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on Experimental Economics |
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Issue of 2012‒04‒17
fifteen papers chosen by |
| By: | Vetter, Stefan |
| Abstract: | We study experimentally whether anti-corruption policies with a focus on bribery might be insufficient to uncover more subtle ways of gaining an unfair advantage. In particular, we investigate whether an implicit agreement to exchange favors between a decision-maker and a lobbying party serves as a legal substitute for corruption. Due to the obvious lack of field data on these activities, the laboratory provides an excellent opportunity to study this question. We find that even the pure anticipation of future rewards from a lobbying party suffices to bias a decision-maker in favor of this party, even though it creates negative externalities to others. Although future rewards are not contractible, the benefitting party voluntarily compensates decision-makers for partisan choices. In this way, both receive higher payoffs, but aggregate welfare is lower than without a rewards channel. Thus, the outcome mirrors what might have been achieved via conventional bribing, while not being illegal. |
| Keywords: | delegation; gift exchange; corruption; lobbying; negative externalities |
| JEL: | C91 D62 D63 D73 K42 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12884&r=exp |
| By: | Hunt Allcott; Sendhil Mullainathan; Dmitry Taubinsky |
| Abstract: | We show how the traditional logic of Pigouvian externality taxes changes if consumers under-value energy costs when buying energy-using durables such as cars and air conditioners. First, with undervaluation, there is an "Internality Dividend" from externality taxes: aside from reducing the provision of public bads, they also reduce allocative inefficiencies caused by consumers' underinvestment in energy efficient durables. Second, although Pigouvian taxes are clearly the preferred policy mechanism when externalities are the only market failure, undervaluation provides an "Internality Rationale" for alternative policies such as product subsidies that reduce the relative price of energy efficient durables. However, when some consumers misoptimize and others do not, a crucial quantity for policy analysis is the average marginal internality: the extent to which a policy preferentially targets misoptimizing consumers. As an example of the importance of the average marginal internality, we carry out a randomized field experiment to provide rebates for energy efficient lightbulbs and illustrate how the welfare effects of the rebate depend significantly on whether consumers that undervalue energy costs are more or less elastic. |
| JEL: | D03 D04 D11 H21 H22 H23 L51 L62 L97 Q41 Q48 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17977&r=exp |
| By: | John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); James J. Murphy (Department of Economics, University of Alaska Anchorage); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst) |
| Keywords: | Compliance, Enforcement, Emissions trading, Laboratory experiments, Permit markets, Permit banking |
| JEL: | C91 L51 Q58 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2011-01&r=exp |
| By: | Klemens Keldenich |
| Abstract: | This paper presents a laboratory experiment to measure the effect of group membership on individual behavior in modified dictator games. The results suggest that this effect is influenced by the degree of group membership saliency. A within-subject design is employed: in stage 1, each subject decides individually; in stage 2, the subjects are divided into groups of three and one person is selected at random from each group to make the decision (the “hierarchical decision rule”). In stage 3, additional pre-play communication in the group is allowed before the decision and, in stage 4, the decisions are again made on an individual basis. Interestingly, the dictators behave more selfishly when group members are not allowed to communicate. However, if groups are allowed to communicate, decisions do not differ from individual choices. Chat content shows that groups are concerned with reaching a consensus, even though talk is “cheap” and only one group member will make the binding decision. |
| Keywords: | Group decision making; social comparison; leadership; communication |
| JEL: | C91 C92 D71 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0322&r=exp |
| By: | Simona Cicognani (School of Social Sciences, University of Trento, Italy); Aanna D'Ambrosio (School of Social Sciences, University of Trento, Italy); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Simone Pfuderer (School of Social Sciences, University of Trento, Italy); Matteo Ploner (Cognitive and Experimental Economics Laboratory, University of Trento, Italy) |
| Abstract: | We define and experimentally test a public provision mechanism that meets three basic ethical requirements and allows community members to influence, via monetary bids, which of several projects is implemented. For each project, participants are assigned personal values, which can be positive or negative. We provide either complete or only private information about others' personal values. This produces two distinct public provision games which are experimentally implemented and analysed for various projects. In spite of the complex experimental task, participants do not rely on truth-telling as an obvious and simple heuristic whose general acceptance would result in fair and efficient outcomes. Rather, they yield to strategic underbidding. Although underbidding is affected by projects' characteristics, the provision mechanism seems quite functional. |
| Keywords: | Public Provision, Procedural Fairness, Experiment |
