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on Experimental Economics |
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Issue of 2011‒11‒07
seventeen papers chosen by |
| By: | Maria Bigoni (Dipartimento di Scienze Economiche, Universita di Bologna); Davide Dragone (Dipartimento di Scienze Economiche, Universita di Bologna and Max Plank Institute of Economics, Jena) |
| Abstract: | In this paper we treat instructions as an experimental variable. Using a public good game, we study how the instructions' format affects the participants' understanding of the experiment, their speed of play and their experimental behavior. We show that longer instructions do not significantly improve the subjects' understanding of the experiment; on-screen instructions shorten average decision times with respect to on-paper instructions, and requiring forced inputs reduces waiting times, in particular for the slowest subjects. Consistent with cognitive load theory, we find that short, on-screen instructions which require forced inputs improve on subjects' comprehension and familiarity with the experimental task, and they contribute to reduce both decision and waiting times without affecting the overall pattern of contributions. |
| Keywords: | Cognitive load theory, Comprehension, Distraction, Experimental instructions |
| JEL: | C72 C90 H41 |
| Date: | 2011–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-049&r=exp |
| By: | Fochmann, Martin (University of Magdeburg); Weimann, Joachim (University of Magdeburg) |
| Abstract: | We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects' income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple at taxes are particularly prone to being misperceived because their simplicity reduces the tax salience. |
| Keywords: | field experiment, real effort experiment, tax perception, tax salience, tax experience, behavioral economics |
| JEL: | C91 D14 H24 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6049&r=exp |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Robert-Vincent Joule (LPS-AIX - Laboratoire de Psychologie Sociale - Université de Provence - Aix-Marseille I : EA849); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming) |
| Abstract: | Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies - people tend to overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses an experimental design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both IV and HG values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an induced-value, private good context, and (ii) persists in homegrown values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by "preference formation" rather than "preference elicitation". In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid "zero" to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them. |
| Keywords: | Auctions; Demand revelation; Experimental valuation; Hypothetical bias |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00526134&r=exp |
| By: | Ondrej Rydval (Max Planck Institute of Economics, Jena) |
| Abstract: | We extend evidence on the interaction between financial incentives and cognitive abilities by focusing on the effect of task-specific abilities. In a memory-intensive task situated in an accounting context, the effect of accounting education on performance is stronger under financial incentives as compared to flat rate pay. Subjects with more accounting education respond stronger to financial incentives. Hence using incentives efficiently may involve targeting them at high-ability individuals. More generally, taking into account the incentive-ability interaction seems important when interpreting observed behavior in cognitively demanding lab and field economic environments. |
| Keywords: | Financial incentives, Cognitive ability, Performance, Experiment |
| JEL: | C81 C91 C93 D83 |
| Date: | 2011–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-050&r=exp |
| By: | Peter Kuhn (Department of Economics, University of California, Santa Barbara, 2127 North Hall, Santa Barbara, CA 93106-9210); Marie-Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | Are women disproportionately attracted to work environments where cooperation rather than competition is rewarded ? This paper reports the results of a real-effort experiment in which participants choose between an individual compensation scheme and a team-based payment scheme. We find that women are more likely than men to select team-based compensation in our baseline treatment, but women and men join teams with equal frequency when we add an efficiency advantage to team production. Using a simple structural discrete choice framework to reconcile these facts, we show that three elements can account for the observed patterns in the team-entry gender gap : (1) a gender gap in confidence in others (i.e. women are less pessimistic about their prospective teammates’ relative ability), (2) a greater responsiveness among men to instrumental reasons for joining teams, and (3) a greater “pure” preference for working in a team environment among women. |
| Keywords: | gender, cooperation, self-selection, confidence, experiment |
| JEL: | C91 J16 J24 J31 M5 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1127&r=exp |
| By: | Bin Xu (Public Administration College, Zhejiang Gongshang University and Experimental Social Science Laboratory, Zhejiang University.); Bram Cadsby (Department of Economics, University of Guelph.); Liangcong Fan (College of Public Administration, Zhejiang University.); Fei Song (Ted Rogers School of Management, Ryerson University.) |
