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on Experimental Economics |
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Issue of 2015‒08‒01
24 papers chosen by |
| By: | Lachlan Deer; Ralph-C. Bayer |
| Abstract: | We use experimental methods to investigate whether pledges of commitment can improve cooperation in endogenously formed partnerships facing a social dilemma. Treatments vary in terms of the individual’s (a) opportunity to commit to their partner, (b) the cost of dissolving committed partnerships, and (c) the distribution of these dissolution costs between partners. Our findings show that pledges of commitment increase cooperation in committed partnerships when costs to dissolve them are shared equally among partners. In contrast, when costs to dissolve committed partnerships fall solely on the individual choosing to break up, pledges of commitment fail to improve cooperation and instead decrease cooperation. |
| Keywords: | Commitment, cooperation, endogenous group formation, experiment |
| JEL: | C92 D03 D83 H41 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:201&r=exp |
| By: | Robin Cubitt (Department of Economics, University of Nottingham); Simon Gaechter (Department of Economics, University of Nottingham); Simone Quercia (University of Bonn, Institute for Applied Microeconomics) |
| Abstract: | We investigate whether there is a link between conditional cooperation and betrayal aversion. We use a public goods game to classify subjects by type of contribution preference and by belief about the contributions of others; and we measure betrayal aversion for different categories of subject. We find that, among conditional cooperators, only those who expect others to contribute little to the public good are significantly betrayal averse, while there is no evidence of betrayal aversion for those who expect substantial contributions by others. This is consistent with their social risk taking in public goods games, as the pessimistic conditional cooperators tend to avoid contribution to avoid exploitation, whereas the optimistic ones typically contribute to the public good and thus take the social risk of being exploited. |
| Keywords: | public goods game, conditional cooperation, trust, betrayal aversion, exploitation aversion, free riding, experiments |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2015-14&r=exp |
| By: | Iván Barreda Tarrazona (LEE & Economics Department, Universitat Jaume I, Castellón, Spain); Aurora García-Gallego (LEE & Economics Department, Universitat Jaume I, Castellón, Spain); Nikolaos Georgantzis (UJI-LEE, Spain and Agriculture Policy and Development, University of Reading, UK); Nikolas Ziros (Department of Economics, University of Cyprus, Cyprus) |
| Abstract: | We study an experimental exchange market based on Shapley and Shubik (1977). Two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in the market. We implement a case in which the Nash equilibrium involves minimum exchange or no trade at all. This is almost never confirmed by our laboratory data. On the contrary, after a sufficiently large number of periods, convergence close to full trade is obtained, which can be supported as an epsilon symmetric strategy evolutionary stable equilibrium. We also study cheap talk communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. As predicted by the theory, horizontal communication restricts trade, whereas vertical communication leads to higher bids, but always lower or equal than those achieved tacitly by learning alone. Vertical messages limit the collusive effect of horizontal communication when the former precede the latter. Results do not differ when players are allowed to choose the communication mode. |
| Keywords: | Efficiency, strategic market games, experiments, vertical communication, horizontal communication Technology |
| JEL: | D43 C91 C73 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2015/10&r=exp |
| By: | Zeballos, Eliana |
| Abstract: | Sometimes people, when comparing themselves with others, take a host of actions that are destructive to those around them, even when these actions imply self-inflicted costs. "Pulling down" other more successful individuals may have both direct and indirect detrimental effects on productivity and efficiency. On one hand, welfare is reduced directly as output is destroyed, and indirectly if their threat induces ex-ante behavioral responses in the form of lower levels of effort and investment. Consequently, linking reactions to upward social comparisons and their effect on effort levels may help explain the considerable variability in how people have been shown to react to such comparisons. In this paper, I develop a two-stage, two-agent model of strategic behavior that integrates the role of inter-personal comparisons with conventional neoclassical economic preference theory to analyze how interpersonal comparisons lead to destructive behavior and affect levels of effort. The experiment, designed to test the predictions of the model and tease out the mechanisms that drive destructive behavior, builds on the two-stage "money burning" game. The experimental games were carried out in Bolivia among 285 dairy farmers. Results show that people that were above the within-group mean, in average exert less effort when comparing themselves with others (the "guilt" case); while people below the within-group mean exert more effort (the "keep-up-with-the-Joneses" case). People who fear the envy of others decrease their effort exerted, specially if they are highly ranked. Results from the money burning game show that people below the mean took in average more destructive behavior than people above the mean. Of all the participants, 55% took at least one destructive action against somebody in their group reducing their output by 34%. People seem to be averse to disadvantageous inequalities, but not averse to advantageous inequalities. Moreover, people destroy less the bigger the advantageous difference is but destroy more in the oposite case. |
