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on Experimental Economics |
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Issue of 2012‒03‒28
twenty-two papers chosen by |
| By: | Urs Fischbacher; Sabrina Teyssier; Simeon Schudy |
| Abstract: | In many cases individuals benefit differently from the provision of a public good. We study in a laboratory experiment how heterogeneity in returns and uncertainty affects unconditional and conditional contribution behavior in a linear public goods game. The elicitation of conditional contributions in combination with a within subject design allows us to investigate belief-independent and type-specific reactions to heterogeneity. We find that, on average, heterogeneity in returns decreases unconditional contributions but does not affects conditional contributions only weakly. Uncertainty in addition to heterogeneity reduces conditional contributions slightly. Individual reactions to heterogeneity differ systematically. Selfish subjects and one third of conditional cooperators do not react to heterogeneity whereas the reactions of the remaining conditional cooperators vary. A substantial part of heterogeneity in reactions can be explained by inequity aversion which accounts for different reference groups subjects compare to. |
| Keywords: | public goods, social preferences, conditional cooperation, heterogeneity |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0073&r=exp |
| By: | Carrillo, Juan D; Gaduh, Arya |
| Abstract: | We use a laboratory experiment to explore dynamic network formation in a six-player game where link creation requires mutual consent. The analysis of network outcomes suggests that the process tends to converge to the pairwise-stable (PWS) equilibrium when it exists and not to converge at all when it does not. When multiple PWS equilibria exist, subjects tend to coordinate on the high-payoff one. The analysis at the single choice level indicates that the percentage of myopically rational behavior is generally high. Deviations are more prevalent when actions are reversible, when marginal payoff losses are smaller and when deviations involve excessive links that can be removed unilaterally later on. There is, however, some heterogeneity across subjects. |
| Keywords: | Laboratory experiments; Myopic rationality; Pairwise stable equilibria; Social networks |
| JEL: | C73 C92 D85 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8757&r=exp |
| By: | Glenn W. Harrison; Jimmy MartÃnez-Correa; J. Todd Swarthout |
| Abstract: | The reduction of compound lotteries (ROCL) has assumed a central role in the evaluation of behavior towards risk and uncertainty. We present experimental evidence on its validity in the domain of objective probabilities. Our experiment explicitly recognizes the impact that the random lottery incentive mechanism payment procedure may have on preferences, and so we collect data using both "1-in-1" and "1-in-K" payment procedures, where K>1. We do not find violations of ROCL when subjects are presented with only one choice that is played for money. However, when individuals are presented with many choices and random lottery incentive mechanism is used to select one choice for payoff, we do find violations of ROCL. These results are supported by both non-parametric analysis of choice patterns, as well as structural estimation of latent preferences. We find evidence that the model that best describes behavior when subjects make only one choice is the Rank-Dependent Utility model. When subjects face many choices, their behavior is better characterized by our source-dependent version of the Rank-Dependent Utility model which can account for violations of ROCL. We conclude that payment protocols can create distortions in experimental tests of basic axioms of decision theory. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2012-04&r=exp |
| By: | Stracke, Rudi; Höchtl, Wolfgang; Kerschbamer, Rudolf; Sunde, Uwe |
| Abstract: | This paper investigates the effects of different prize structures on the effort choices of participants in two-stage elimination contests. A format with a single prize is shown to maximize totaleffort over both stages, but induces low effort in stage 1 and high effort in stage 2. By contrast, a format that allocates the same total amount to multiple prizes in such a way that the predicted effort remains constant across stages yields lower total effort provision. Experimental evidence suggests that (i) total effort is higher in the single prize format, but only for risk-neutral subjects; (ii) effort is constant across stages in the format with multiple prizes, independently of risk-attitudes; and (iii) the runner-up prize in the multiple prize format increases stage-1 and decreases stage-2 efforts in line with the theoretical prediction. |
| Keywords: | Dynamic Contests, Multiple Prizes, Experiment, Over-provision |
| JEL: | C72 D72 J33 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2012:08&r=exp |
