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on Experimental Economics |
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Issue of 2011‒09‒05
twelve papers chosen by |
| By: | Barmettler, Franziska (Foundation for Global Sustainability); Fehr, Ernst (University of Zurich); Zehnder, Christian (University of Lausanne) |
| Abstract: | Social preference research has received considerable attention in recent years. Researchers have demonstrated that the presence of people with social preferences has important implications in many economic domains. However, it is important to be aware of the fact that the empirical basis of this literature relies to a large extent on experiments that do not provide anonymity between experimenter and subject. It has been argued that this lack of experimenter-subject anonymity may create selfish incentives to engage in seemingly other-regarding behavior. If this were the case these experiments would overestimate the importance of social preferences. Previous studies provide mixed results and methodological differences within and across studies make it difficult to isolate the impact of experimenter-subject anonymity on prosocial behavior. In this paper we use a novel procedure that allows us to examine the impact of the exact same ceteris-paribus variation in anonymity on behavior in three of the most commonly used games in the social preference literature. Our data does not support the hypothesis that introducing experimenter-subject anonymity affects observed prosocial behavior. We do not observe significant effects of experimenter-subject anonymity on prosocial behavior in any of our games. |
| Keywords: | laboratory experiments, anonymity, scrutiny, prosocial behavior |
| JEL: | C91 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5925&r=exp |
| By: | David Gill; Victoria Prowse |
| Abstract: | We present experimental evidence which sheds new light on why women may be less competitive than men. Specifically, we observe striking differences in how men and women respond to good and bad luck in a competitive environment. Following a loss, women tend to reduce effort, and the effect is independent of the monetary value of the prize that the women failed to win. Men, on the other hand, reduce effort only after failing to win large prizes. Responses to previous competitve outcomes explain about 11% of the variation that we observe in women’s efforts, but only about 4% of the variation in the effort of men, and differential responses to luck account for about half of the gender performance gap in our experiment. These findings help to explain both female underperformance in environments with repeated competition and the tendency for women to select into tournaments at a lower rate than men. |
| Keywords: | Real effort experiment, gender differences, gender gap, competition aversion, tournament, luck, win, loss, competitive outcomes |
| JEL: | C91 J16 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:564&r=exp |
| By: | David Gill; Rebecca Stone |
| Abstract: | Teams are becoming increasingly important in work settings. We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve. Team members find it painful to receive less than their perceived entitlement, while receiving more may induce pleasure or pain depending on whether preferences exhibit desert elation or desert guilt. Our notion of desert generalizes distributional concern models to situations in which effort choices affect the distribution perceived to be fair; in particular, desert nests inequity aversion over money net of effort costs as a special case. When identical teammates share output equally, desert guilt generates a continuum of symmetric equilibria. Equilibrium effort can lie above or below the level in the absence of desert, so desert guilt generates behavior consistent with both positive and negative reciprocity and may underpin social norms of cooperation. |
| Keywords: | Desert, deservingness, equity, inequity aversion, loss aversion, reference-dependence preferences, guilt, reciprocity, social norms, team production |
| JEL: | D63 J33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:563&r=exp |
| By: | Brice Corgnet (Economic Science Institute, Chapman University); Roberto Hernán-González (Economic Science Institute, Chapman University) |
| Abstract: | We study the effect of participative decision making in an experimental principalagent game, where the principal can consult the agent’s preferred option regarding the task to be undertaken in the final stage of the game. We show that consulting the agent was beneficial to principals as long as they followed the agent’s choice. Ignoring the agent’s choice was detrimental to the principal as it engendered negative emotions and low levels of transfers. Nevertheless, the majority of principals were reluctant to change their mind and adopt the agent’s proposal. Our results suggest that the ability to change one’s own mind is an important dimension of managerial success. |
| Keywords: | organizational behavior, participative decision making, principal-agent model |
| JEL: | C92 D23 D82 E2 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:11-04&r=exp |
| By: | Juan-Camilo Cárdenas; Anna Dreber; Emma von Essen; Eva Ranehill |
| Abstract: | We explore gender differences in preferences for competition and risk among children aged 9-12 in Colombia and Sweden, two countries differing in gender equality according to macro indices. We include four types of tasks that vary in gender stereotyping when looking at competitiveness: running, skipping rope, math and word search. We find that boys and girls are equally competitive in all tasks and all measures in Colombia. Unlike the consistent results in Colombia, the results in Sweden are mixed, with some indication of girls being more competitive than boys in some tasks in terms of performance change, whereas boys are more likely to choose to compete in general. Boys in both countries are more risk taking than girls, with a smaller gender gap in Sweden. |
| Date: | 2011–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:008910&r=exp |
| By: | Alessia Isopi (School of Economics, University of Nottingham); Daniele Nosenzo (School of Economics, University of Nottingham); Chris Starmer (School of Economics, University of Nottingham) |
| Abstract: | This paper reports an experiment designed to test whether prior consultation within a group affects subsequent individual decision making in tasks where demonstrability of correct solutions is low. In our experiment subjects considered two paintings created by two different artists and were asked to guess which artist made each painting. We observed answers given by individuals under two treatments: in one, subjects were allowed the opportunity to consult with other participants before making their private decisions; in the other there was no such opportunity. Our primary findings are that subjects in the first treatment evaluate the opportunity to consult positively but they perform significantly worse and earn significantly less. |
| Keywords: | Consultation; Decision making; Group decisions; Individual decisions |
| JEL: | C91 C92 D80 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2011-08&r=exp |
| By: | Lotito, Gianna; Migheli, Matteo; Ortona, Guido |