| Keywords: | Interpersonal comparisons, Destructive behavior, Envy, Equity, Equality, Institutional and Behavioral Economics, D01, D03, D63, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205660&r=exp |
| By: | Shimpei Koike (Department of Value and Decision Science, Tokyo Institute of Technology); Mayuko Nakamaru (Department of Value and Decision Science, Tokyo Institute of Technology); Tokinao OTAKA (Department of Social Engineering, Tokyo Institute of Technology); Hajime Shimao (Department of Value and Decision Science, Tokyo Institute of Technology); Ken-Ichi Shimomura (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Takehiko Yamato (Department of Social Engineering, Tokyo Institute of Technology) |
| Abstract: | Rotating savings and credit associations (Roscas) are worldwide informal financial institutions, in which all participants contribute to a fund and one of them receives it in rotation. A crucial problem is that participants have incentives to default on contributing after receiving the fund. We conducted an experiment and found that Roscas were sustained using a rule of excluding defaulters from the group by voting. We observed that group members behave reciprocally and revengefully: a member contributed (or did not contribute) to the fund of other members who had (or had not) contributed to theirs. This voluntary behavior sustained Roscas. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2015-31&r=exp |
| By: | Lee, Ji Yong; Fox, John A. (Sean) |
| Abstract: | We treat a difference in initial bids for two private goods as an endogenous “induced” value. Results from follow up auctions eliciting positive or negative bids to exchange one good for the other suggest that positive WTP bids are demand revealing while subjects tended to overbid (in absolute value) negative WTA values. Controlling for risk attitude in WTA bids is shown to partially explain the WTA overbidding. WTA bids tended to be lower in a random nth price auction compared to those elicited in a 5th price auction. |
| Keywords: | Experimental Auction, Negative Bids, Strategic Bidding, Institutional and Behavioral Economics, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:204984&r=exp |
| By: | Marta Dyrkacz (Faculty of Economic Sciences, University of Warsaw); Michal Krawczyk (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | In this paper we introduce an innovative research method called Double Response under which subjects are incentivised to provide a quick, intuitive choice and additionally one based on longer deliberation. We apply the method to a series of simple decision tasks aimed at eliciting subjects’ social preferences (as in Charness and Rabin, 2002). Our method appears to successfully induce very quick responses. We find that although only 9.9% of initial choices are changed after deliberation, 79.4% of subjects change at least one of their choices. Comparing contents of the decisions we observe that time pressure leads to more negative attitude towards another individual’s earnings when they are higher than those of the decision maker. In other words, with deliberation decisions are typically updated towards lesser aversion to disadvantageous inequality (“envy”). |
| Keywords: | response time, design of laboratory experiments, other-regarding preference, inequality aversion |
| JEL: | C92 D63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2015-27&r=exp |
| By: | Di Bartolomeo Giovanni; Papa Stefano |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0112&r=exp |
| By: | Purohit, Purnima; Subramanian, Arjunan; Naik, Gopal; Swaminathan, N. |
| Keywords: | Crop Production/Industries, International Development, |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aesc15:204290&r=exp |
| By: | Hunter, Elizabeth; Crago, Christine; Spraggon, John |
| Abstract: | In the context of climate change and heightened concerns about our energy future, academics and policy makers have taken an interest in the different motivational factors influencing individuals’ energy use. One area of particular interest is the role of information and other non-financial motivators: When traditional financial incentives are not appropriate, can contextualized information programs be used to encourage energy conservation? In our research we conduct an experiment to examine the effect of feedback and social nudges on the energy consumption of renters in utility-inclusive contracts. A sample of 64 households at a University of Massachusetts Amherst family housing complex was selected to participate in this experiment. These residents pay utility-inclusive rent and previously had no means of gaining access to information regarding their personal energy consumption. Households were randomly divided into a control and two treatment groups. During the first phase of the experiment, both treatment groups received weekly Home Energy Reports [HERs] with feedback pertaining to their electricity consumption and its associated financial cost. During the second phase of the experiment both treatment groups continued to receive these HERs as before but with one distinction: households in one of the treatment groups received additional information as to how their electricity consumption compared to the electricity consumption of others in the complex (a social nudge). Analysis of this experiment suggests that feedback on own electricity usage reduced electricity consumption on average by 1.9%, while the social nudge increased electricity consumption by 3.6%. Further investigation into the cause of this positive effect on electricity consumption from social contextualization reveals that this figure was driven by low-consumers of electricity, who subsequently increased their electricity consumption upon receiving the social nudge. |
