|
on Experimental Economics |
|
Issue of 2012‒12‒06
twenty-six papers chosen by |
| By: | Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M. |
| Abstract: | Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to the realization of the state of the world, but he may also abuse this flexibility to exploit the agent. We capture this tradeoff in an experimental design and show that principals exhibit a strong preference for the employment contract. However, selfish principals exploit agents in one-shot interactions, inducing them to resist entering into employment contracts. This resistance to employment contracts vanishes if fairness preferences in combination with reputation opportunities keep principals from abusing their power, leading to the widespread, endogenous formation of efficient long-run employment relations. Our results inform the theory of the firm by showing how behavioral forces shape an important transaction cost of integration – the abuse of authority – and by providing an empirical basis for assessing differences between the Marxian and the Coasian view of the firm, as well as Alchian and Demsetz’s (1972) critique of the Coasian approach. |
| Keywords: | theory of the firm; transaction cost economics; authority; power abuse; employment relation; fairness; reputation |
| JEL: | C91 D23 D86 M5 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:14243&r=exp |
| By: | Cary Frydman; Nicholas Barberis; Colin Camerer; Peter Bossaerts; Antonio Rangel |
| Abstract: | We use measures of neural activity provided by functional magnetic resonance imaging (fMRI) to test the "realization utility" theory of investor behavior, which posits that people derive utility directly from the act of realizing gains and losses. Subjects traded stocks in an experimental market while we measured their brain activity. We find that all subjects exhibit a strong disposition effect in their trading, even though it is suboptimal. Consistent with the realization utility explanation for this behavior, we find that activity in the ventromedial prefrontal cortex, an area known to encode the value of options during choices, correlates with the capital gains of potential trades; that the neural measures of realization utility correlate across subjects with their individual tendency to exhibit a disposition effect; and that activity in the ventral striatum, an area known to encode information about changes in the present value of experienced utility, exhibits a positive response when subjects realize capital gains. These results provide support for the realization utility model and, more generally, demonstrate how neural data can be helpful in testing models of investor behavior. |
| JEL: | G11 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18562&r=exp |
| By: | Reuben, Ernesto (Columbia University); Stephenson, Matt (Columbia University) |
| Abstract: | We investigate the intrinsic motivation of individuals to report, and thereby sanction, fellow group members who lie for personal gain. We further explore the changes in lying and reporting behavior that result from giving individuals a say in who joins their group. We find that enough individuals are willing to report lies such that in fixed groups lying is unprofitable. However, we also find that when groups can select their members, individuals who report lies are generally shunned, even by groups where lying is absent. This facilitates the formation of dishonest groups where lying is prevalent and reporting is nonexistent. |
| Keywords: | lying, lying aversion, whistleblowing, social norms, dishonesty |
| JEL: | D03 K42 M42 M14 C92 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6998&r=exp |
| By: | Malmendier, Ulrike; Schmidt, Klaus M. |
| Abstract: | In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or informational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group†to whom social preferences are applied. We also show that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided. |
| Keywords: | Gift exchange; externalities; lobbyism; corruption; reciprocity; social preferences |
| JEL: | C91 D73 I11 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:14241&r=exp |
| By: | Riener, Gerhard; Wiederhold, Simon |
| Abstract: | We show in a laboratory experiment that the same method of group induction carries different behavioral consequences. These heterogeneous treatment effects can be directly related to the quality of the relationship established between the subjects. Our results indicate the importance of manipulation checks in group-formation tasks in economic experiments. -- |
| Keywords: | Group induction,Control,Laboratory experiment,Manipulation check |
| JEL: | C92 M54 D03 J22 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:73&r=exp |
| By: | Nejat Anbarci; Nick Feltovich |
