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on Experimental Economics |
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Issue of 2017‒03‒05
28 papers chosen by |
| By: | Jonathan E. Alevy (Department of Economics, University of Alaska Anchorage); Julianna Butler (Department of Economics, University of Delaware); Michael Price (Department of Economics, Georgia State University) |
| Abstract: | Economic theory has shown that bidder’s choice auctions result in higher revenues than traditional good-by-good auctions, if bidders are risk-averse. Most theoretical and experimental work focuses on bidder’s choice auctions where bidders value only one of the available goods. We report results from lab and field experiments that examine multi-good demand, which is common in bidder’s choice auctions used in field settings. We also implement treatments that vary revelation of price. Information. We find that while price revelation does not have a significant effect on revenue, multi-good demand mutes the theoretical revenue superiority the bidder’s choice mechanism. This is consistent with the notion that the perceived risk of losing one’s most preferred good is softened when there is a chance to win other goods. This result implies that bidder’s choice auctions should be used in settings where each bidder is likely to strongly prefer one good over the others, though this need not be the same good for every bidder. Further, this work demonstrates the complementarities of the field and laboratory settings to answer questions which are not clearly resolved using only one setting. |
| Keywords: | experimental economics, field experiment, lab experiment, auction, bidder's choice |
| JEL: | D70 H41 D81 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2016-01&r=exp |
| By: | James C. Cox; Vjollca Sadiraj; Kurt E. Schnier; John F. Sweeney |
| Abstract: | This paper reports research on improving decisions about hospital discharge ? a critical healthcare quality and cost determinant identified by the Centers for Medicare and Medicaid Services. We report an experiment on effects of subjective information about patients’ health status on discharge decisions as well as uptake of recommendations from a clinical decision support system (CDSS). Subjective information about readiness for discharge was obtained during examinations of standardized patients, who are regularly employed in medical education, but in our experiment had been given scripts developed for the experimental treatments. The CDSS presents evidence-based discharge recommendations obtained from econometric analysis of data from de identified electronic health records (EHR) of hospital patients. Subjects in the experiment were third and fourth year medical students. We find that the CDSS decreases hospital stay by one day while decreasing readmissions of high-risk patients. Subjects are responding appropriately to information conveyed by standardized patients when such information is consistent with the EHR. Compared to patient discharge from the hospital absent patient reports, Eager patients when also EHR-Fit are at least seven times more likely to be discharged whereas Reluctant patients when also EHR-Sick are about four times less likely to be discharged. |
| Keywords: | Experiment, Decision Support, Patient Reports, Default Option |
| JEL: | C91 D81 I10 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2017-03&r=exp |
| By: | Praveen Kujal (Middlesex University and Economic Science Institute, Chapman University); Owen Powell (Universität Wien) |
| Abstract: | One can define a bubble as a persistent increase in the price of an asset over and above its fundamental value with an abrupt fall in prices when no buyers are available to make purchases. The occurrence of market bubbles has a long history, starting with the Dutch Tulip Mania (1624-1637) to the South Sea and Mississippi Bubble (1716-1720), the British Railway Mania (1840´s) to the crash of 1929. Recent events have been the crash of 1987, the dot-com bubble (1990s) to the most recent housing crisis in early 2000. Even though bubbles, and a subsequent crash, may reallocate resources to more efficient activities, the economic costs of bubbles are large and sometimes felt for long periods of time. It is important to emphasize that markets perform an important role in that they aggregate information (Hayek, 1945) for its participants. The aggregation of information occurs through the price discovery process. In the real world markets are seldom efficient and mispricing is common. Due to this, information aggregation seldom happens and consequently one observes deviations of prices from their fundamentals on a regular basis. Market bubbles are an elusive phenomenon and it is due to this that the prior knowledge of the occurrence of a bubble is difficult. In most cases we only know of their occurrence when we observe a crash, but by then it’s too late. Simply stated, bubbles reflect mis-pricing of an asset from its fundamental value. Clearly, knowing the fundamental value in the real world is a challenge. The use