| By: | Ligon, Ethan; Schechter, Laura |
| Abstract: | What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variationin sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related(sanctions and reciprocity). We observe high average levels of sharing in ourbaseline treatment, while variation across individuals depends importantlyon the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed 'real-world' gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment. |
| Keywords: | Social Sciences, General, Economics |
| Date: | 2011–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:qt4sn304b6&r=exp |
| By: | Ashraf, Nava; Bandiera, Oriana; Jack, Kelsey |
| Abstract: | A substantial body of research investigates the design of incentives in firms, yet less is known about incentives in organizations that hire individuals to perform tasks with positive social spillovers. We conduct a field experiment in which agents hired by a public health organization are randomly allocated to four groups. Agents in the control group receive a standard volunteer contract often offered for this type of task, whereas agents in the three treatment groups receive small financial rewards, large financial rewards, and non-financial rewards, respectively. The analysis yields three main findings. First, non-financial rewards are more effective at eliciting effort than either financial rewards or the volunteer contract. The effect of financial rewards, both large and small, is much smaller and not significantly different from zero. Second, non-financial rewards elicit effort both by leveraging intrinsic motivation for the cause and by facilitating social comparison among agents. Third, contrary to existing laboratory evidence, financial incentives do not crowd out intrinsic motivation in this setting. |
| Keywords: | incentives; intrinsic motivation; non-monetary rewards |
| JEL: | D82 J33 M52 O15 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8834&r=exp |
| By: | Bhirombhakdi, Kornpob |
| Abstract: | This economic experiment initiates in evaluating a model's performance in predicting a decision. The reciprocity model is measured its accuracy rate in prediction and informativeness as aspects of the model's performance. Seventy-nine undergraduate students voluntarily joined the experiment. They made decisions contingently in designed situations as the first player in a dictator game and all roles in trust-share games. The study controls effects of choice set (equal split, competitive, and different social welfare choices) and framing effect. The result shows that the model has high performance in both prediction and informative. Furthermore, it shows an existence of the loss aversion behavior, and a significant relationship between decisions in the dictator game and the trustshare games. The study suggests that the more complicated model may not be marginally useful in predicting decision in the positive reciprocity situations. |
| Keywords: | economic experiment; performance; reciprocity; trust-share game |
| JEL: | B40 C71 C91 |
| Date: | 2011–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37468&r=exp |
| By: | Grossman, Zachary; Owens, David |
| Abstract: | How does overconfidence arise and persist in the face of experience and feedback? We examine experimentally how individuals' beliefs about their absolute, as opposed to relative, performance on a quiz react to noisy, but unbiased, feedback. Participants believe themselves to have received `unlucky' feedback and they overestimate their own scores, but they exhibit no overconfidence in non-ego-relevant beliefs---in this case, about others' scores. Unlike previous studies of relative performance estimates, we find this to be driven by overconfident priors, as opposed to biased updating, which suggests that social comparisons contribute to biased information processing. While feedback improves performance estimates, this learning does not translate into improved estimates of subsequent performances. This suggests that people use performance feedback to update their beliefs about their ability differently than they do to update their beliefs about their performance, contributing to the persistence of overconfidence. |
| Keywords: | overconfidence, feedback, overestimation, absolute performance, Bayesian updating, biased updating, information processing, learning transfer, cross-game learning, quadratic scoring rule, behavioral economics, experimental economics, Behavioral Economics |
| Date: | 2011–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt0dh5s03j&r=exp |
| By: | Bandiera, Oriana; Barankay, Iwan; Rasul, Imran |