| Abstract: | In this study, we examine the effectiveness of the individual-punishment mechanism in larger groups, comparing groups of four to groups of 40 participants. We find that the individual punishment mechanism is remarkably robust when the MPCR is held constant despite the coordination problems inherent in an institution relying on decentralized individual punishment decisions in the context of a larger group. This reflects increased per-capita expenditures on punishment that offset the greater coordination difficulties in the larger group. However, if the marginal group return stays constant, resulting in an MPCR that shrinks with group size, no such offset occurs and punishment loses much but not all of its effectiveness at encouraging voluntary contributions to a public good. |
| Keywords: | Experiment, Public Good, Punishment, Large Groups |
| JEL: | C91 H41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2011-10.&r=exp |
| By: | Dietmar Fehr; Frank Heinemann; Aniol Llorente-Saguer |
| Abstract: | We present an experiment in which extrinsic information (signals) may generate sunspot equilibria. The underlying coordination game has a unique symmetric non-sunspot equilibrium, which is also risk-dominant. Other equilibria can be ordered according to risk dominance. We compare treatments with different salient, but extrinsic signals. By increasing the precision of private signals, we manipulate the available public information, which allows us to measure the force of extrinsic signals. We also vary the number of signals and combine public and private signals, allowing us to see how subjects aggregate available (and possibly irrelevant) information. Results indicate that sunspot equilibria emerge naturally if there are salient (but extrinsic) public signals. However, salient private signals of high precision may also cause sunspot-driven behavior, even though this is no equilibrium. The higher the precision of signals and the easier they can be aggregated, the more powerful they are in dragging behavior away from the risk-dominant to risk-dominated strategies. Sunspot-driven behavior may lead to welfare losses and exert negative externalities on agents, who do not receive extrinsic signals. |
| Keywords: | coordination games, strategic uncertainty, sunspot equilibria, irrelevant information |
| JEL: | C72 C92 D84 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2011-070&r=exp |
| By: | Chen, Chia-Ching; Chiu, I-Ming; Smith, John; Yamada, Tetsuji |
| Abstract: | Although there is an increasing interest in examining the relationship between cognitive ability and economic behavior, less is known about the relationship between cognitive ability and social preferences. We investigate the relationship between strongly incentivized measures of intelligence and measures of social preferences. We have data on a series of small-stakes dictator-type decisions, known as Social Value Orientation (SVO), in addition to choices in a larger-stakes dictator game. We also have access to the grade point averages (GPA) and Scholastic Aptitude Test (SAT) outcomes of our subjects. We find that subjects who perform better on the math portion of the SAT are more generous in both the dictator game and the SVO measure. By contrast we find that subjects with a higher GPA are more selfish in the dictator game and more generous according to the SVO. We also find that the consistency of the subjects is related to GPA but we do not find evidence that it is related to either portion of the SAT. |
| Keywords: | dictator game; Social Value Orientation; altruism; cognitive ability |
| JEL: | D64 C91 |
| Date: | 2011–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34438&r=exp |
| By: | Abigail Barr (Institute for Fiscal Studies and University of Oxford); Justine Burns; Luis Miller; Ingrid Shaw |
| Abstract: | <p>Issues of inequality, distribution and redistribution are commanding progressively more attention in the minds of not only world leaders, politicians, and academics but also of ordinary people. So, what constitutes distributive justice in the minds of ordinary people? The philosophical literature offers several alternative principles of distributive justice. But which of these, if any, do ordinary people adopt as the principle against which to judge their own and other people's and entities' outcomes and actions? </p><p> </p><p>This paper presents the findings from two experiments designed to test the hypothesis that individuals' notions of distributive justice are associated with their economic status relative to others within their own society. In the experiments, each participant played a specially designed distribution game. This game allowed us to establish whether and to what extent the participants perceived inequalities owing to differences in productivity rather than luck as just and, hence, not in need of redress. A type of participant that distinguished between inequalities owing to productivity and luck, redressing the latter and not or to a lesser extent the former, is said to be subject to an earned endowment effect. Drawing on previous work in both economics and psychology, we hypothesised that the richer members of any society would be more likely to be subject to an earned endowment effect, while the poorer members would be more inclined towards redistribution irrespective of whether the inequality was owing to productivity or luck. </p><p> </p><p>We conducted our first experiment in the UK. We selected unemployed residents of one city to represent low