| Keywords: | energy efficiency, energy conservation, social nudge, social norms, feedback, field experiment, boomerang effect, split incentives, Resource /Energy Economics and Policy, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205414&r=exp |
| By: | Liu, Pengfei; Swallow, Stephen K. |
| Abstract: | We generalize the dominant assurance contract (Tabarrok, 1998) to the threshold public good provision. This contract offers, to donors who agree to a minimum price, an assurance payment as compensation in the event that fundraising fails to achieve the threshold needed to fund the good. We analyze the outcomes when individuals face 1) a minimum price for eligibility for the assurance payment and 2) an assurance payment that differs from the suggested price. We report a field experiment to fund bird habitat in Rhode Island, USA. An increase of assurance payment does not necessarily increase donations; however, for online donation data, we find positive evidence that the assurance payment can increase donation probability. Assurance payments could potentially improve fundraising success and the private provision of public goods. |
| Keywords: | Assurance Contract, Public Good Provision, Ecosystem Service, Field Experiment, Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, Public Economics, Q56, Q57, C72, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205384&r=exp |
| By: | Patrick Aquino (Harvard Graduate School of Education); Robert S. Gazzale (University of Toronto); Sarah Jacobson (Williams College) |
| Abstract: | The public good literature has often found that a punishment option increases cooperation while the gift exchange literature has found the opposite. We use a novel experiment to seek the cause of this difference. We begin with a gift exchange game with punishment as it has typically been implemented therein, and modify two features to replicate conditions more like those usually used in a public good game: punishment's power and its timing (whether the punisher publicly pre-commits to punishment before the punishee decides or acts after the punishee). We replicate the result that punishment institutions as they have typically been implemented in gift exchange games "backfire," but show that this bad outcome disappears if punishment is more powerful. We find three reasons that punishment decreases cooperation: lower wages are offered (a stick is substituted for a carrot); punishment is poorly chosen by many punishers; and some agents spitefully choose low cooperation in retribution against a punishing principal, but only if the punishment is weak so that spite is relatively cheap. We find that punishment that is not publicly pre-committed to is not effective in this game, even though this kind of punishment is similar to that used in many public good games in the literature where punishment does seem to increase cooperation. The only punishment institution that increases cooperation is high-power punishment that is publicly pre-committed to. Finally, the existence of a punishment institution often decreases social surplus (when punishment-related losses are considered), although it may eventually increase social surplus if it is powerful and publicly pre-committed to. |
| Keywords: | punishment, cooperation, reciprocity, gift exchange, public good |
| JEL: | C91 D03 D64 H41 J41 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2015-15&r=exp |
| By: | Chakrabarti, Anwesha; Swallow, Stephen; Anderson, Christopher |
| Keywords: | Environmental economics, Ecosystem service market, Payment for ecosystem services, Provision point mechanism, Field experiments, Community/Rural/Urban Development, Resource /Energy Economics and Policy, Teaching/Communication/Extension/Profession, Q20, Q57, C93, H41, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:206199&r=exp |
| By: | Maertens, Annemie; Michelson, Hope; Nourani, Vesall |
| Abstract: | Farmer clubs play an important role in improving the lives of millions of farmers in developing countries as they can resolve critical market failures, ranging from providing access to output markets and club-based input credit to sharing technology and marketing information. The efficacy of farmer clubs, however, depends on successful collaboration between members and their ability to overcome free-riding. In this study, we conducted a public goods game among farmer clubs in Malawi. In this game, club members were asked to divide 400 Malawian kwacha between an individual account and a common account. At the end of the game, the funds in the common account were multiplied by two and used by the club to provide a public good of their choice. Using the amount contributed into the common account as a measure of cooperative behavior, we find that most club members display some level of cooperative behavior, and that the extent of this cooperative behavior critically depends on an individual’s relative status within the club. Individuals with a higher status cooperate less compared to individuals with a lower status. In addition, women appear to be less cooperative compared to men. We show that these results are consistent with the predictions of a Voluntary Contribution Nash Equilibrium in which club members are uncertain about each other’s valuations and expect a bargaining process (as opposed to democratic process) to resolve these uncertainties and provide a resolution as to which public good the club selects at the end of the game. |