| Abstract: | Many organizations rely on teamwork, and yet field evidence on the impacts of team-based incentives remains scarce. Compared to individual incentives, team incentives can affect productivity by changing both workers’ effort and team composition. We present evidence from a field experiment designed to evaluate the impact of rank incentives and tournaments on the productivity and composition of teams. Strengthening incentives, either through rankings or tournaments, makes workers more likely to form teams with others of similar ability instead of with their friends. Introducing rank incentives however reduces average productivity by 14%, whereas introducing a tournament increases it by 24%. Both effects are heterogeneous: rank incentives only reduce the productivity of teams at the bottom of the productivity distribution, and monetary prize tournaments only increase the productivity of teams at the top. We interpret these results through a theoretical framework that makes precise when the provision of team-based incentives crowds out the productivity enhancing effect of social connections under team production. |
| Keywords: | rank incentives; team-based incentives; teams; tournaments |
| JEL: | D23 J33 M52 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8776&r=exp |
| By: | Bryan, Gharad; Karlan, Dean S.; Zinman, Jonathan |
| Abstract: | We examine a randomized trial that allows separate identification of peer screening and enforcement of credit contracts. A South African microlender offered half its clients a bonus for referring a friend who repaid a loan. For the remaining clients, the bonus was conditional on loan approval. After approval, the repayment incentive was removed from half the referrers in the first group and added for half those in the second. We find large enforcement effects, a $12 (100 Rand) incentive reduced default by 10 percentage points from a base of 20%. In contrast, we find no evidence of screening. |
| Keywords: | credit market failures; Information asymmetries; peer networks; social capital; social networks |
| JEL: | C93 D12 D14 D82 O12 O16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8857&r=exp |
| By: | Booth, Alison L; Nolen, Patrick |
| Abstract: | Risk theories typically assume individuals make risky choices using probability weights that differ from objective probabilities. Recent theories suggest that probability weights vary depending on which portion of a risky environment is made salient. Using experimental data we show that salience affects young men and women differently, even after controlling for cognitive and non-cognitive skills. Men are significantly more likely than women to switch from a certain to a risky choice once the upside of winning is made salient, even though the expected value of the choice remains the same. |
| Keywords: | cognitive ability; gender; probability weights; risk-aversion |
| JEL: | D8 D81 J16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8868&r=exp |
| By: | Dessí, Roberta; Gallo, Edoardo; Goyal, Sanjeev |
| Abstract: | We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit two main cognitive biases: (i) they underestimate the mean degree compared to the actual network and (ii) they underestimate (overestimate) the number of frequent (rare) degrees. We then analyze survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further findings: (iii) network cognition is affected by the subject's location, (iv) the accuracy of network cognition varies with the nature of the network, and (v) limitations in network cognition have payoff implications. |
| Keywords: | cognition; social networks |
| JEL: | Z1 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8732&r=exp |
| By: | Kray, Laura J.; Haselhuhn, Michael P. |
| Abstract: | Why do men have more lenient ethical standards than women? To address this question, we test the male pragmatism hypothesis, which posits that men rely on their social and achievement motivations to set ethical standards more so than women. Across two studies, motivation was both manipulated and measured before examining ethicality judgments. Study 1 manipulated identification with two parties in an ethical dilemma and found that men were more egocentric than women. Whereas men’s ethicality judgments were affected by the identification manipulation, women’s judgments were not. Study 2 examined whether implicit negotiation beliefs, which predict achievement motivations to either demonstrate or develop negotiating skill, predicted ethicality judgments and, if so, whether this relationship was moderated by gender. As hypothesized, fixed beliefs predicted lower ethical standards, particularly for men. In combination, these findings suggest men are more pragmatic in setting ethical standards than women. |
| Keywords: | Gender, ethical judgment, egocentrism, self-interest, negotiation, motivated reasoning, Organizational Behavior and Theory |
| Date: | 2011–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt05n3d6pj&r=exp |
| By: | Casella, Alessandra; Palfrey, Thomas R; Turban, Sébastien |