of economic experiments is important to study the nature of bubbles for this very reason. Bubbles are hard to detect. The institutional environment is easily controlled in a laboratory setting and one can study the reasons behind the deviation of prices from their fundamental value by carefully varying the experimental parameters. Information that is not easily available in real world settings, such as the fundamental value, is observed and can be controlled in a laboratory setting (declining, constant, ambiguous etc.). Typically, experimental studies on asset market bubbles utilize the continuous Double Auction institution where a participant can be on either side of the market acting as a buyer or seller. This may depend upon the underlying market conditions or their choice of the role based upon their expectations. The good in a typical asset market is durable and lasts till the end of the experiment. For our purpose we will limit ourselves to studies that use perfectly durable goods in asset markets. A good purchased in any period earns a dividend at the end of that period and can be resold at any point of time till the last period and is not perishable. The knowledge of the last period is common to all subjects. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:17-01&r=exp |
| By: | Dalton, Patricio (Tilburg University, School of Economics and Management); Gonzalez Jimenez, Victor (Tilburg University, School of Economics and Management); Noussair, Charles (Tilburg University, School of Economics and Management) |
| Abstract: | We study whether exposure to poverty can induce affective states that decrease productivity. In a controlled laboratory setting, we find that subjects randomly assigned to a treatment, in which they view a video featuring individuals that live in extreme poverty, exhibit lower subsequent productivity compared to subjects assigned to a control treatment. Questionnaire responses, as well as facial recognition software, provide quantitative measures of the affective state evoked by the two treatments. Subjects exposed to images of poverty experience a more negative affective state than those in the control treatment. Further analysis shows that individuals in a more positive emotional state exhibit less of a treatment effect. Also, those who exhibit greater attentiveness upon viewing the poverty video are less productive. The results are consistent with the notion that exposure to poverty can induce a psychological state in individuals that adversely affects productivity. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:f8000f4a-b5d5-4ca5-bf73-2c1d90589f9b&r=exp |
| By: | Marcel Fafchamps; Di Mo |
| Abstract: | We conduct a large scale RCT to investigate peer effects in computer assisted learning (CAL). Identification of peer effects relies on three levels of randomization. It is already known that CAL improves math test scores in Chinese rural schools. We find that paired treatment improves the beneficial effects of treatment for poor performers when they are paired with high performers. We test whether CAL treatment reduces the dispersion in math scores relative to controls, and we find statistically significant evidence that it does. We also demonstrate that the beneficial effects of CAL could potentially be strengthened, both in terms of average effect and in terms of reduced dispersion, if weak students are systematically paired with strong students during treatment. To our knowledge, this is the first time that a school intervention has been identified in which peer effects unambiguously help weak students catch up with the rest of the class without imposing any learning cost on other students. |
| JEL: | I24 I25 O15 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23195&r=exp |
| By: | Greiff, Matthias; Ackermann, Kurt; Murphy, Ryan O. |
| Abstract: | Different social contexts have been used when measuring distributional preferences. This could be problematic as contextual variance may inadvertently muddle the measurement process. We use a within-subjects design and measure distributional preferences in resource allocation tasks with role certainty, role uncertainty, decomposed games, and matrix games. Results show that, at the aggregate level, role uncertainty and decomposed games lead to higher degrees of prosociality when compared to role certainty. At the individual level, we observe considerable differences in behavior across the social contexts, indicating that the majority of people are sensitive to these different social settings but respond in different ways. |
| JEL: | C91 D03 D64 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145529&r=exp |
| By: | Himmler, Oliver; Jaeckle, Robert; Weinschenk, Philipp |
| Abstract: | A large share of students in higher education graduates with delay or fails to obtain a degree at all. In our field experiment, students can sign a non-binding agreement and self-commit to staying on track for graduation. We provide first evidence that soft commitment devices can enhance educational progress and -- more generally -- improve the completion of complex tasks such as passing exams. A pure reminder treatment does not change behavior, suggesting that the effects are not driven by increased salience. As predicted by a simple decision model, we show that procrastinators benefit most from the soft commitment device. |
