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on Experimental Economics |
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Issue of 2016‒07‒16
twenty-one papers chosen by |
| By: | Schneider, Tim; Meub, Lukas; Bizer, Kilian |
| Abstract: | Markets for expert services are characterized by information asymmetries between experts and consumers. We analyze the effects of consumer information, where consumers suffer from either a minor or serious problem and only experts can infer the appropriate treatment. Consumer information is a noisy signal that is informative about a consumer's problem severity. In a laboratory experiment, we show that consumers are generally reluctant to accept expensive treatment recommendations, which is endorsed by good signals and fundamentally changed by bad signals. Experts condition their cheating on a consumer's risk of suffering from a serious problem if they can observe consumer information. Accordingly, experts and low-risk consumers benefit at the expense of more frequently cheated high-risk consumers. Consumer information leads to more appropriate treatments being carried out and thus superior overall welfare. In contrast to our theoretical predictions, this effect does not depend on hiding consumer information for experts. |
| Keywords: | consumer information,credence goods,experts,laboratory experiment |
| JEL: | C70 C91 D82 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:285&r=exp |
| By: | C. Kirabo Jackson; Alexey Makarin |
| Abstract: | We analyze an experiment in which middle-school math teachers were randomly given access to “off-the-shelf” lessons designed to develop students’ deep understanding. These lessons were provided online, but are designed to be taught by teachers in a traditional classroom setting. Teaching involves multiple complementary tasks, but we model two: imparting knowledge and developing understanding. In our model, lessons designed to develop understanding substitute for teacher effort on this task so that teachers who may only excel at imparting knowledge can be effective overall – simplifying the job of teaching. Providing teachers with online access to the lessons with supports to promote their use increased students’ math achievement by about 0.08 of a standard deviation. These effects appear to be mediated by the lessons promoting deep understanding, and teachers therefore being able to provide more individualized attention. Benefits were much larger for weaker teachers, suggesting that weaker teachers compensated for skill deficiencies by substituting the lessons for their own efforts. The intervention is highly scalable and is more cost effective than most policies aimed at improving teacher quality. |
| JEL: | I20 J0 J48 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22398&r=exp |
| By: | Darolia, Rajeev (Federal Reserve Bank of Philadelphia) |
| Abstract: | There is ample concern that college students are making ill-informed student loan decisions with potentially negative consequences to themselves and the broader economy. This paper reports the results of a randomized field experiment in which college students are provided salient information about their borrowing choices. The setting is a large flagship public university in the Midwest, and the sample includes all nongraduating students who previously borrowed student loan money (~10,000 students). Half of the students received individually tailored letters with simplified information about future monthly payments, cumulative borrowing, and the typical borrowing of peers; the other half is the control group that received no additional information. There are at most modest effects of the letter overall, which suggests that information alone is not sufficient to drive systematically different borrowing choices among students. However, some key student subgroups changed their borrowing in response to the letter, particularly those with low GPAs. There is also evidence of intended (more contact with financial aid professionals) and unintended (lower Pell Grant receipt) consequences of the letter. |
| Keywords: | Student Loans; Debt Letter; Financial Literacy; Payment Cards Center; |
| JEL: | D83 H52 I22 I28 |
| Date: | 2016–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:16-18&r=exp |
| By: | Armin Falk (Universität Bonn); Fabian Kosse (University of Bonn); Ingo Menrath (Heinrich Heine University, Department of Medical Sociology); Pablo Emilio Verde (Heinrich Heine University, Department of Medical Sociology); Johannes Siegrist (Heinrich Heine University, Department of Medical Sociology) |
| Abstract: | This paper investigates physiological responses to perceptions of unfair pay. We use an integrated approach exploiting complementarities between controlled lab and representative panel data. In a simple principal-agent experiment agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. Throughout the experiment we record agents’ heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control, and which has been shown to predict coronary heart disease in the long-run. Our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using observational data from a large representative panel data set. Complementary to our experimental findings we show a strong and significant negative association between unfair pay and health outcomes, in particular cardiovascular health. |
| Keywords: | fairness, social preferences, Inequality, heart rate variability, Health, experiment, SOEP |
| JEL: | C91 D03 D63 I14 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2016-015&r=exp |