| Abstract: | Two groups of voters of known sizes disagree over a single binary decision to be taken by simple majority. Individuals have different, privately observed intensities of preferences and before voting can buy or sell votes among themselves for money. We study the implication of such trading for outcomes and welfare when trades are coordinated by the two group leaders and when they take place anonymously in a competitive market. The theory has strong predictions. In both cases, trading falls short of full efficiency, but for opposite reasons: with group leaders, the minority wins too rarely; with market trades, the minority wins too often. As a result, with group leaders, vote trading improves over no-trade; with market trades, vote trading can be welfare reducing. All predictions are strongly supported by experimental results. |
| Keywords: | Bargaining; Competitive equilibrium; Experiments; Votes market; Voting |
| JEL: | C72 C78 C92 D70 P16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8848&r=exp |
| By: | Garance Genicot, Orazio Attanasio, Abigail Barr, Juan Camilo Cardenas and Costas Meghir (Department of Economics, Georgetown University) |
| Abstract: | Using data from an experiment conducted in 70 Colombian communities, we investigate who pools risk with whom when trust is crucial to enforce risk pooling arrangements. We explore the roles played by risk attitudes and social networks. Both theoretically and empirically, we nd that close friends and relatives group assortatively on risk attitudes and are more likely to join the same risk pooling group, while unfamiliar participants group less and rarely assort. These ndings indicate that where there are advantages to grouping assortatively on risk attitudes those advantages may be inaccessible when trust is absent or low. |
| Keywords: | Field experiment; risk sharing; social sanctions; insurance; group formation; matching. |
| Date: | 2011–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~11-11-05&r=exp |
| By: | Bhirombhakdi, Kornpob; Potipiti, Tanapong |
| Abstract: | This economic experiment tests the positive relationship between perceived intention and positive reciprocity by altering material-payoff structures in treatments, or material-payoff approach. To design the treatments, this study applies a signalling model to explain how the intention of an action is signalled and perceived. As a result from the model, cost of an action positively relates to the perceived intention. The results from seventy-nine subjects who participated in this four-session hand-run experiment that was double-blindly organized between August - September 2011 support the relationship. Moreover, this study hypothesizes on consistent decisions across treatments with different levels of perceived intention, and the results support the hypotheses. The insight into sacrificing and rewarding is the significant implication in this study. |
| Keywords: | Behavioral economics; reciprocity; asymmetric information |
| JEL: | C71 D82 C91 |
| Date: | 2012–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37469&r=exp |
| By: | David McKenzie (World Bank) |
| Abstract: | International migration is one of the most important choices that individuals and households in poor countries can make to increase their lifetime wellbeing. This choice presents a severe challenge to researchers attempting to learn the impacts of migration, since those who choose to move typically differ in a host of observable and unobservable ways from those who choose to stay behind. This paper provides an overview of a new experimental literature which uses policy experiments and researcher-designed experiments to overcome these selection issues. Particular emphasis is placed on discussing the different datagathering strategies needed for conducing policy experiments. Experimental migration research as a field is still in its nascent stages, and there appears to be plenty of scope for both policymakers and researchers to design new experiments going forward – it is hoped that the summary here will aid researchers and policymakers in this purpose. |
| Keywords: | Migration, Experiments, Selection, Data Gathering Methods. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1207&r=exp |
| By: | Irenaeus Wolff |
| Abstract: | Models of evolutionary game theory have shown that punishment may be an adaptive behaviour in environments characterised by a social-dilemma situation. Experimental evidence closely corresponds to this finding but questions the cooperation-enhancing effect of punishment if players are allowed to retaliate against their punishers. This study provides a theoretical explanation for the existence of retaliating behaviour in the context of repeated social dilemmas and analyses the role punishment can play in the evolution of cooperation under these conditions. We show a punishing strategy can pave the way for a partially-cooperative equilibrium of conditional cooperators and de- fecting types and, under positive mutation rates, foster the cooperation level in this equilibrium by prompting reluctant cooperators to cooperate. How- ever, when rare mutations occur, it cannot sustain cooperation by itself as punishment costs favour the spread of non-punishing cooperators. |