| Keywords: | Commitment Device; Reminder; Procrastination; Education; Field Experiment |
| JEL: | C93 D03 I20 |
| Date: | 2017–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76832&r=exp |
| By: | Roy, Nilanjan |
| Abstract: | We report on an experiment designed to study a dynamic model of quantity competition where firms continuously revise their production targets prior to the play of the "one-shot" game. We investigate how the observability of rival firm's plans and the technology for implementation of revised actions affect market competitiveness. Under a real-time revision game where payoffs are determined only by the quantities prepared at the end, play converges to the Cournot-Nash output when rival's plans are unobservable. If plans cannot be hidden from competitors, choices are even more competitive than the static Nash equilibrium, thereby showing a negative value of information with lower profits. With stochastic revision, where opportunities to revise arrive according to a Poisson process and the quantities selected at the last opportunity are implemented, collusion is much frequent. This shows, more generally, that cooperation can be observed even when individuals interact only once. |
| Keywords: | Cournot duopoly, real-time revision, stochastic revision, experiment, information, imitation, best response |
| JEL: | C72 C92 D22 D43 D83 L13 |
| Date: | 2017–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77033&r=exp |
| By: | Francesco Bogliacino; Cristiano Codagnone |
| Abstract: | The article discusses whether and to what extent experiments can contribute to a research paradigm based on the study of human behaviour in complex evolving environments and on the problem of asymmetric adjustment among different components of economic system along certain trajectories, focusing on the possibility that experimental evidence may represent an external consistency check on this type of heterodox modelling. It considers methodological issues related with the concept of validity, the evidence on rationality of human agents, and the possibility to identify a microfoundation alternative to homo oeconomicus, discussing the evidence on humans as strong reciprocators, as trusting individuals and as embedded in social norms. |
| Keywords: | Experiments; Causality; Heuristics; Learning; Bounded Rationality; Altruism; Punishment; Trust; Norms |
| JEL: | C9 C18 D01 D03 |
| Date: | 2017–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:col:000178:015379&r=exp |
| By: | Heinz, Matthias; Schumacher, Heiner |
| Abstract: | We examine what an applicant’s vita signals to potential employers about her willingness to cooperate in teams. Intensive social engagement may credibly reveal that an applicant cares about the well‐being of others and therefore is less likely to free‐ride in teamwork situations. We find that contributions in a public goods game strongly increase in a subject’s degree of social engagement as indicated on her résumé (and rated by an independent third party). Engagement in other domains, such as student or sports associations, is not positively correlated with contributions. In a prediction experiment with human resource managers from various industries, we find that managers use résumé content effectively to predict relative differences in subjects’ willingness to cooperate. Thus, young professionals signal important behavioral characteristics to potential employers through the choice of their extracurricular activities. |
| JEL: | C72 C92 D82 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145648&r=exp |
| By: | John List; Robert Metcalfe; Michael Price; Florian Rundhammer |
| Abstract: | The literature has shown the power of social norms to promote residential energy conservation, particularly among high usage users. This study uses a natural field experiment with nearly 200,000 US households to explore whether a financial rewards program can complement such approaches. We observe strong impacts of financial rewards, particularly amongst low-usage and low-variance households, customers who typically are less responsive to normative messaging. Our data thus suggest important policy complementarities between behavioral and financial incentives: whereas non-pecuniary interventions disproportionally affect intense users, financial incentives are able to affect substantially low-user, "sticky households." |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00597&r=exp |
| By: | Grimm, Michael; Lenz, Luciane; Peters, Jörg; Sievert, Maximiliane |
