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on Experimental Economics |
| By: | Asen Ivanov (Department of Economics, VCU School of Business) |
| Abstract: | Based on an experiment in the lab, we classify behavior in one-shot normal-form games along three important dimensions. The first dimension, which is of main interest, is about whether subjects are ambiguity-loving, ambiguity-neutral, or ambiguity-averse. The second dimension is about whether subjects are risk-loving, risk-neutral, or risk-averse. The third dimension is about whether subjects are naive or strategic. Our main result is that, in our main treatment, 32/46/22 percent of subjects are classified as ambiguity-loving/ambiguity-neutral/ ambiguity-averse. |
| Keywords: | games, experiments, beliefs, ambiguity, risk |
| JEL: | C72 C92 C51 D81 D84 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:vcu:wpaper:0902&r=exp |
| By: | Ruffle, Bradley J. |
| Abstract: | The rise in mega-retailers has contributed to a growing literature on buyer power and large-buyer discounts. According to Rotemberg and Saloner (1986) and Snyder (1998), large buyers' ability to obtain price discounts depends on their relative (rather than absolute) size and the degree of competition between suppliers. I test experimentally comparative statics implications of this theory concerning the number of sellers and the sizes of the buyers in the market. The results track the comparative statics predictions to a surprising extent. Subtle changes in the distribution of buyer sizes or the number of suppliers can create or negate large-buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer-size discounts. Furthermore, the experiments establish the presence of small-buyer premia, not anticipated by the theory. |
| Keywords: | experimental economics; large-buyer discounts; buyer power; seller competition |
| JEL: | C92 D43 |
| Date: | 2009–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16683&r=exp |
| By: | David L. Dickinson; Todd McElroy |
| Abstract: | We administer a unique online version of the Guessing Game where subject responses are collected across all 24 hours of the day. While time-of-day itself does not affect guesses, when combined with a trait-level sleepiness measure and previous night sleep, adverse sleep states lead to responses significantly farther from equilibrium. These results have implications for shift workers and others whose constraints or choices lead to adverse sleep parameters. Key Words: |
| JEL: | C7 C9 J2 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:09-17&r=exp |
| By: | Robin Cubitt; Michalis Drouvelis; Simon Gachter; Ruslan Kabalin |
| Abstract: | In the last thirty years economists and other social scientists investigated people's normative views on principles of distributive justice. Here we study people's normative views in social dilemmas, which underlie many situations of economic and social significance. Using insights from moral philosophy and psychology we provide an analysis of the morality of free riding. We use experimental survey methods to investigate people's moral judgments empirically. We vary others' contributions, the framing ("give-some" vs. "take-some") and whether contributions are simultaneous or sequential. We find that moral judgments depend strongly on others' behaviour; and that failing to give is condemned more strongly than withdrawing all support. |
| Keywords: | moral judgments, framing effects, public goods experiments, free riding |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:09/20&r=exp |
| By: | Jonathan Zinman (Dartmouth College & Innovations for Poverty Action); Dean Karlan (Economic Growth Center, Yale University, Innovations for Poverty Action, MIT Jameel Poverty Action Lab) |
| Abstract: | Microcredit seeks to promote business growth and improve well-being by expanding access to credit. We use a field experiment and follow-up survey to measure impacts of a credit expansion for microentrepreneurs in Manila. The effects are diffuse, heterogeneous, and surprising. Although there is some evidence that profits increase, the mechanism seems to be that businesses shrink by shedding unproductive workers. Overall, borrowing households substitute away from labor (in both family and outside businesses), and into education. We also find substitution away from formal insurance, along with increases in access to informal risk-sharing mechanisms. Our treatment effects are stronger for groups that are not typically targeted by microlenders: male and higher-income entrepreneurs. In all, our results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through the targeted businesses. |
| Keywords: | microfinance, microcredit, microentreprenuership, risk sharing, formal and informal finance |
| JEL: | O1 D1 D2 G2 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:976&r=exp |
| By: | Luigi Mittone; Matteo Ploner |
| Abstract: | We experimentally investigate social effects in a principal-agent setting with incomplete contracts. The strategic interaction scheme is based on the well-known Investment Game (Berg et al., 1995). In our setting four agents (i.e., trustees) and one principal (i.e., trustor) are interacting and the access to choices of peers in the group of trustees is experimentally manipulated. Overall, subjects are positively influenced by peer's choices they observe. However, the positive interaction between choices is not strong enough to raise the reciprocity of those observing at the same level of those whose choices are observed. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:0905&r=exp |
| By: | Peter Duersch (Department of Economics, Universität Heidelberg); Maroš Servátka (Department of Economics and Finance, University of Canterbury) |