economic status individuals and student and employed residents of the same city to represent relatively high economic status individuals. We found a statistically significant earned endowment effect among the students and employed and no effect among the unemployed. The difference between the unemployed and the others was also statistically significant. </p><p>Our second experiment was designed to test the generalizability of the findings from our first. It was conducted in Cape Town, South Africa. Exploiting the fact that Cape Town is home to one of the continent's best universities, we built a participant sample that was highly comparable to the UK sample in many regards. However, the states of employment and unemployment are less distinct in South Africa as compared to the UK and a number of interventions are in place to ensure that the student body of the University of Cape Town includes young people from not only rich and middle income but also poorer households. So, in South Africa we chose to rely on responses to a survey question to distinguish between high and low economic status individuals. The findings from this second experiment also supported the hypothesis; among individuals who classified their households as rich or high or middle income there was a statistically significant earned endowment effect, among individuals who classified their households as poor or low income there was not and the different between the two participant types was significant. </p><p> </p><p>We conclude that individuals' notions of distributive justice are associated with their relative economic status within society and that this is a generalizable result.</p> |
| Keywords: | Distributive Justice; inequality; laboratory experiments. |
| JEL: | D63 C91 C93 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:11/19&r=exp |
| By: | Matthew Pearson; Burkhard Schipper |
| Abstract: | In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 subjects, we scan also the right hand of each subject. We study how the ratio of the length of the index and ring fingers (2D:4D) of the right hand, a measure of prenatal hormone exposure, is correlated with bidding behavior and total profits. 2D:4D has been reported to predict competitiveness in sports competition (Manning and Taylor, 2001, and Hoenekopp, Manning, and Mueller, 2006), risk aversion in lottery tasks (Dreber and Hoffman, 2007, Garbarino et al., 2010), and the average profitability of high-frequency traders in financial markets (Coates, Gurnell, and Rustichini, 2009). We do not find any significant correlation between 2D:4D on either bidding or profits. However, there might be racial differences in the correlation between 2D:4D and bidding and profits. |
| Keywords: | Hormones, Digit ratio, 2D:4D, Risk behavior, Competition, Competitive behavior, Auctions, Bidding, Endocrinological economics |
| JEL: | C72 C91 C92 D44 D81 D87 |
| URL: | http://d.repec.org/n?u=RePEc:cda:wpaper:11-9&r=exp |
| By: | Meyer, E.; Van Klaveren, C. |
| Abstract: | Policies that aim at improving student achievement frequently increase instructional time, for example by means of an extended day program. There is, however, hardly any evidence that these programs are effective, and the few studies that allow causal inference indicate that we should expect neutral to small effects of such programs. This study conducts a randomized field experiment to estimate the effect of an extended day program in seven Dutch elementary schools on math and reading achievement. The empirical results show that this three-month program had a modest but non-significant effect on math, and no significant effect on reading achievement. |
| Keywords: | Extended Day; Increased Instructional Time; Random Assignment; Field Experiment |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:tir:wpaper:40&r=exp |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason Shogren (Departement of Economics and Finance, University of Wyoming - University of Wyoming); Adam Zylbersztejn (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | We study the simultaneous move version of a coordination game in which failures arise due to the use (and fear) of weakly dominated strategies. Existing evidence shows neither cheap talk communication between players nor historical information on past decisions nor even repetition-based learning are able to implement the efficient outcome. We study the effect of one addition to the design: subjects sign a truth-telling oath before participating to the game with cheap-talk communication. We find oath significantly improves the truthfulness of messages sent, as well as helps eliminating weakly dominated actions. This change however has very few consequences on coordination, because receivers do not adjust their own strategies for this change. |
| Keywords: | Coordination game; Cheap talk communication; Oath |
| Date: | 2011–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00635801&r=exp |
| By: | Keser, Claudia; Suleymanova, Irina; Wey, Christian |
| Abstract: | We examine a technology adoption game with network effects in which coordination on technology A and technology B constitute a Nash equilibrium. Coordination on technology B is assumed to be payoff-dominant. We define a technology's critical mass as the minimum share of users necessary to make the choice of this technology a best response for any remaining user. We show that the technology with a lower critical mass is risk-dominant and is chosen by the maximin criterion. We present experimental evidence that both pay-off dominance and risk dominance explain participants' choices. The relative riskiness of a technology can be proxied using technologies' critical masses or stand-alone values. -- |