| Abstract: | Providing electricity to the unconnected 1.1 billion people in developing countries is one of the top political priorities of the international community, yet the costs of reaching this objective are very high. The present paper examines whether the objective and the associated costs are justified by the value that target beneficiaries assign to electricity. We provide experimental evidence on the revealed willingness-to-pay (WTP) for three types of off-grid solar electricity devices. Our findings show that households are willing to dedicate a substantial part of their expenditures to electricity. In absolute terms, though, the WTP does not suffice to reach cost-covering prices. Different payment schemes, which we randomized across our sample, do not alter the WTP significantly. If universal electricity access is to be achieved, direct subsidies might be necessary. We argue that from a public policy perspective it is more rationale to promote off-grid solar than grid-based electrification because of its better cost-benefit performance. |
| Keywords: | Technology adoption, electrification, willingness-to-pay, real-purchase offer game, energy access, Resource /Energy Economics and Policy, D12, O12, O13, Q28, Q41, |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ubzefd:253528&r=exp |
| By: | Ostermaier, Andreas |
| Abstract: | Capital rationing and reporting are often combined to allocate resources in firms. Trust in managers' honest reports and distrustful control create an interesting tension. How do managers respond to this ambivalence of trust and control? We develop an analytical model to predict, first, that managers reciprocate distrust; they misreport heavily so as to sabotage profitable investments. Second, reporting reduces in turn sabotage because managers are reluctant to lie. Third, honesty spills over, in addition, to inhibit managers' reciprocity. Evidence from a laboratory experiment supports our predictions. Our study ties capital rationing and reporting to the psychological factors of reciprocity and honesty and helps us understand their effects in budgeting. From a managerial viewpoint, the value of reporting, even in combination with capital rationing, may be as interesting to see as how sabotage further exacerbates the underinvestment which is known to arise from capital rationing. |
| JEL: | D03 G31 M41 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145904&r=exp |
| By: | Mariana Carrera; Heather Royer; Mark F. Stehr; Justin R. Sydnor |
| Abstract: | The use of incentives to encourage healthy behaviors is increasingly widespread, but we have little evidence about how best to structure these programs. We explore how different incentive designs affect behavior on the extensive and intensive margins through an experiment offering incentives to employees of a Fortune 500 company to use their workplace gym. Overall the likelihood of joining the gym was not strongly affected by the incentive design. Notably, front-loading incentives to encourage initial participation was not more effective than an incentive kept constant over time. For those who were already at least occasional users of the gym, however, we find more evidence that the design of incentives matters. For this group, front-loading incentives appears to be detrimental relative to a constant incentive, but a novel design that spreads out the incentive budget by turning incentives on and off over a longer period of time is effective. |
| JEL: | D03 I10 J30 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23188&r=exp |
| By: | Kataria, Mitesh (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Evidence from ten natural field studies comparing long-distance runners' incentivized predictions of race finishing time with their actual finishing time is reported. A modest but regular bias is found. Male runners are consistently found to be more time optimistic than female runners and finish slower than they predict to finish. Males are found to over-appreciate their physical fitness. To the extent this behaviour carries over to other contexts, such as the labor market, the tendency of men to overestimate their capacity could lead to distorted self-appraisals and give them advantages in terms of higher salaries and better positions. |
| Keywords: | Overconfidence; Time optimism; Gender differences |
| JEL: | C93 D01 D03 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0694&r=exp |
| By: | BONAN Jacopo; LEMAY-BOUCHER Philippe; SCOTT Douglas; TENIKUE Michel |
| Abstract: | This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual?s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements. |
| Keywords: | Time-Preferences; Randomized-experiment; Senegal |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2017-03&r=exp |
| By: | Mengxing Wei; Ali al-Nowaihi; Sanjit Dhami |
| Abstract: | We report the results of an experiment we performed to test the matching probabilities for the Ellsberg paradox predicted by the quantum decision model of al-Nowaihi and Dhami (2016). We find that the theoretical predictions of that model are in conformity with our experimental results. This supports the thesis that violations of classical (Kolmogorov) probability theory may not be due to irrational behaviour but, rather, due to inadequacy of classical probability theory for the description of human behaviour. |