| Abstract: | This paper experimentally investigates whether risk-averse individuals punish less if the outcome of punishment is uncertain than when it is certain. Our design includes three treatments: Baseline in which the one-shot prisoner’s dilemma game is played; Certain Punishment in which the prisoner’s dilemma game is followed by a punishment stage allowing subjects to decrease the other player’s payoff by 2 Euros; and Uncertain Punishment in which subjects could decrease the other player’s payoff with a 50% probability by 1 Euro and with a 50% probability by 3 Euros. We find that in all cases the risk-averse subjects are equally likely to cooperate in the prisoner’s dilemma and equally likely to punish in the second stage in either of the two punishment treatments. |
| Keywords: | experiment, prisoner’s dilemma, punishment, risk aversion, uncertainty |
| JEL: | C72 C91 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0485&r=exp |
| By: | Smith, John |
| Abstract: | This paper presents evidence which challenges the view that techniques which are designed to measure the social preferences of subjects can always be accomplished in a nonintrusive manner. We find evidence that such measurements can influence the preferences which they are designed to measure. Researchers often measure social preferences by posing a series of dictator game allocation decisions; we use a particular technique, Social Value Orientation (SVO). In our experiment we vary the order of the SVO measurement and a lager stakes dictator game. We find that subjects with prosocial preferences act even more prosocially when the SVO measurement is administered first, whereas those with selfish preferences are unaffected by the order of the measurement. Additionally, we find evidence that this difference is driven by the presence of choices involving the size of surplus. |
| Keywords: | Other-Regarding Preferences; Social Value Orientation; Dictator Game |
| JEL: | D64 C91 |
| Date: | 2009–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16599&r=exp |
| By: | Spiliopoulos, Leonidas |
| Abstract: | This paper addresses how neural networks learn to play one-shot normal form games through experience in an environment of randomly generated game payoffs and randomly selected opponents. This agent based computational approach allows the modeling of learning all strategic types of normal form games, irregardless of the number of pure and mixed strategy Nash equilibria that they exhibit. This is a more realistic model of learning than the oft used models in the game theory learning literature which are usually restricted either to repeated games against the same opponent (or games with different payoffs but belonging to the same strategic class). The neural network agents were found to approximate human behavior in experimental one-shot games very well as the Spearman correlation coefficients between their behavior and that of human subjects ranged from 0.49 to 0.8857 across numerous experimental studies. Also, they exhibited the endogenous emergence of heuristics that have been found effective in describing human behavior in one-shot games. The notion of bounded rationality is explored by varying the topologies of the neural networks, which indirectly affects their ability to act as universal approximators of any function. The neural networks' behavior was assessed across various dimensions such as convergence to Nash equilibria, equilibrium selection and adherence to principles of iterated dominance. |
| Keywords: | Behavioral game theory; Learning; Global games; Neural networks; Agent-based computational economics; Simulations; Complex adaptive systems; Artificial intelligence |
| JEL: | C45 C70 C73 |
| Date: | 2009–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16765&r=exp |
| By: | Margaretha Buurman (Erasmus University Rotterdam); Robert Dur (Erasmus University Rotterdam); Seth Van den Bossche (TNO Work and Employment) |
| Abstract: | We assess whether public sector employees have a stronger inclination to serve others and are more risk averse than employees in the private sector. A unique feature of our study is that we use revealed rather than stated preferences data. Respondents of a large-scale survey were offered a substantial reward and could choose between a widely redeemable gift certificate, a lottery ticket, or making a donation to a charity. Our analysis shows that public sector employees are significantly less likely to choose the risky option (lottery) and, at the start of their career, significantly more likely to choose the pro-social option (charity). However, when tenure increases, this difference in pro-social inclinations disappears and, later on, even reverses. Our results further suggest that quite a few public sector employees do not contribute to charity because they feel that they already contribute enough to society at work for too little pay. |
| Keywords: | public service motivation; risk aversion; revealed preferences data |
| JEL: | H1 J45 M52 |
| Date: | 2009–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090067&r=exp |
| By: | Robin Hogarth; Natalia Karelaia; Carlos Andrés Trujillo |
| Abstract: | We use a Colombian TV game show to test gender differences in competitive behavior where there is no opportunity for discrimination and females face no genderspecific external constraints. Each game started with six contestants who had to answer general knowledge questions in private. There were five rounds of questions and, at the end of each, one participant was eliminated. Despite equality in starting numbers, women earn less than men and exit the game at a faster rate. In particular, there are more voluntary withdrawals by women than men. We draw an analogy between the game and the process by which employees rise through the levels of a corporation. As such, we note that “glass ceilings” may result, in part, from women’s own behavior and this raises the issue of how women are socialized to behave. At the same time, our results illustrate that maintaining and promoting gender diversity at the lower/middle ranks of organizations is necessary to obtain gender diversity at the top. |