| Abstract: | Previous research has shown that individuals do not respond to changes in their bargaining position to the extent predicted by standard bargaining theories. Most of these results have come from experiments with bargaining power allocated exogenously, so that individuals may perceive it as having been “unearned” and thus be reluctant to exploit it. Also, equal splits of the “cake” (the amount bargained over) have typically been equilibrium outcomes, leading to a powerful tendency toward 50-50 splits. We conduct a bargaining experiment in which subjects earn their bargaining power through a real–effort task. Treatments are based on the Nash demand game (NDG) and a related unstructured bargaining game (UBG). Subjects bargain over a fixed amount of money, with disagreement payments determined entirely by the number of units of the real–effort task successfully completed. Task parameters are set to allow disagreement payoffs above half the cake size, in which case 50–50 splits are not individually rational, and thus not consistent with equilibrium. We find that subjects are least responsive to changes in own and opponent disagreement payoffs in the NDG with both disagreement payments below half the cake size. Responsiveness is higher in the UBG, and in the NDG when one disagreement payment is more than half the cake size, but in both cases it is still less than predicted. It is only in the UBG when a disagreement payment is more than half the cake size that responsiveness to disagreement payoffs reaches the predicted level. Our results imply that even when real–life bargaining position is determined by past behaviour rather than luck, the extent to which actual bargaining corresponds to theoretical predictions will depend on (1) the institutions within which bargaining takes place, and (2) the distribution of bargaining power; in particular, whether the 50–50 norm yields a viable outcome. |
| Keywords: | Nash demand game, unstructured bargaining, real effort, disagreement, experiment. |
| JEL: | C78 C72 D81 |
| Date: | 2012–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:dkn:econwp:eco_2012_6&r=exp |
| By: | Noémi Berlin (Centre d'Economie de la Sorbonne); Marie-Pierre Dargnies (Université Paris Dauphine - DRM Finance) |
| Abstract: | Men are known to have a higher taste for competition than women. This paper presents an experiment that analyses the different determinants of the choice to enter a competition : beliefs and the competition level. As far as entry in the competition is concerned, low-performing subjects adapt their decision entry to the level of the competition, whereas high-performers do no. However, the behaviors leading to these results are quite different for men and women : women mainly react to the information on their own performance while men seem to respond more to their beliefs concerning the level of the competition they will be evolving in. Finally, both men and women deviate from their bayesian beliefs and become too pessimistic (optimistic) after a negative (positive) feedback. |
| Keywords: | Experimental economics, beliefs, performance feedback, gender, competition. |
| JEL: | C91 D83 J16 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12075&r=exp |
| By: | J. Philipp Reiß (Department of Economics, University of Maastricht, The Netherlands); Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany) |
| Abstract: | We examine the incentive effects of funding contracts on entrepreneurial effort decisions and allocative efficiency. We experiment with funding contracts that differ in the structure of investor repayment and, therefore, in the incentives for entrepreneurial effort provision. Theoretically the replacement of a standard debt contract by a repayment-equivalent non-monotonic contract reduces effort distortions and increases efficiency. Likewise the replacement of outside equity by a repayment-equivalent standard-debt contract mitigates distortions. We test both hypotheses in the laboratory. Our results reveal that the incentive effects of funding contracts need to be experienced before they reflect in observed behavior. With sufficient experience observed behavior is consistent with the theoretical predictions and supports both hypotheses. If we allow for entrepreneur-sided manipulations of the project outcome we find that non-monotonic contracts lose its appeal. |
| Keywords: | hidden information, funding contracts, incentives, experiment, standard debt contract, non-monotonic contract, state manipulation |
| JEL: | C91 D82 G21 |
| Date: | 2012–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1226&r=exp |
| By: | Ackermann, Hagen; Fochmann, Martin; Mihm, Benedikt |
| Abstract: | We study how taxes and subsidies affect portfolio choices in a laboratory experiment. We find highly significant differences after intervention, even though the net income is identical in all our treatments and thus the decision pattern of investors should be constant. In particular, we observe that the willingness to invest in the risky asset decreases markedly when an income tax has to be paid or when a subsidy is paid. If we combine both a tax and a subsidy, this effect intensifies. -- |
| Keywords: | tax perception,risk-taking behavior,portfolio choice,distorting taxation,tax,subsidy,behavioral economics |
| JEL: | C91 D14 H24 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:138&r=exp |
| By: | Di Bartolomeo Giovanni; Papa Stefano; Bellomo Saverio |
| Abstract: | Our research aims to find out whether meditation has a positive impact on trust and cooperation. By comparing the behavior of agents exposed to meditation before playing an investment game to others not exposed, we find that the formers show more trust on average than the latters. Meditation seems to reduce risk aversion and “competitiveness” among people inducing agents to behave in a more cooperative (and efficient) way. |