| JEL: | C91 C72 D63 |
| Date: | 2012–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-015&r=exp |
| By: | Grazzini, J. (University of Turin) |
| Abstract: | This paper builds an agent based model to reproduce the results of an experimental stock market that studies how the market aggregates private information. The aim is to contribute to the relationship between experiments and agent-based modeling and to understand the behavior of the agents. Using the experimental environment and results, it is possible to formulate a hypothesis about the behavior of the subjects and thereby formalize (algorithmically) the behavior of the traders. This allows a better understanding of how the market converges toward the equilibrium and the mechanism that allows for the dissemination of private information in the market. |
| URL: | http://d.repec.org/n?u=RePEc:ams:ndfwpp:11-07&r=exp |
| By: | Christoph Helbach; Klemens Keldenich |
| Abstract: | This study uses a laboratory experiment to analyze the effectiveness of performance-based monetary incentives in the teaching process. The process of knowledge transmission is recreated using a video-stream. Four different teacher payment schemes are compared, three of which depend on the student‘s success. Furthermore, the experiment is done with two different subject pools: prospective teachers and regular students. Results indicate that prospective teachers do not react to monetary incentives in the given task. However, regular students do react in the expected way: Teachers transmit a significantly higher share of their knowledge when paid according to student performance. |
| Keywords: | Education; monetary incentives; video analysis |
| JEL: | C91 D03 I21 J33 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0328&r=exp |
| By: | Julie Rosaz (LAMETA - Laboratoire Montpellierain d'économie théorique et appliquée - CNRS : UMR5474 - INRA : UR1135 - CIHEAM - Université Montpellier I - Montpellier SupAgro); Robert Slonim (University of Sydney, School of economics - University of Sydney); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon) |
| Abstract: | While peer effects have been shown to affect worker's productivity when workers are paid a fixed wage, there is little evidence on their influence on quitting decisions. This paper presents results from an experiment in which participants receive a piece-rate wage to perform a real-effort task. After completing a compulsory work period, the participants have the option at any time to continue working or quit. To study peer effects, we randomly assign participants to work alone or have one other worker in the room with them. When a peer is present, we manipulate the environment by giving either vague or precise feedback on the co-worker's output, and also vary whether the two workers can communicate. We find that allowing individuals to work with a co-worker present does not increase worker's productivity. However, the presence of a peer in all working conditions causes workers to quit at more similar times. When, and only when, communication is allowed, workers are significantly more likely to (1) stay longer if their partner is still working, and (2) work longer the more productive they are. We conclude that when workers receive a piece-rate wage, critical peer effects occur only when workers can communicate with each other. |
| Keywords: | Quits; peer effects; communication; feedback; experiment |
| Date: | 2012–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00684812&r=exp |
| By: | Anufriev, M. (University of Amsterdam); Hommes, C.H. (University of Amsterdam) |
| Abstract: | In recent `learning to forecast' experiments with human subjects (Hommes, et al. 2005), three different patterns in aggregate price behavior have been observed: slow monotonic convergence, permanent oscillations and dampened fluctuations. We show that a simple model of individual learning can explain these different aggregate outcomes within the same experimental setting. The key idea of the model is the evolutionary selection among heterogeneous expectation rules, driven by the relative performance of the rules. Out-of-sample predictive power of our switching model is higher compared to the rational or other homogeneous expectations benchmarks. Our results show that heterogeneity in expectations is crucial to describe individual forecasting behavior as well as aggregate price behavior. |
| URL: | http://d.repec.org/n?u=RePEc:ams:ndfwpp:11-06&r=exp |
| By: | Josse Delfgaauw (Erasmus University Rotterdam); Robert Dur (Erasmus University Rotterdam, CESifo, IZA); Arjan Non (Erasmus University Rotterdam); Willem Verbeke (Erasmus University Rotterdam, ERIM) |
| Abstract: | We conduct a field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second round of the tournament. As predicted by theory, we find that a more convex prize spread increases performance in the second round at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is significantly larger for stores that historically have relatively stable performance as compared to stores with more noisy performance. |
| Keywords: | Elimination tournaments; Incentives; Prize spread; Performance measurement; Field experiment |
| JEL: | C93 M51 M52 |
| Date: | 2011–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20110120&r=exp |
| By: | Tubetov, Dulat; Maart, Syster Christin; Musshoff, Oliver |