| Keywords: | Public goods, Prisoner's Dilemma, Strong reciprocity, Counter-punishment |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0075&r=exp |
| By: | Anderson, Cameron; Brion, Sebastien; Moore, Don A.; Kennedy, Jessica A. |
| Abstract: | In explaining the prevalence of the overconfident belief that one is better than others, prior work has focused on the motive to maintain high self-esteem, abetted by biases in attention, memory, and cognition.An additional possibility is that overconfidence enhances the person’s social status.We tested this status-enhancing account of overconfidence in six studies. Studies 1 through 3 found overconfidence leads to higher social status in both short and longer-term groups, using naturalistic and experimental designs. Study 4 applied a Brunswikian (1956) lens analysis and found that overconfidence leads to a behavioral signature that makes the individual appear competent to others. Studies 5 and 6 measured and experimentally manipulated the desire for status and found that the status motive promotes overconfidence. Together, these studies suggest that people might so often believe they are better than others because it helps them achieve higher social status. |
| Keywords: | Business Administration, Management and Operations, Other |
| Date: | 2012–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt6s5812wf&r=exp |
| By: | Sebastian Braun, Nadja Dwenger, Dorothea Kübler, Alexander Westkamp |
| Abstract: | Quotas for special groups of students often apply in school or university admission procedures. This paper studies the performance of two mechanisms to implement such quotas in a lab experiment. The first mechanism is a simplified version of the mechanism currently employed by the German central clearinghouse for university admissions, which first allocates seats in the quota for top-grade students before allocating all other seats among remaining applicants. The second is a modified version of the student-proposing deferred acceptance (SDA) algorithm, which simultaneously allocates seats in all quotas. Our main result is that the current procedure, designed to give top-grade students an advantage, actually harms them, as students often fail to grasp the strategic issues involved. The modified SDA algorithm significantly improves the matching for top-grade students and could thus be a valuable tool for redesigning university admissions in Germany |
| Keywords: | College admissions, experiment, quotas, matching, Gale-Shapley mechanism, Boston mechanism |
| JEL: | C78 C92 D78 I20 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1761&r=exp |
| By: | Bruhn, Miriam; Karlan, Dean S.; Schoar, Antoinette S |
| Abstract: | We test whether managerial human capital has a first order effect on the performance and growth of small enterprises in emerging markets. In a randomized control trial in Puebla, Mexico, we randomly assigned 150 out of 432 small and medium size enterprises to receive subsidized consulting services, while the remaining 267 enterprises served as a control group that did not receive any subsidized training. Treatment enterprises were matched with one of nine local consulting firms and met with their consultants once a week for four hours over a one year period. Results from a follow-up survey, conducted after the intervention, show that the consulting services had a large impact on the performance of the enterprises in the treatment group: monthly sales went up by about 80 percent; similarly, profits and productivity increased by 120 percent compared to the control group. We also see a significant increase in the entrepreneurial spirit index for the treatment group, a set of questions designed to elicit the SME owners’ confidence in their ability to manage their business and deal with any future difficulties. However, we do not find any significant increase in the number of workers employed in the treatment group. |
| Keywords: | enterprise growth; entrepreneurship; managerial capital |
| JEL: | D21 D24 L20 M13 O12 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8887&r=exp |
| By: | Fairlie, Robert W; Karlan, Dean S.; Zinman, Jonathan |
| Abstract: | We use randomized program offers and multiple follow-up survey waves to examine the effects of entrepreneurship training on a broad set of outcomes. Training increases short run business ownership and employment, but there is no evidence of broader or longer run effects. We also test whether training mitigates market frictions by estimating heterogeneous treatment effects. Training does not have strong effects (in either relative or absolute terms) on those most likely to face credit or human capital constraints, or labor market discrimination. Training does have a relatively strong short-run effect on business ownership for those unemployed at baseline, but not at other horizons or for other outcomes. |
| Keywords: | climate coalitions; climate policy; free riding; game theory |
| JEL: | C68 C72 D58 Q54 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8823&r=exp |