| Keywords: | Other-regarding preferences, trust, reciprocity, investment game, frame effect, polarization, meditation |
| JEL: | D03 C91 D83 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0095&r=exp |
| By: | Butler, Jeff; Giuliano, Paola; Guiso, Luigi |
| Abstract: | Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners - i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one's own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Miscalibrated beliefs lower participants' experimental trust game earnings by about 20 percent on average. |
| Keywords: | culture; false consensus; trust; trustworthiness |
| JEL: | A1 A12 D1 Z1 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9216&r=exp |
| By: | Andreas Nicklisch (Max Planck Institute for Research on Collective Goods, University of Bonn, Germany); Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany) |
| Abstract: | We experimentally show that current models of reciprocity are incomplete in a systematic way using a new variant of the ultimatum game that provides second-movers with a marginal-cost-free punishment option. For a substantial proportion of the population, the degree of first-mover unkindness determines the severity of punishment actions even when marginal costs are absent. The proportion of these participants strongly depends on a treatment variation: higher fixed costs of punishment more frequently lead to extreme responses. The fractions of purely selfish and inequity-averse participants are small and stable. Among the variety of reciprocity models, only one accommodates (rather than predicts) parts of our findings. We discuss ways of incorporating our findings into the existing models. |
| Keywords: | Distributional fairness, experiments, intention-based fairness, reciprocity, ultimatum bargaining |
| JEL: | C91 D03 D63 |
| Date: | 2012–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1227&r=exp |
| By: | Normann, Hans-Theo; Rösch, Jürgen; Schultz, Luis Manuel |
| Abstract: | We explore whether buyer groups, in which firms legally purchase inputs jointly, facilitate collusion in the product market. In a repeated game, abandoning the buyer group altogether or excluding single firms from them constitute more severe credible threats, hence, in theory buyer groups facilitate collusion. We run several experimental treatments in a three-firm Cournot framework to test these predictions, and we also explore the impact communication has on buyer groups. The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is identified as a main factor causing collusive product markets. -- |
| Keywords: | buyer groups,cartels,collusion,communication,experiments,repeated games |
| JEL: | C7 C9 L4 L41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:74&r=exp |
| By: | Sawada, Yasuyuki; Kasahara, Ryuji; Aoyagi, Keitaro; Shoji, Masahiro; Ueyama, Mika |
| Abstract: | In a canonical model of collective action, individual contribution to collective action is negatively correlated with group size. Empirical evidence on the group size effect has been mixed, partly due to heterogeneities in group activities. In this paper, we first construct a simple general model of collective action with the free-riding problem, altruism, public goods, and positive externalities of social networks. We then empirically test the theoretical implications of group size effect on individual contribution to four different types of collective action, i.e., monetary or nonmonetary contribution to directly or indirectly productive activities. To achieve this, we collect and employ artefactual field experimental data such as public goods and dictator games conducted in southern Sri Lanka under a natural experimental situation where the majority of farmers were relocated to randomly selected communities based on the government lottery. This unique situation enables us to identify the causal effects of community size on collective action. We find that the levels of collective action can be explained by the social preferences of farmers; we show evidence on the free-riding by self-interested households with no land holdings. The pattern of collective action, however, differs significantly by the mode of activities; the collective action which is directly related to production is less likely to suffer from the free rider problem than from indirectly productive activities. Finally, the monetary contribution is less likely to cause the free riding than the non-monetary contribution. |
| Keywords: | collective action , social preference , natural and artefactual field experiment , irrigation , South Asia |
| Date: | 2012–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:jic:wpaper:47&r=exp |