| Keywords: | Network Effects,Critical Mass,Coordination,Riskiness |
| JEL: | C72 C91 D81 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:33&r=exp |
| By: | Ernst Fehr; Oliver D. Hart; Christian Zehnder |
| Abstract: | Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)’s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post renegotiation. We investigate the relevance of these features experimentally. Our evidence indicates that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation. However, our data also reveal new behavioral features that suggest refinements of the theory. In particular, we find that the availability of informal agreements and ex post renegotiation changes how trading parties evaluate ex post outcomes. Interestingly, the availability of these additional options affects ex post evaluations even in situations in which the parties do not use them. |
| JEL: | C91 D86 J41 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17545&r=exp |
| By: | Stachtiaris, Spiros; Drichoutis, Andreas; Nayga, Rodolfo; Klonaris, Stathis |
| Abstract: | We examine whether religious priming can induce more truthful preference revelation in valuation research. Using induced value second price Vickrey auctions in both hypothetical and non-hypothetical contexts, our results suggest that religious priming can indeed induce more truthful bidding and eliminate hypothetical bias in hypothetical contexts. In non-hypothetical contexts where there are real economic incentives, religious priming induces similar truthful bidding as the absence of religious priming, implying that the use of real economic incentives is sufficient in producing truthful valuations. Our findings have significant implications for the use of religious priming in stated preference or contingent valuation studies. |
| Keywords: | willingness-to-pay (WTP); Vickrey auction; hypothetical bias; religious priming |
| JEL: | D12 C90 C91 |
| Date: | 2011–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34433&r=exp |
| By: | Juergen Huber (University of Innsbruck); Martin Shubik (Cowles Foundation, Yale University); Shyam Sunder (Yale School of Management) |
| Abstract: | We compare general equilibrium economies in which building and maintenance of a depreciating public facility is financed either by anonymous voluntary contributions or by taxing agents on their income from private production. Agents start with an endowment of private goods and money, while the government starts with an endowment of public good and money. All private goods produced are tendered for sale in exchange for money in a sell-all market mechanism. Agents' proceeds from sale are taxed, and they individually allocate their private goods between current consumption and investment in production for the following period. The optimal levels of supply of the public good, and tax rate to sustain it over time, are defined and calculated for infinite and finite horizons. These equilibrium theoretical predications are compared to the outcomes of laboratory economies when (1) the starting public facility is either at or below the optimal level; and (2) the tax rate is either exogenously set at the optimal level, or at the median of rates proposed by individual agents. We find that the experimental economies sustain public goods at about 70-90 percent of the infinite horizon but considerably more than the finite horizon optimum. Payoffs (efficiency) is at 90 percent of the infinite horizon equilibrium level even when the rate of taxation is determined by voting. Starting conditions play only a minor role for outcomes of the economies, as efficiency and the stock of public good adjusts to about the same level irrespective of the starting level. These results contrast with rapid decline in provision of public goods under anonymous voluntary contributions, and point to the possibility that the social institution of government enforced taxation may have evolved to address the problem of under-production of public goods through anonymous voluntary contributions. |
| Keywords: | Public goods, Experimental gaming, Voting, taxation, Evolution of institutions |
| JEL: | C72 C91 C92 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1830&r=exp |
| By: | Achleitner, Ann-Kristin; Lutz, Eva; Mayer, Judith; Spiess-Knafl, Wolfgang |
| Abstract: | This paper analyzes how social investors evaluate the integrity of social entrepreneurs. Based on an experiment with 40 professionals and 40 students, we investigate how five attributes of the entrepreneur contribute to the assessment of integrity. These attributes are the entrepreneur's personal experience, professional background, voluntary accountability efforts, reputation and awards/fellowships granted to the entrepreneur. We find that social investors focus largely on voluntary accountability efforts of the entrepreneur and the entrepreneur's reputation when judging integrity. For an overall positive judgment of integrity, it was sufficient if either reputation or voluntary accountability efforts of the entrepreneur were high. By comparing professionals with students, we show that experience leads to a simpler decision model focusing on key attributes. -- |
| Keywords: | social entrepreneur,social investor,integrity,conjoint analysis,venture philanthropy |
| JEL: | M13 M14 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cefswp:201103&r=exp |