| Abstract: | Our experiment aims at studying the impact of two types of relational goods on the voluntary contributions to the production of a public good, i.e. acquaintance among the contributors and having performed a common work before the experiment. We implement two treatments with 128 participants from two different groups. In the first treatment the subjects are left talking in a room before the experiment (cheap talk treatment); they are not suggested any particular topic to talk about, nor are they requested to perform any activity in particular. The second treatment involves the performance of a common work (namely, the computation of some indices of economic performance of three companies, based on their balance sheets). The two groups of subjects are composed either by people with or without previous acquaintance. An equal number of subjects from each of these groups is then allocated to either treatment. After that the subjects played a standard 10-rounds public goods game in groups of 4. The groups were gender-homogeneous. This allows us also to inquire for the possible presence of a gender effect in our experiment. Our results show that: 1) both common work and previous acquaintance increase the average contribution to the public good, 2) there is a relevant gender effect with women contributing more or less than men, depending on the treatment. Therefore, we conclude that relational goods are important to enhance cooperation, that acquaintance and working together are rather complements than substitutes, and that different relational goods produce different effects on cooperation. Also, we find further evidence for women's behaviour to be more context-specific than men's. |
| Keywords: | relational goods; public goods experiments; gender effect |
| JEL: | C91 H41 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:160&r=exp |
| By: | Pfajfar, D.; Zakelj, B. (Tilburg University, Center for Economic Research) |
| Abstract: | Using laboratory experiments within a New Keynesian macro framework, we explore the formation of inflation expectations and its interaction with monetary policy design. The central question in this paper is how to design monetary policy in the environment characterized by heterogeneous expectations. Rules that use actual rather than forecasted inflation produce lower inflation variability and alleviate expectational cycles. Degree of responsiveness to deviations of inflation from its target in the Taylor rule produces nonlinear effects on inflation variability. We also provide considerable support for the existence of heterogeneity of inflation expectations and show that a significant proportion of subjects are rational in our experiment. However, most subjects rather than using a single model they tend to switch between alternative models. |
| Keywords: | Laboratory Experiments;Inflation Expectations;New Keynesian Model;Monetary Policy Design. |
| JEL: | C91 C92 E37 E52 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011091&r=exp |
| By: | Peter Bardsley; Nisvan Erkal; Nikos Nikiforakis; Tom Wilkening |
| Abstract: | This paper investigates the relationship between firm longevity and rat races in an environment where long-lived firms are operated by overlapping generations of short-lived players. We first present a complete information model in which workers in the young generation are offered employment contracts designed by the firms' owners who belong to the old generation. When old, employed workers are granted ownnership rights as long as the firm continues to operate. We test the theoretical predictions of the model in a laboratory experiment. In line with our model's predictions, as firm longevity increases, the recursive nature of the contracts leads to a rat race characterized by low wages, high effort levels, and rent dissipation |
| Keywords: | Overlapping-generations models; Recursive contracts; Rat races; Experiments |
| JEL: | C91 D02 D21 D86 D92 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1122&r=exp |
| By: | Michalis Drouvelis (University of Birmingham); Alejandro Saporiti (University of Manchester); Nicolaas J. Vriend (Queen Mary, University of London) |
| Abstract: | We study both theoretically and experimentally the complete set of Nash equilibria of a classical one-dimensional, majority rule election game with two candidates, who might be interested in power as well as in ideology, but not necessarily in the same way. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and 'probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a series of laboratory experiments, as we observe convergence to the Nash equilibrium values at the aggregate as well as the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory. |
| Keywords: | Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium, Experimental evidence |
| JEL: | C72 C90 D72 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp682&r=exp |
| By: | Stefan Trautmann; Razvan Vlahu |
| Abstract: | This paper experimentally studies the impact of uncertainty about bank and borrower fundamentals on loan repayment. We find that solvent borrowers are more likely to default strategically when stricter disclosure creates common knowledge about bank weakness. Borrowers are also less likely to repay in the presence of higher uncertainty regarding other. Borrowers’ financial health, regardless of disclosure rules. We show that uncertainty about fundamentals changes the risk dominance properties of the coordination problem, and that these changes subsequently explain borrowers’ default. For the individual borrower, loss aversion and negative past experiences reduce repayment, suggesting that bank failure can be contagious in times of distress. |
| Keywords: | credit market; strategic default; loss aversion; risk dominance; transparency |
| JEL: | D81 G21 G28 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:312&r=exp |
| By: | Cho, In Soo; Orazem, Peter |
| Abstract: | The link between measured risk aversion and the decision to become an entrepreneur is well established, but the link between risk preferences and entrepreneurial success is not. Standard theoretical models of occupational choice under uncertainty imply a positive correlation between an individual’s degree of risk aversion and the expected return from an entrepreneurial venture at the time of entry. Because the expected return is the risk neutral equivalent value, a higher expected return implies a higher survival probability, and so more risk averse entrepreneurs should survive more frequently than their less risk averse counterparts. We test that prediction using successive entry cohorts of young entrepreneurs in the National Longitudinal Survey of Youth 1979 (NLSY79). The empirical results soundly reject the prediction: the most successful entrepreneurs are the least risk averse. This surprising finding calls into question the interpretation of common measures of risk aversion as measures of taste for risk. Instead, measured risk attitudes perform as if they are indicators of entrepreneurial ability– the least risk averse are apparently those who can best assess and manage risks. Indeed, our interpretation is consistent with the work of recent experimental studies that find that the less risk averse have higher cognitive ability. |
| JEL: | J24 L24 M1 |
| Date: | 2011–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:34162&r=exp |