| Keywords: | Discrimination, TV game shows, gender differences, glass ceilings |
| JEL: | C93 E24 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1165&r=exp |
| By: | Robin Pope; Reinhard Selten; Sebastian Kube |
| Abstract: | This paper introduces a new theoretic entity, a nominalist heuristic, defined as a focus on prominent numbers, indices or ratios. Abstractions used in the evaluation stage of decision making typically involve nominalist heuristics that are incompatible with expected utility theory which excludes the evaluation stage, and are also incompatible with prospect theory which assumes that, while the evaluation procedure can involve systematic mistakes, the overall decision situation is nevertheless sufficiently simple: 1) for economists and psychologists to identify what is a mistake, and 2) to be compatible with maximisation. But in the typical complex situation giving rise to nominalist heuristics neither 1) nor 2) hold, and therefore what is required is a fundamentally different class of models that allow for the progressive anticipated changes in knowledge ahead faced under risk and uncertainty, namely models under the umbrella of SKAT, the Stages of Knowledge Ahead Theory. A sequel paper. Pope et al 2009b, shows field and laboratory evidence of heuristics in the form of prominent numbers entering exchange rate determination. |
| Keywords: | nominalism, money illusion, heuristic, unpredictability, experiment, SKAT the Stages of Knowledge Ahead Theory, prominent numbers, prominent indices, prominent ratios, equality, historical benchmarks, complexity, decision costs, evaluation |
| JEL: | D80 D81 F31 F33 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse17_2009&r=exp |
| By: | Robin Pope; Reinhard Selten; Sebastian Kube; Jürgen von Hagen |
| Abstract: | The prior paper in this sequel, Pope (2009) introduced the concept of a nominalist heuristic, defined as a focus on prominent numbers, indices or ratios. In this paper the concept is used to show three things in how scientists and practitioners analyse and evaluate to decide (conclude). First, in constructing theories such as purchasing power and interest parity to predict exchange rates and to advocate floating exchange rates, economists unwittingly employ nominalist heuristics. Second, nominalist heuristics have influenced actual exchange rates through the centuries, and this finding is replicated in the laboratory. Third, nominalist heuristics are incompatible with expected utility theory which excludes the evaluation stage, and are also incompatible with prospect theory which assumes that, while the evaluation stage can involve systematic mistakes, the overall decision situation is ultra simple. It is so simple that: a) economists and psychologists can mechanically model and identify what is a mistake, and b) decision makers can maximise. However, contrary to prospect theory, in the typical complex situation, neither a) nor b) holds. Assuming that a) and b) hold has resulted in the 1988 crisis from applying the Black Scholes formulae to forward exchange rates and contributed to sequel financial crises including that of 2007-2009. What is required is a fundamentally different class of models that allow for the progressive anticipated changes in knowledge ahead faced under risk and uncertainty, namely models under the umbrella of SKAT, the Stages of Knowledge Ahead Theory. The paper’s findings support a single world currency rather than variable unpredictable exchange rates subjected to the vagaries of how prominent numbers, ratios and indices influence events via the models of scientists and practitioners. |
| Keywords: | nominalism, money illusion, heuristic, unpredictability, experiment, SKAT the Stages of Knowledge Ahead Theory, prominent numbers, prominent indices, prominent ratios, transparent policy, nominal equality, historical benchmarks, complexity, decision costs, evaluation, maximisation, Black Scholes, Lehmann Brothers, sub-prime crisis, central bank swaps |
| JEL: | D80 D81 F31 F33 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse18_2009&r=exp |
| By: | Dan Usher (Queen's University) |
| Abstract: | We know that people strike bargains and that civilized life could not proceed otherwise. We do not know how bargains are struck. We have no explanation of bargaining, comparable to the general equilibrium in the economy, accounting for essential features of bargaining as we know it with reference to universal self-interested behaviour subject only to economy-wide rules. This claim is supported here in a survey of the principal models of bargaining: as a reflection of a shared sense of fairness, as an imposed sequence of offers, as a source of transaction cost and as a species of conflict. Also discussed is the dual role of bargaining in politics as a necessary complement to voting and as an impediment to the exploitation of minority groups. |
| Keywords: | Bargaining, Comprimise, Fairness, Self-interest, Transaction cost, conflict |
| JEL: | C7 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1208&r=exp |
| By: | David L. Dickinson |
| Abstract: | People differ in their diurnal (time-of-day) preferences—some are morning-types and others are evening-types. These differences are explored in a unique experiment design in which subjects are randomly assigned to produce paper airplanes at either 8:00 a.m. or 10:00 p.m. Our results show that evening-types at their more optimal time-of-day (10:00 p.m.) produce planes that fly statistically significantly farther than those produced by morning-types at their more optimal time-of-day (8:00 a.m.). Evidence also indicates that planes produced by evening-types fly straighter. These results have implications for hiring practices and shift work design in aeronautical engineering and aircraft production. Key Words: |
| JEL: | C9 J22 J24 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:09-16&r=exp |