|
on Experimental Economics |
|
Issue of 2016‒09‒18
fourteen papers chosen by |
| By: | Alessandro Innocenti |
| Abstract: | The paper provides a review of research using virtual reality as a tool in experimental economics. It addresses the question of whether behavior in virtual environments is a valuable source of empirical evidence for economists. A typology of virtual reality experiments based on the difference between low-immersive (LIVE) and high-immersive virtual environments (HIVE) is offered. It is argued that virtual reality experiments are framed field experiments, which allow testing the effect of contextual cues on economic decision-making under the strict control of the experimenter. This feature enhances replicability and attenuates the context-free illusion that represents an important limitation of the standard laboratory approach in economics. |
| Keywords: | virtual reality, experimental economics, laboratory methods, virtual worlds, immersive environments. |
| JEL: | B41 C90 C93 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:049&r=exp |
| By: | Bartuli, Jenny (Continental AG); Djawadi, Behnud Mir (University of Paderborn); Fahr, René (University of Paderborn) |
| Abstract: | The present paper suggests an innovative experimental design to study the nature and occurrence of whistleblowing in an employee-organization context. In particular, we aim at identifying whether student subjects in the role of employees are willing to blow the whistle on their managers' decisions to withhold money that is destined for a charitable purpose. Since the sole act of reporting leads to negative financial consequences for both players, the employee faces a conflict between ethical considerations and monetary interests. Of the 111 employee-manager pairings, 88 managers misappropriate the donation funds and 33 employees blow the whistle on their managers' fraudulent behaviors. We use different scales of the HEXACO and the DOSPERT personality inventory to link measures of personality traits to actual behavior which enables us to identify specific characteristics that distinguish whistleblowers from silent observers. We find that the Honesty-Humility factor scale is a strong predictor for whistleblowing. Further, employees who are more altruistic and more aware of ethical issues are more likely to refrain from supporting fraud and report wrongdoing. With the foci on research exploring individual and situational antecedents of whistleblowing, our experimental design offers researchers a new approach to studying organizational behavior of ethical scope under controlled and incentive-compatible conditions. |
| Keywords: | whistleblowing, fraud, organizational wrongdoing, social norms, experimental economics, laboratory experiment |
| JEL: | C91 I11 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10190&r=exp |
| By: | Daniela Di Cagno (LUISS, Rome); Werner Gürth (LUISS, Rome; Max Planck Institute for Research on Collective Goods, Bonn; Frankfurt Business School); Noemi Pace (Ca’ Foscari University of Venice, Department of Economics; LUISS, Rome); Francesca Marzo (LUISS, Rome) |
| Abstract: | A risky choice experiment is based on one-dimensional choice variables and risk neutrality induced via binary lottery incentives. Each participant confronts many parameter constellations with varying optimal payoffs. We assess (sub)optimality, as well as (non)optimal satisficing, partly by eliciting aspirations in addition to choices. Treatments differ in the probability that a binary random event, which are payoff- but not optimal choice–relevant, is experimentally induced and whether participants choose portfolios directly or via satisficing, i.e., by forming aspirations and checking for satisficing before making their choice. By incentivizing aspiration formation, we can test satisficing, and in cases of satisficing, determine whether it is optimal. |
| Keywords: | (un)Bounded Rationality, Satisficing, Risk, Uncertainty, Experiments |
| JEL: | D03 D81 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2016:22&r=exp |
| By: | Francis Larson; John A. List; Robert D. Metcalfe |
| Abstract: | Behavioral economists have recently put forth a theoretical explanation for the equity premium puzzle based on combining myopia and loss aversion. Complementing the behavioral theory is evidence from laboratory experiments, which provide strong empirical support consistent with myopic loss aversion (MLA). Yet, whether, and to what extent, such preferences underlie behaviors of traders in their natural domain remains unknown. Indeed, a necessary condition for the MLA theory to explain the equity premium puzzle is for marginal traders in markets to exhibit such preferences. Using minute-by-minute trading observations from over 864,000 price realizations in a natural field experiment, we find data patterns consonant with MLA: in their normal course of business, professional traders who receive infrequent price information invest 33% more in risky assets, yielding profits that are 53% higher, compared to traders who receive frequent price information. Beyond testing theory, these results have important implications for efficient resource allocation as well as characterizing the optimal structure of social and economic policies. |
| JEL: | C9 C93 G02 G11 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22605&r=exp |
| By: | Sebastian Galiani; Nadya Hajj; Pablo Ibarraran; Nandita Krishnaswamy; Patrick J. McEwan |