| Keywords: | Farmer clubs, Malawi, Public Goods Game, Political Economy, Public Economics, O1, Q1, H4, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205551&r=exp |
| By: | Ellison, Brenna; Kirwan, Barrett; Nepal, Atul |
| Abstract: | This study elicites consumers' willingness to pay for an environmentally sustainable good that might not typically be purchased on its own. We isolate the value of these perfectly-complementary, auxiliary goods by endowing consumers with the complete good and giving them the opportunity to pay to upgrade the auxiliary component of the good. We employ a Becker-Degroot-Marschack auction design in a market setting to determine consumers' actual willingness to pay for the auxiliary good. We find consumers are willing to pay a $0.67--$1.12 premium for a bioplastic plant container over a traditional plastic one. |
| Keywords: | bioplastics, specialty crop containers, experimental auctions, consumer willingness to pay, Agribusiness, Demand and Price Analysis, Marketing, Research Methods/ Statistical Methods, M31, Q21, D44, |
| Date: | 2015–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205670&r=exp |
| By: | Sanou, Awa; Liverpool-Tasie, Lenis Saweda O.; Shupp, Robert |
| Abstract: | Fertilizer micro-dosing is a precision fertilizer application technique that has the potential to improve agricultural productivity and livelihoods in Niger. Despite more than two decades of disseminating the technology, adoption rates remain low and there is evidence of dis-adoption of micro-dosing among fertilizer users. Since fertilizer is a risk increasing technology, it is possible that risk attitudes contribute to the low rates of adoption observed. This paper empirically estimates the effects of risk attitudes on fertilizer use and the practice of micro-dosing. We elicit several measures of risk aversion to assess their comparability and supplement those with measures of ambiguity and loss aversion to examine their effect on the decision to use fertilizer. We find that incentivized measures of risk attitudes have better predictive power than general measures based on hypothetical survey questions. Risk aversion matters in the decision to use fertilizer, and less risk averse farmers tend to practice micro-dosing over mixing seeds with fertilizer. Consequently, it is important to consider policies like insurance programs for risk averse farmers, to increase their likelihood of using fertilizer and promote the practice of micro-dosing. |
| Keywords: | Risk elicitation, laboratory experiments in the field, incentives, fertilizer micro-dosing, rural Niger, International Development, Risk and Uncertainty, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205813&r=exp |
| By: | Irenaeus Wolff |
| Abstract: | Crawford and Iriberri (AER, 2007) show how a level-k model can be based on salience to explain behaviour in games with distinctive action labels, taking hideand-seek games as an example. This study presents four different experiments designed to measure salience. When based on any of these empirical salience measures, their model does not explain behaviour. Modifying the model such that players follow salience when payoffs are equal, the model fits hide-and-seek data well. However, neither the original nor the modified model account for data from a discoordination game. This holds true even when incorporating the heterogeneity in measured salience perceptions. |
| Keywords: | ABAA, hide and seek, cognitive hierarchy, strategic reasoning, saliency |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0096&r=exp |
| By: | Deniz Aydin (Stanford) |
| Abstract: | This paper presents novel tests of competing models of inter temporal consumption behavior us- ing unique European panel data on income, spending and assets. I estimate the marginal propensity to consume (MPC) out of liquidity, the debt response to a change in borrowing capacity, using changes in credit card limits in an ongoing randomized controlled trial involving thirty thousand individuals. I ob- tain four empirical results: (i) consumers, even those that are away from a binding borrowing constraint, respond aggressively to a change in borrowing limits, accumulating an average of 20 cents of debt per dollar change in limit (ii) in line with models that predict a concave consumption function, the MPC is a decreasing function of cash-on-hand (iii) the cumulative response of debt and credit utilization is mean reverting: for the lowest cash-on-hand quartile the cumulative response is more than 0.5 after 6 months; however, the debt stock drops back to zero after 18 months. (observational data) (iv) additional liquidity is spent on both durables and non-durables, as well as taken out as cash advances. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:270&r=exp |
| By: | Oben Kurtulus Bayrak; John Hey |
| Abstract: | This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individualsâ vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwiczâs criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain. |
| JEL: | D81 |
| Date: | 2015–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:jmp:jm2015:pba1276&r=exp |
| By: | Baylis, Kathy; Ham, Andres |
| Abstract: | Randomized controlled trials have become the gold standard for impact evaluation since they provide unbiased estimates of causal effects. This paper studies randomized settings where treatment is assigned over geographical units. We analyze how omitting spatial correlation in outcomes or unobservables affects treatment effect estimates. First, we study spatial dependence in Mexico's Progresa program. Second, we conduct Monte Carlo simulations to generalize our results. Findings reveal that spatial correlation is more relevant than the literature suggests, and may affect both the precision of the estimate and the estimate itself. Existing spatial econometric methods may provide solutions to mitigate the consequences of omitting spatial correlation. |
