public Finance, University of Innsbruck) |
| Abstract: | We study household decision making in a high-stakes experiment with a random sample of households in rural China. Spouses have to choose between risky lotteries, first separately and then jointly. We find that spouses’ individual risk preferences are more similar the richer the household and the higher the wife’s relative income contribution. A couple’s joint decision is typically determined by the husband, but women who contribute relatively more to the household income, women in high-income households, women with more education than their husbands, and women with communist party membership have a stronger influence on the joint decision.<p> |
| Keywords: | Household decision making; Risk; Field experiment; China |
| JEL: | C91 C92 C93 D10 |
| Date: | 2009–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0356&r=exp |
| By: | Ciro Avitabile (University College London, University of Naples Federico II and CSEF) |
| Abstract: | We present evidence on how the requirement to attend health and nutrition sessions affects the health behaviour of adults living in households targeted by a nutritional programme in rural Mexico. The evaluation sample of the Programa de Apoyo Alimentario (PAL) is unique in having four different treatment types, which are randomly assigned to four different groups of localities, with one group designated to receive transfers but without any requirement to attend health and nutrition courses. We find that attendance at educational sessions does not affect drinking and smoking behaviour, but significantly reduces the probability of having a large waist circumference among women. We provide evidence that attending health and nutrition related courses determines a large drop in the probability that adult women have excessive calorie intake. The results suggest that lack of information can explain, at least in part, the impressive rise in female obesity in developing countries. |
| Keywords: | Adult Health, Conditional Cash Transfers, Information, PAL |
| JEL: | I12 O12 |
| Date: | 2009–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:222&r=exp |