| By: | Emrah Arbak (CEPS - Centre for European Policy Studies - Centre for European Policy Studies); 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: | In social dilemmas, leading a team by making heroic efforts may prove costly, especially when the followers are not adequately motivated to make similar sacrifices. Attempting to shed light on what drives people to lead, we devise a two-stage public good experiment with endogenous timing. We show that leading by making generous contributions is widespread and relatively persistent. At least three motives explain this behavior. Some use leadership strategically to distill personal gains, with the expectation that others will respond by being at least as generous. Others are more altruistic, volunteering to lead even though this may come at a personal cost. Yet for another fraction of volunteers, a concern for maintaining a positive social image appears to be responsible. We also find that voluntary leaders are not necessarily more influential than randomly-chosen leaders. |
| Keywords: | leadership, endogenous selection, influence, voluntary contribution, experiment |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00664830&r=exp |
| By: | Di Bartolomeo Giovanni; Papa Stefano |
| Abstract: | Our paper reconsiders the triadic design proposed by Cox (2004) to identify trust and reciprocity in investment games. Specifically, we extend the design in two directions. First, we elicit expectations by a fixed-fee incentive scheme and test the coherence of them with the triadic outcomes. We expect that if trust is reported by the triadic design, investors’ expected gains should be also observed. Second, we collect information about participants’ choices by using both direct-response (as Cox) and strategy method. By the latter we are able to control reciprocity for initial inequality, which is endogenous when reciprocity is investigated. Finally, we test the existence of an emotional bias, i.e. we test if expectations mismatches induce participant to change actual choices from the planned ones. |
| Keywords: | Conditional and unconditional motivations, other-regarding preferences, trust, reciprocity, investment game, expectation, inequality, strategy method |
| JEL: | D03 C91 D83 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0096&r=exp |
| By: | Booth, Alison L. (Australian National University); Katic, Pamela (Australian National University) |
| Abstract: | In this paper we utilise data from a unique new birth‐cohort study to see how the risk preferences of young people are affected by cognitive skills and gender. We find that cognitive ability (measured by the percentile ranking for university entrance at age 18) has no effect on risk preferences measured at age 20. This is in contrast to experimental studies that use IQ measures to proxy cognitive skills. However we do find that gender matters. While young women are significantly more likely than young men to assess themselves as being prepared to take risks, women choose to invest significantly less when they are confronted with a clearly specified investment decision based on hypothetical lottery winnings. This difference between the impact of gender on risk attitudes and the hypothetical lottery investment suggests that impatience and framing affect young women and men differently. |
| Keywords: | cognitive ability, risk preferences, risk attitudes, gender |
| JEL: | D01 D80 J16 J24 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6997&r=exp |
| By: | Uwe Dulleck (QUT); Jonas Fooken (QUT); Cameron Newton (QUT); Andrea Ristl; Markus Schaffner (QUT); Benno Torgler (QUT) |
| Abstract: | Although paying taxes is a key element in a well-functioning civilized society, the understanding of why people pay taxes is still limited. What current evidence shows is that, given relatively low audit probabilities and penalties in case of tax evasion, compliance levels are higher than would be predicted by traditional economics-of-crime models. Models emphasizing that taxpayers make strategic, financially motivated compliance decisions, seemingly assume an overly restrictive view of human nature. Law abidance may be more accurately explained by social norms, a concept that has gained growing importance as a facet in better understanding the tax compliance puzzle. This study analyzes the relation between psychic cost arising from breaking social norms and tax compliance using a heart rate variability (HRV) measure that captures the psychobiological or neural equivalents of psychic costs (e.g., feelings of guilt or shame) that may arise from the contemplation of real or imagined actions and produce immediate consequential physiologic discomfort. Specifically, this nonintrusive HRV measurement method obtains information on activity in two branches of the autonomous nervous system (ANS), the excitatory sympathetic nervous system and the inhibitory parasympathetic system. Using time-frequency analysis of the (interpolated) heart rate signal, it identifies the level of activity (power) at different velocities of change (frequencies), whose LF (low frequency) to HF (high frequency band) ratio can be used as an index of sympathovagal balance or psychic stress. Our results, based on a large set of observations in a laboratory setting, provide empirical evidence of a positive correlation between psychic stress and tax compliance and thus underscore the importance of moral sentiment in the tax compliance context. |
| Keywords: | tax compliance, psychic costs, stress, tax morale, cooperation, heart rate variability, biomarkers, experiment |
| JEL: | H26 H41 K42 D31 D63 C91 |
| Date: | 2012–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:001&r=exp |