| Abstract: | We analyzed two conditional cash transfers experiments that preceded Honduran presidential elections in 2001 and 2013. In the first, smaller transfers had no effects on voter turnout or incumbent vote share. In the second, larger transfers increased turnout and incumbent share in similar magnitudes, consistent with the mobilization of the incumbent party base rather than vote switching. Moreover, we found that turnout and incumbent share increased when cumulative payments were similar, but larger payments were made closer to the elections. As in prior lab experiments, individuals seem to overweight “peak” and “end” payments in their retrospective estimation of net benefits. We further argue that a model of intrinsically-reciprocal voters is most consistent with the findings. |
| JEL: | H3 I38 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22588&r=exp |
| By: | David B. Johnson (Department of Economics, Finance, and Marketing, University of Central Missouri); Matthew D. Webb (Department of Economics, Carleton University) |
| Abstract: | Little is known about how individuals make decisions when they must choose several options from a set of options when the outcomes are risky and the payoffs are rival. When researchers model these decisions, they assume people maximize their expected utility. We design an experiment in which subjects face either rival or independent payoffs. While theory predicts different behavior, subjects behave nearly identically under these payoff schemes. This suggests individuals are not maximizing expected utility. Additional treatments demonstrate that this behavior is likely driven by a heuristic used to simplify a complex math problem, rather than a preference for lotteries with the highest independent expected utilities. Our results suggest that using expected utility as peoples' objective function in these types of environments will lead to biased predictions. |
| Keywords: | decision making, risk, rival, online experiment |
| JEL: | C90 D01 D81 |
| Date: | 2016–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:16-12&r=exp |
| By: | Jesse Rothstein; Till von Wachter |
| Abstract: | Large-scale social experiments were pioneered in labor economics, and are the basis for much of what we know about topics ranging from the effect of job training to incentives for job search to labor supply responses to taxation. Random assignment has provided a powerful solution to selection problems that bedevil non-experimental research. Nevertheless, many important questions about these topics require going beyond random assignment. This applies to questions pertaining to both internal and external validity, and includes effects on endogenously observed outcomes, such as wages and hours; spillover effects; site effects; heterogeneity in treatment effects; multiple and hidden treatments; and the mechanisms producing treatment effects. In this Chapter, we review the value and limitations of randomized social experiments in the labor market, with an emphasis on these design issues and approaches to addressing them. These approaches expand the range of questions that can be answered using experiments by combining experimental variation with econometric or theoretical assumptions. We also discuss efforts to build the means of answering these types of questions into the ex ante design of experiments. Our discussion yields an overview of the expanding toolkit available to experimental researchers. |
| JEL: | H53 I38 J22 J24 J31 J65 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22585&r=exp |
| By: | SHIMAMOTO Daichi; TODO Yasuyuki; Yu Ri KIM; Petr MATOUS |
| Abstract: | Utilizing a randomized controlled trial (RCT) in traditional clusters of apparel and textile firms in Vietnam, this paper investigates how firms' decisions to participate in seminars on export promotion are affected by their information exchange peers. We identify the effect of the number of peers participating in the seminars by using the number of randomly invited peers as an instrument. In addition, because we held three one-day seminars consecutively and invited each firm to one of the seminars, we can isolate the peer effects based on the reduction of the psychological costs of participation--or social utility--from other effects through information confirmation among the peer participants and free riding on peer information. We find that peers' participation in the seminars has a positive effect overall. To further decompose this positive effect, we distinguish between peers participating on the same day and other days, finding that the former has a positive effect while the latter has no significant effect. These results imply that peer effects arise mostly through the social utility channel. The presence of positive peer effects suggests that multiple equilibria in terms of the share of participants within each network of firms may emerge, which is also consistent with our observations. |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:16083&r=exp |
| By: | Thomas J. Leeper |