| By: | Huck, Steffen; Lünser, Gabriele; Spitzer, Florian; Tyran, Jean-Robert |
| Abstract: | In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians' market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated. |
| Keywords: | Credence good,Physician,Overtreatment,Competition,Insurance |
| JEL: | C91 I11 I13 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2014307r&r=exp |
| By: | Chemla, Gilles; Hennessy, Christopher |
| Abstract: | Double-blind RCTs are viewed as the gold standard in eliminating placebo effects and identifying non-placebo physiological effects. Expectancy theory posits that subjects have better present health in response to better expected future health. We show that if subjects Bayesian update about efficacy based upon physiological responses during a single-stage RCT, expected placebo effects are generally unequal across treatment and control groups. Thus, the difference between mean health across treatment and control groups is a biased estimator of the mean non-placebo physiological effect. RCTs featuring low treatment probabilities are robust: Bias approaches zero as the treated group measure approaches zero. |
| Keywords: | Bayesian updating; bias; control; double-blind RCTs; drug; placebo; treatment |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11360&r=exp |
| By: | Andersson, Ola (Research Institute of Industrial Economics, Sweden); Ingebretsen Carlson, Jim (Department of Economics, Lund University); Wengström, Erik (Department of Economics, Lund University) |
| Abstract: | Several recent models of choice build on the idea that decision makers are more likely to choose an option if its attributes stand out compared to the attributes of the available alternatives. One example is the model of focusing by Köszegi and Szeidl (2013) where decision makers focus disproportionally on the attributes in which the available options differ more, implying that some attributes will be overweighted. We test this prediction in a controlled experiment. We find that subjects are more likely to make inconsistent choices when we manipulate the choice set by adding new options that are unchosen, but affect the maximal difference in attributes among the options. Hence, our results suggest that there exists a focusing effect. |
| Keywords: | Individual decision making; focus; attention; salience; decoy; experiments |
| JEL: | C91 D03 D12 |
| Date: | 2016–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2016_015&r=exp |
| By: | Matteo Rizzolli; James Tremewan |
| Abstract: | The theory of optimal deterrence suggests the substitution of mon- etary sanctions over non-monetary sanctions whenever this is possible because non-monetary sanctions are more socially costly. This pre- scription is based on the assumption that monetary and non-monetary sanctions are perfect substitutes: there exists a monetary equivalent of a non-monetary sanction that, if used as a ne, produces the same level of deterrence. We test this assumption with an experiment. In our stealing game potential thieves face the possibility of punishment. Our non-monetary sanction treatments mimic hard labour: we require convicted individuals to carry out a tedious real e ort task. In the monetary treatments sanctions are insteadones, which are based on individuals' willingness to pay to avoid the effort task to ensure com- parability to the non-monetary treatment. A second manipulation of our experiment concerns the balance of errors in the adjudication pro- cedure (convictions of innocents and acquittal of guilty individuals). We and that stealing is reduced most e ectively by a sanction regime that combines non-monetary sanctions with a severe procedure. Our data is consistent with the notion that both monetary punishment and pro-defendant sanction regimes are less effective in communicat- ing moral condemnation of an act. |
| JEL: | D01 K14 K40 K41 D42 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1606&r=exp |
| By: | Eva O. Arceo-Gómez (Division of Economics, CIDE); Raymundo M. Campos-Vázquez (Division of Economics, CIDE) |
| Abstract: | Jobs ads often narrow their searches using gender or age requirements. These narrow searches do not rule out the existence of post-application discrimination. We test for such biases using a correspondence experiment in Mexico City. Some job advertisements explicitly discriminated against males, females, asked for beauty or requested a photograph. The experiment consisted on sending fictitious resumes responding to job advertisements with randomized information of the applicants, which included photographs representing three distinct phenotypes: white, mestizo and indigenous. The two forms of discrimination are correlated: explicitly discriminating firms tend to discriminate more against indigenous-looking females and against married females. |
| Keywords: | Discrimination, Gender, Race, Labor marke, Mexico, Correspondence. |
| JEL: | I24 J10 J16 J70 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:emc:wpaper:dte593&r=exp |
| By: | Kono, Hisaki; Sawada, Yasuyuki; Shonchoy, Abu S. |