| By: | Huck, Steffen; Rasul, Imran; Shephard, Andrew |
| Abstract: | We present evidence from a natural field experiment and structural model designed to shed light on the efficacy of alternative fundraising schemes. In conjunction with the Bavarian State Opera, we mailed 25,000 opera attendees a letter describing a charitable fundraising project organized by the opera house. Recipients were randomly assigned to six treatments designed to explore behavioral responses to fundraising schemes varying in two dimensions: (i) the presence of a lead donor; (ii) how individual donations would be matched using the lead donation, using either linear, non-linear and fixed-gift matching schemes. We develop and estimate a structural model that simultaneously estimates individual responses on the intensive and extensive margins of giving. We utilize the structural model to predict giving behavior in counterfactual fundraising schemes. We find that if lead donors insist their gifts must be matched in some way, the fundraiser is best off announcing the existence of a lead donor and using a non-convex scheme to match the lead donation with individual donations. We conclude by providing evidence from a follow-up field experiment designed to probe further the question why lead donors are so effective in inducing others to give. -- Wir präsentieren Ergebnisse aus einem Feldexperiment und der Schätzung eines strukturellen Modells, das zum Zwecke der Erhellung der Wirksamkeit von alternativen Fundraisingstrategien konzipiert wurde. In Zusammenarbeit mit der Bayerischen Staatsoper wurden 25.000 Opernbesucher angeschrieben und über ein gemeinnütziges Spendenprojekt informiert, das von der Staatsoper organisiert wurde. Die Adressaten wurden zufällig auf sechs verschiedene Anreizsysteme verteilt, die Verhaltensreaktionen auf Spendenaktionen messen sollten, und zwar hinsichtlich zweier Dimensionen: (1) ob es einen Großspender gibt oder nicht und (2) wie bei Bekanntgabe der Großspende die individuellen Spenden beeinflusst würden durch lineare und nicht-lineare Matchingregeln sowie durch einen festen Matchingbetrag. Wir entwickeln ein strukturelles Modell, das gleichermaßen die individuelle Wahrscheinlichkeit zu spenden sowie die Spendenhöhe einschätzt. Das entwickelte strukturelle Modell wird benutzt, um Spendenverhalten auch für kontrafaktische Matchingstrategien vorhersagen zu können. Dabei zeigt sich, dass, wenn Großspender darauf bestehen, dass ihre Spenden für Matching eingesetzt werden, eine nicht-konvexe Matchingregel optimal ist. Schließlich präsentieren wir Ergebnisse aus einem weiteren Feldexperiment, bei dem näher untersucht wurde, warum Großspender andere so effektiv dazu animieren können, ebenfalls zu spenden. |
| Keywords: | charitable giving,field experiment,structural estimation |
| JEL: | C93 D12 D64 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2012303&r=exp |
| By: | Beath, Andrew; Christia, Fotini; Enikolopov, Ruben |
| Abstract: | In societies with widespread gender discrimination, development programs that encourage female participation in local governance can potentially redress gender imbalances in economic, political, and social outcomes. Using a randomized field experiment encompassing 500 Afghan villages, this study finds that a development program which incorporates mandated female participation increases female mobility and involvement in income generation, but does not change female roles in family decision-making or attitudes toward the general role of women in society. |
| Keywords: | Gender and Law,Gender and Health,Housing&Human Habitats,Anthropology,Gender and Development |
| Date: | 2012–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6269&r=exp |
| By: | Lucas, Pablo; de Oliveira, Angela C.M.; Banuri, Sheheryar |
| Abstract: | Behavioural economics highlights the role of social preferences in economic decisions. Further, populations are heterogeneous; suggesting that group composition may impact the ability to sustain voluntary public goods contributions. This parallels researc |
| Keywords: | social preferences, agent-based simulation, group composition, beliefs |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-59&r=exp |
| By: | Céline Jullien (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Virginie Pignon (EDF R&D Division - EDF Recherche et Développement); Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Carine Staropoli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne) |
| Abstract: | Competition among producers within an integrated electricity system is impeded by any limited transmission capacity there may be at its borders. Two alternative market mechanisms have recently been designed to organize the allocation of scarce transmission capacity at cross-border level: (i) the "implicit auction", already used in some countries, and (ii) the "coordinated explicit auction", proposed by the European Transmission System Operators (ETSO) but not implemented yet. The main advantage of the explicit auction is that it allows each country to keep its own power exchange running. In the European institutional context, this is seen as a factor of success of a market reform, although the explicit auction (not coordinated) is known to be less efficient than the implicit