| Abstract: | Ecological validity is vital to experimental research because designs that are too artificial may not speak to any real-world political phenomenon. One such concern is treatment self-selection: if individuals in the real world self-select treatments, such as political communications, how well does the sample average treatment effect estimate the effects of message exposure for those individuals who would — if given the choice — opt-in to and out of receiving treatment? This study shows that randomization masks effect heterogeneity between individuals who would select different messages if given the choice. Yet such selections are themselves complex, revealing additional challenges for realistically studying treatments prone to self-selection. The evidence of effect heterogeneity raises questions about the appropriateness of random assignment experiments for studying political communication and the results more broadly advance our understanding of citizens’ selection into and responses to communications when, as they often do, have choice over what messages to receive. |
| JEL: | L91 L96 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:67604&r=exp |
| By: | Sheremeta, Roman |
| Abstract: | Researchers have proposed various theories to explain overbidding in rent-seeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests. |
| Keywords: | rent-seeking, contest, competition, impulsive behavior, experiments |
| JEL: | C72 C91 D01 D72 |
| Date: | 2016–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73731&r=exp |
| By: | Vittorio Pelligra (University of Cagliari); Tommaso Reggiani (LUMSA University); Daniel John Zizzo (Newcastle University Business School) |
| Abstract: | We consider the notions of static and dynamic reasonableness of requests in a trust game experiment. We vary systematically the experimental norm of what is expected from trustees to return to trustors, both in terms of level of each request and in terms of sequence of the requests. Static reasonableness matters in a self-biased way, in the sense that low requests justify returning less but high requests tend to be ignored. Dynamic reasonableness also matters, in the sense that, if requests keep increasing, trustees return less than if requests of different size are presented in random or decreasing order. Requests never systematically increase trustworthiness, but may decrease it. |
| Keywords: | trust; trustworthiness; norms; reasonableness; moral wiggle room; moral licensing |
| JEL: | C91 D01 D03 D63 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:lsa:wpaper:wpc13&r=exp |
| By: | Johannes Abeler (University of Oxford, IZA and CESifo); Daniele Nosenzo (University of Nottingham, School of Economics); Collin Raymond (Amherst College) |
| Abstract: | We study information conditions under which individuals are willing to delegate their sanctioning power to a central authority. We design a public goods game in which players can move between institutional environments, and we vary the observability of others' contributions. We find that the relative popularity of centralized sanctioning crucially depends on the interaction between the observability of the cooperation of others and the absence of punishment targeted at cooperative individuals. While central institutions do not outperform decentralized sanctions under perfect information, large parts of the population are attracted by central institutions that rarely punish cooperative individuals in environments with limited observability. |
| Keywords: | centralized sanctions, cooperation, experiment, endogenous institutions |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-13&r=exp |
| By: | Andreas Nicklisch (University of Hamburg and German Research Foundation); Kristoffel Grechenig (Max Planck Institute for Research on Collective Goods, Bonn); Christian Thoeni (Univesity of Lausanne) |
| Abstract: | We study information conditions under which individuals are willing to delegate their sanctioning power to a central authority. We design a public goods game in which players can move between institutional environments, and we vary the observability of others' contributions. We find that the relative popularity of centralized sanctioning crucially depends on the interaction between the observability of the cooperation of others and the absence of punishment targeted at cooperative individuals. While central institutions do not outperform decentralized sanctions under perfect information, large parts of the population are attracted by central institutions that rarely punish cooperative individuals in environments with limited observability. |
| Keywords: | centralized sanctions, cooperation, experiment, endogenous institutions |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-12&r=exp |
| By: | Brice Corgnet (EMLYON Business School, Univ Lyon, GATE L-SE UMR 5824, F-69131 Ecully, France); Mark DeSantis (Argyros School of Business and Economics & Economic Science Institute, Chapman University, Orange, CA, 92866); David Porter (Argyros School of Business and Economics & Economic Science Institute, Chapman University, Orange, CA, 92866) |
| Abstract: | Using simulations and experiments, we pinpoint two main drivers of trader performance: cognitive reflection and theory of mind. Both dimensions facilitate traders’ learning about asset valuation. Cognitive reflection helps traders use market signals to update their beliefs whereas theory of mind offers traders crucial hints on the quality of those signals. We show these skills to be complementary because traders benefit from understanding the quality of market signals only if they are capable of processing them. Cognitive reflection relates to previous Behavioral Finance research as it is the best predictor of a trader’s ability to avoid commonly-observed behavioral biases. |
| Keywords: | Experimental asset markets, behavioral finance, cognitive reflection, theory of mind, financial education |
| JEL: | C92 G02 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1627&r=exp |