| Keywords: | randomization, spatial correlation, treatment effects, estimation, inference, International Development, Research Methods/ Statistical Methods, C15, I38, R58, |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205586&r=exp |
| By: | Katare, Bhagyashree; Beatty, Timothy |
| Abstract: | Physical inactivity has been linked to increase in the risk of health problems such as obesity, cardiovascular diseases, diabetes, cancer, arthritis, hypertension and depression. The American Heath Association recommends 150 minutes of moderate physical activity or 90 minutes of vigorous physical activity per week. We investigate the effect of a social norming tool and financial incentives on inducing physical exercise in individuals. Physical exercise is measured as the number of times an individual visits the recreation center. The social norming tool provides feedback to individuals on own and peers’ physical exercise behavior. The financial incentive enters the individuals in a lottery to win a gift card. In both the interventions we see positive effect on attending the recreation center. Results show that interventions were effective on those students who reported little or zero level of physical exercise before the interventions. Those students who reported regular physical exercise levels, exercised regularly during the intervention. |
| Keywords: | Physical Exercise, social norming, financial incentive, Health Economics and Policy, Institutional and Behavioral Economics, |
| Date: | 2015–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205954&r=exp |
| By: | Flory, Jeffrey A. |
| Abstract: | Work in progress, results are preliminary. |
| Keywords: | Microfinance, Savings Accounts, Agricultural Inputs, Household Production, Agricultural Finance, Consumer/Household Economics, Crop Production/Industries, Food Security and Poverty, International Development, Production Economics, D14, O12, O16, G21, Q12, Q14, |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205901&r=exp |
| By: | Orazio Attanasio; Arlen Guarín; Carlos Medina; Costas Meghir |
| Abstract: | We use experimental data of a training program in 2005 in Colombia. We find that even up to ten years ahead, the JeA program had a positive and significant effect on the probability to work in the formal sector. Applicants in the treatment group also contributed more months to social security during the analyzed period, and to work for a large firm. Earnings of treated applicants were 11.8% higher in the whole sample, and they made larger contributions to social security. In addition, we also present non parametric bounds that for some percentiles of the sample of women, there are positive and nearly significant effects of the program. Thus, the effects of the program would have been capitalized both in increases in the likelihood of being formal, and increases in productivity. We also present evidence that the estimated program effects on the likelihood of working for the formal sector, the likelihood of working for a large firm, and the earnings in the formal sector, are not an artifact of analyzing multiple outcomes. We also find that for the whole sample of applicants, those in the treatment group have 0.315 more years of education, and have a probability of graduating from high school 10 percent higher than the control group. We find no significant effect on the probability of attending college or any school program, nor on fertility decisions, marital status or some dimensions of assortative mating. Among applicants matching to the census of the poorest population, we find that beneficiaries are more likely to participate in the labor market, to be employed, and to be enrolled in a private health insurance at the time of the survey. Finally, we find that the benefits of the JeA program are higher than it costs, leading to an internal rate of return of at least 22.1 percent. On the whole, the program was a cost-effective alternative, worth to consider to bridging the transit of youths from the informal to the formal sector in the future. |
| JEL: | J24 O15 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21390&r=exp |
| By: | Zaffou, Madiha; Campbell, Benjamin |
| Abstract: | Eating away from home has been noted to be a contributor to the rising obesity epidemic in the U.S. The U.S. Food and Drug Administration has announced plans to require calorie information to certain food retail establishments. However, the effectiveness of such a requirement has been found to be mixed with the literature. The objective of this paper was to understand the role of various nutritional labels (i.e. calorie, percent daily intake, and traffic light signals) on food choice at both sit down and fast food establishments. Our results indicate that participants in the price only treatment chose meals with higher caloric content from both sit down and fast food menus. However, we find that calorie only information provides the largest reduction in calories in a meal from a sit down menu, but percent daily intake in conjunction with calorie information provides the largest reduction in calories for a fast food menu. Further, via eye tracking technology we find that participants looked at the nutritional information similarly across treatments. |
| Keywords: | obesity, eye tracking, menu labeling, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, |
| Date: | 2015–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:206194&r=exp |