mechanism. The addition of a coordination dimension in the explicit auction is intended to solve problems of international flows. We use an experimental methodology to identify and compare in a laboratory setting the efficiency properties of these two market mechanisms, given a market structure similar to the existing one in continental Europe, i.e. a competitive oligopoly. Our main result highlights the inefficiency of the coordinated explicit auction compared to the performance of the implicit auction, measured in terms of both energy prices and transmission capacity allocation. We suggest that the poor performance of the coordinated explicit auction in the laboratory is due to the level of individual expectations about both energy and transmission prices that the mechanism demands. One solution to resolve this problem when the mechanism is implemented in the field would be to design an additional and secondary market for "used" transmission capacity. |
| Keywords: | auctions; congestion management; electricity markets; experimental economics |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:gemptp:halshs-00617026&r=exp |
| By: | Alan, Sule; Lóránth, Gyöngyi |
| Abstract: | Using a unique panel data set from a UK credit card company, we analyze the interest rate sensitivity of subprime credit card borrowers. In addition to all individual transactions and loan terms, we also have access to details of a randomized interest rate experiment conducted by the lender on the existing (inframarginal) loans. Access to such information by academic researchers is rare. The data and the experimental design provide us with a clean identification of heterogenous interest rate sensitivities across borrower types within the subprime population. We find that subprime credit card borrowers generally do not reduce their demand for credit when subject to increases in interest rates. However, we estimate a number of interesting responses that suggest that subprime borrowers are not a homogenous group. The paper also contributes to the literature by demonstrating the importance of isolating exogenous variation in interest rates. We show that estimating a standard credit demand equation with the non-experimental variation in the data leads to severely biased estimates. This is true even when conditioning on a rich set of controls and individual fixed effects. |
| Keywords: | subprime credit; randomized trials; liquidity constraints |
| JEL: | D11 D12 D14 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9210&r=exp |
| By: | Philip Oreopoulos; Ryan Dunn |
| Abstract: | High school students from disadvantaged high schools in Toronto were invited to take two surveys, about three weeks apart. Half of the students taking the first survey were also shown a 3 minute video about the benefits of post secondary education (PSE) and invited to try out a financial-aid calculator. Most students' perceived returns to PSE were high, even among those not expecting to continue. Those exposed to the video, especially those initially unsure about their own educational attainment, reported significantly higher expected returns, lower concerns about costs, and expressed greater likelihood of PSE attainment. |
| JEL: | I2 J24 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18551&r=exp |
| By: | Paolo Crosetto (Max Planck Institute of Economics, Jena); Ori Weisel (Max Planck Institute of Economics, Jena); Fabian Winter (Max Planck Institute of Economics, Jena) |
| Abstract: | This manual describes a z-Tree (Fischbacher, 2007) implementation of the paper-based Social Vaule Orientation (SVO) Slider Measure by Murphy et al. (2011). Using the paper-based version instead of the slider-based version (as implemented on the SVO-Website) avoids server-traffic related delays we experienced in the latter implementation. |
| Keywords: | z-Tree, Social Value Orientation |
| JEL: | C91 D03 D64 |
| Date: | 2012–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-062&r=exp |
| By: | Bettina Klose; Paul Schweinzer |
| Abstract: | We develop the idea of using mean-variance preferences for the analysis of the first-price, all-pay auction. On the bidding side, we characterise the optimal strategy in symmetric all-pay auctions under mean-variance preferences for general distributions of valuations and any number of bidders. We find that, in contrast to winner-pay auction formats, only hightype bidders increase their bids relative to the risk-neutral case while low types minimise variance exposure by bidding low. Introducing asymmetric variance aversions across bidders into a Uniform valuations, two-player framework, we show that a more variance-averse type bids always higher than her less variance-averse counterpart. Taking mean-variance bidding behaviour as given, we show that an expected revenue maximising seller may want to optimally limit the number of participants. Although expected revenue for risk-neutral bidders typically dominates revenue under mean-variance bidding, if the seller himself takes account of the variance of revenue, he may find it preferable to attract bidders endowed with mean-variance preferences. |
| Keywords: | Auctions, contests, mean-variance preferences |
| JEL: | C7 D7 D81 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:097&r=exp |