| Abstract: | In contrast to the remarkable progress in developing countries in improving primary education, access to higher education in many countries remains limited, especially in rural areas where the quality of education is inadequate. We evaluate a DVD-based distance-learning program in rural Bangladesh, targeted at students aiming to take university entrance tests. We conducted two experiments: one to evaluate the effect of the distance-learning program and the second to determine the demand and price sensitivity. Our first experiment shows that the DVD-based distance-learning program has a considerable positive effect on the number of students passing entrance exams. This effect does not depend on cognitive scores, but does depend on non-cognitive attributes, indicating the importance of commitment, which is imposed through our program. In the second experiment, we offered a random subsidy to interested participants. The uptake decision is price-sensitive, although the price sensitivity is not correlated with students' past academic performance or their socio-economic status, suggesting that increasing the price should not disproportionately exclude poor students. |
| Keywords: | Higher education, Rural societies, Distance-Learning, Tertiary education, Bangladesh |
| JEL: | O15 O22 I15 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper580&r=exp |
| By: | Battaglini, Marco; Lai, Ernest; Lim, Wooyoung; Tao-yi Wang, Joseph |
| Abstract: | We experimentally investigate the informational theory of legislative committees first proposed by Gilligan and Krehbiel [1987, 1989]. Two committees provide policy-relevant information to a legislature under two different procedural rules. Under the open rule, the legislature is free to make any decision; under the closed rule, the legislature is constrained to choose between a committee's proposal and an exogenous status quo. Our experiment shows that even in the presence of conflicts of interests, legislative committees help improve the legislature's decision by providing useful information. We further obtain evidence in support of three theoretical predictions: the Outlier Principle, according to which more extreme preferences of the committees reduce the extent of information transmission; the Distributional Principle, according to which the open rule is more distributionally eefficient than the closed rule; and the Restrictive-rule Principle, according to which the closed rule better facilitates the informational role of legislative committees. We, however, obtain mixed evidence for the Heterogeneity Principle, according to which more information can be extracted in the presence of multiple committees with heterogeneous preferences. Our experimental findings provide overall support for the equilibrium predictions of Gilligan and Krehbiel [1989], some of which have been controversial in the literature. |
| Keywords: | information transmission; laboratory experiment; legislative committees |
| JEL: | C72 C82 D83 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11356&r=exp |
| By: | Seema Jayachandran; Joost de Laat; Eric F. Lambin; Charlotte Y. Stanton |
| Abstract: | This paper evaluates a Payments for Ecosystem Services (PES) program in western Uganda that offered forest-owning households cash payments if they conserved their forest. The program was implemented as a randomized trial in 121 villages, 60 of which received the program for two years. The PES program reduced deforestation and forest degradation: Tree cover, measured using high-resolution satellite imagery, declined by 2% to 5% in treatment villages compared to 7% to 10% in control villages during the study period. We find no evidence of shifting of tree-cutting to nearby land. We then use the estimated effect size and the "social cost of carbon" to value the delayed carbon dioxide emissions, and compare this benefit to the program's cost. |
| JEL: | O10 O13 Q23 Q54 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22378&r=exp |
| By: | Michal Bauer (CERGE-EI and Charles University); Christopher Blattman (Columbia University, New York City and National Bureau of Economic Research, Cambridge, Massachusetts); Julie Chytilová (CERGE-EI and Charles University); Joseph Henrich (Harvard University, Cambridge, Massachusetts and CIFAR, Toronto, Ontario, Canada); Edward Miguel (University of California, Berkeley, California, and National Bureau of Economic Research, Cambridge, Massachusetts); Tamar Mitts (Columbia University, New York City, New York) |
| Abstract: | In the past decade, nearly 20 studies have found a strong, persistent pattern in surveys and behavioral experiments from over 40 countries: individual exposure to war violence tends to increase social cooperation at the local level, including community participation and prosocial behavior. Thus while war has many negative legacies for individuals and societies, it appears to leave a positive legacy in terms of local cooperation and civic engagement. We discuss, synthesize and reanalyze the emerging body of evidence, and weigh alternative explanations. There is some indication that war violence especially enhances in-group or “parochial” norms and preferences, a finding that, if true, suggests that the rising social cohesion we document need not promote broader peace. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:224&r=exp |
| By: | Amanda E. Kowalski (Cowles Foundation, Yale University) |
| Abstract: | I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization. |
| Keywords: | Compliers, Dierence-in-dierence test, Sample local average treatment eect (SLATE), Marginal untreated outcome test, Massachusetts health reform, Program evaluation, Selection |
| JEL: | C1 C9 H4 I13 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2045&r=exp |
| By: | Daniel Marszalec (Faculty of Economics, The University of Tokyo) |