| Abstract: | Kazakhstan and Germany have different development levels of the agricultural sectors. One of the explanations for this fact might be the different investment behavior of farmers in the two countries. We experimentally analyze whether the investment behavior of farmers is consistent with the normative benchmarks of the net present value criterion or the real options approach. Furthermore, we experimentally compare the investment behavior of farmers in the two countries in an agricultural and a non-agricultural treatment. In addition, farmers were confronted with the two treatments in a different order. Our results show that both theories cannot exactly predict the investment behavior of farmers. Farmers invest later than the net present value criterion suggests and earlier than the real options approach suggests. However, German farmers invest later than Kazakhstani farmers, which mean that the investment behavior of German farmers is more in accordance with the superior real options approach. Therefore, the different investment behavior might partly be an explanation for different development levels of the agricultural sectors of the two countries. Moreover, results are independent from the framing of an agricultural and a non-agricultural treatment. However, farmers learn from their former investment decisions and consider the value of waiting over time. |
| Keywords: | Experimental Economics, Investment Timing, Real Options, Kazakhstan, Germany, Agricultural Finance, Institutional and Behavioral Economics, International Development, Risk and Uncertainty, C91, D03, D81, D92, |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gagfdp:122422&r=exp |
| By: | Owens, David; Grossman , Zachary; Fackler , Ryan |
| Abstract: | We document a lower bound for thecontrol premium: agents' willingness to pay to control their own payoff. Participants choose between an asset that will pay only if they later answer a particular quiz question correctly and one that pays only if their partner answers a different question correctly. However, they first estimate the likelihood that each asset will pay off. Participants are 20% more likely to choose to control their payoff than a group of payoff-maximizers with accurate beliefs. While some of this deviation is explained by overconfidence, 34% of it can only be explained by the control premium. The average participant expresses a control premium equivalent to 8% to 15% of the expected asset-earnings. Our results show that even agents with accurate beliefs may incur costs to avoid delegating and suggest that to correctly infer beliefs from choices, one should account for the control premium. |
| Keywords: | Economics, experiment, principal-agent, overconfidence, control premium, desire for control, control, Delegation |
| Date: | 2012–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt5bg845s1&r=exp |
| By: | Neil J. Buckley; Katherine Cuff; Jeremiah Hurley; Logan McLeod; Stuart Mestelman; David Cameron |
| Abstract: | This paper presents the results of a revealed-choice experiment testing the theoretical predictions of a model of a mixed system of public and private finance. In the context of a mixed system of health care finance, we investigate behavioural responses to changing the public sector allocation rule (needs-based vs. random), the supply of health care resources, and the size of the public health care budget on the following outcomes: the equilibrium market price for health care resources, the number of individuals who purchase private insurance, the probability of health treatment in the public system for those without private insurance, the health status of individuals left untreated, and the incomes of individuals who receive treatment. Our findings are generally consistent with the predictions of the theoretical model, although individuals consistently exhibit greater willingnesses-to-pay for private insurance than predicted resulting in a larger than predicted amount of private insurance being purchased. A commonly used risk-aversion measure only partially explains this observed deviation. We also find that, relative to a system of public financing only, a mixed system of health care finance results in higher health care prices and sicker, poorer people being left untreated. |
| Keywords: | experiment, health care finance, public health care, rationing, needs-based allocation. |
| JEL: | C92 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2012-02&r=exp |
| By: | Christos A. Ioannou; Julian Romero |
| Abstract: | We modify the self-tuning Experience Weighted Attraction (EWA-lite) model of Camerer, Ho, and Chong (2007) and use it as a computer testbed to study the likely performance of a set of twostate automata in four symmetric 2 x 2 games. The model suggested allows for a richer specification of strategies and solves the inference problem of going from histories to beliefs about opponents' strategies, in a manner consistent with \belief-learning". The predictions are then validated with data from experiments with human subjects. Relative to the action reinforcement benchmark model, our modified EWA-lite model can better account for subject-behavior. |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:pur:prukra:1269&r=exp |
| By: | Yamamura, Eiji |
| Abstract: | A Japanese General Social Survey is used to re-examine how voluntary giving is associated with inequality aversion, and how the relationship differs between high- and low-income groups. This paper also investigates how social capital influences that relationship. The key findings are that (1) the level of voluntary giving increases with inequality aversion for high-income groups, but not for low-income groups, and (2) social capital accumulated in the respondent’s residential area reinforces the positive influence of inequality aversion on voluntary giving for high-income groups only. |
| Keywords: | Inequality aversion; charitable contribution; trust; private provision of public goods |
| JEL: | D63 H41 Z13 |
| Date: | 2012–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37975&r=exp |