| Abstract: | I evaluate the performance of four static sealed-bid package auctions in an experimental setting with complementarities. The valuation model comprises two items, and three bidders: two `local bidders demand one item only, while the third (global) bidder only wants both. The rules I compare include the Vickrey and first-price auctions, Vickrey Nearest Rule and the Reference Rule. Auction-level tests find the first-price auction revenue dominant overall, while the Vickrey auction performs worst; the other two rules rank intermediate. Bidder-level tests of the experimental data reject the competitive equilibrium bidding functions: overbidding is widespread in all four auctions, and bidders are averse to submitting boundary bids. I also observe behaviour consistent with collusive bidding in the Vickrey auction. Contrary to theoretical predictions, the Vickrey auction performs worst on efficiency, primarily for this reason. |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2016cf1018&r=exp |
| By: | Dmitry Levando |
| Abstract: | The paper suggests a non-cooperative simultaneous game, with a number of potential deviators is a parameter of the game. A definition of the game embeds mechanism design. The game has an equilibrium in mixed strategies. The equilibrium encompasses intra and inter group externalities and individual payoffs that make it different from a strong Nash, coalition-proof equilibrium and some other equilibrium concepts. We offer a non-cooperative stability criterion to describe a robustness of an equilibrium strategy profile to an increase in a number of deviators. The criterium may serve as a way to measure trust for the equilibrium in terms of a number of potential deviators. |
| Keywords: | Non-cooperative games |
| JEL: | C72 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2016:15&r=exp |
| By: | Felix Koelle (Faculty of Management, Economics and Social Sciences, University of Cologne) |
| Abstract: | We experimentally investigate spillover effects of affirmative action policies on team performance and the willingness to work in teams. We find that such policies in form of gender quotas do not harm performance and cooperation within teams, and do not discourage selection into teams. |
| Keywords: | Affirmative action, cooperation, competition, teams, selection, experiments |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-07&r=exp |
| By: | Juan I Block; Drew Fudenberg; David K Levine |
| Date: | 2016–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000001375&r=exp |
| By: | Klaus Wälde (Johannes Gutenberg-University Mainz); Agnes Moors (KU Leuven) |
| Abstract: | Positive and negative feelings were central to the development of economics, especially in utility theory in classical economics. While neoclassical utility theory ignored feelings, behavioral economics more recently reintroduced feelings in utility theory. Beyond feelings, economic theorists use full-fledged specific emotions to explain behavior that otherwise could not be understood or they study emotions out of interest for the emotion itself. While some analyses display a strong overlap between psychological thinking and economic modelling, in most cases there is still a large gap between economic and psychological approaches to emotion research. Ways how to reduce this gap are discussed. |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:1612&r=exp |
| By: | Cagri S. Kumru (The Australian National University); John Piggott (The University of New South Wales); Athanasios C. Thanopoulos (University of Athens) |
| Abstract: | This study analyzes the relative performance in terms of welfare of the current U.S. PAYG system compared to an array of cost equivalent alternative specifications of means-tested pension programs. We conduct our analysis under two different settings. While in the first setting, individuals have standard preferences, in the second setting individuals have self-control preferences. We show that the implications of the reform substantially differs across the two settings. |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp340&r=exp |
| By: | Adriaan R. Soetevent (University of Groningen, The Netherlands); Tadas Bruzikas (University of Groningen, The Netherlands) |
| Abstract: | Do the choices of consumers who search for a product's best price exhibit risk neutral, risk averse or loss averse risk attitudes? We study how in a problem of sequential search with costless recall the relation between a consumer's willingness to pay for continued search and the level of price uncertainty depends on her risk preferences. Independent of the current best price, an increase in price uncertainty encourages continued search when consumers are risk neutral. However, we prove that theory predicts an inversion when consumers are either risk or loss averse. In those cases, an increase in price uncertainty only increases the consumer's willingness to pay (WTP) for continued search if the current best price is sufficiently low. We subsequently use this observation in an empirical test to identify between different risk preferences in a stylized problem of sequential search. In line with the inversion, we find that a reduction in price uncertainty decreases the WTP for continued search when the current best price is low but increases the WTP when it is high. While at odds with the assumption of risk neutrality, this finding is consistent with models of consumer risk and/or loss aversion. Moreover, the model parameters of risk and loss aversion that lead to the best empirical fit have values similar to those estimated for other decision domains. |
| Keywords: | consumer search; risk aversion; loss aversion; price uncertainty |
| JEL: | D11 D12 D83 M31 |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160049&r=exp |