| Keywords: | Quantum probability; the Ellsberg paradox; the law of total probability; the law of reciprocity; the Feynman rules; cognitive limitations. |
| JEL: | D03 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:17/07&r=exp |
| By: | Erik O. Kimbrough (Simon Fraser University); Andrew Smyth (Marquette University) |
| Abstract: | We report boundary experiments testing the robustness of price convergence in double auction markets for non-durable goods in which there is extreme earnings inequality at the competitive equilibrium (CE). Following up on a conjecture by Smith (1980), we test whether the well-known equilibrating power of the double auction institution is robust to the presence of complete information about traders' values and costs and the presence of symmetric market power. Contra Smith's conjecture, we find that complete information is insufficient to impede convergence to CE prices; however, introducing market power consistently causes prices to deviate from the CE, whether or not subjects possess complete information. Our design highlights the value of boundary experiments in understanding how market institutions shape behavior, and our findings help delineate the limits of the double auction institution to generate competitive outcomes. |
| Keywords: | double auction, market power, institutions, information, experimental economics |
| JEL: | C92 D02 D43 D44 L13 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp17-05&r=exp |
| By: | Tabea Herrmann; Olaf Hübler; Lukas Menkhoff; Ulrich Schmidt |
| Abstract: | This paper complements evidence on the Allais paradox from advanced countries and educated people by a novel investigation in a poor rural area. The share of Allais-type behavior is indeed high and related to characteristics of “lacking ability”, such as poor education, unemployment, and little financial sophistication. Based on prospective reference theory, we extend these characteristics by biased processing of probabilistic information. Finally, we reveal that Allais-type behavior is linked to risk-related characteristics, such as risk tolerance and optimism. This indicates a potential problem as exactly the more dynamic among the poor tend to make inconsistent decisions under uncertainty. |
| Keywords: | Field experiments, Allais paradox, socio-demographic characteristics, prospective reference theory, first order stochastic dominance, risk attitude, optimism |
| JEL: | D81 D3 O10 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1645&r=exp |
| By: | A. Rafsanjani; Bertoldi, K. |
| Abstract: | We investigate the mechanical response of thin sheets perforated with a square array of mutually orthogonal cuts, which leaves a network of squares connected by small ligaments. Our combined analytical, experimental and numerical results indicate that under uniaxial tension the ligaments buckle out-of-plane, inducing the formation of 3D patterns whose morphology is controlled by the load direction. We also find that by largely stretching the buckled perforated sheets, plastic strains develop in the ligaments. This gives rise to the formation of kirigami sheets comprising periodic distribution of cuts and permanent folds. As such, the proposed buckling-induced pop-up strategy points to a simple route for manufacturing complex morphable structures out of flat perforated sheets. |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:500046&r=exp |
| By: | Jana Friedrichsen |
| Abstract: | This paper uses a controlled laboratory experiment to investigate the effect of wealth on individual social responsibility (ISR), defined as choosing a more socially responsible product if a cheaper alternative is available. We find that rich consumers are significantly less likely to engage in ISR than poor consumers. This suggests that socially responsible production conditions may not be normal product attributes. |
| Keywords: | Social responsibility, consumer behavior, market experiment, wealth effect |
| JEL: | M14 A13 J81 D03 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1644&r=exp |
| By: | Rodemeier, Matthias; Löschel, Andreas; Kube, Roland |
| Abstract: | We investigate consumer inattention and imperfect information regarding the financial benefits of energy-efficient lighting using a randomized controlled trial with 1,084 observations. Results suggest that subjects generally know about cost savings of LED bulbs - the central lighting technology of the future - but largely underestimate the magnitude of these savings. As a result, stated willingness-to-pay for an LED bulb increases on average by 2.53€ through the provision of information on expected lifetime costs. Consumers also confound technology attributes of energy-efficient alternatives, which further explains low adoption rates of the LED technology. |
| Keywords: | Imperfect Information,Inattention,Energy Efficiency Gap,Experimental Economics |
| JEL: | D03 D12 D83 Q41 Q48 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:93&r=exp |
| By: | Daniel A. Brent; Michael Ward |
| Abstract: | Recent attention has focused on the role of financial literacy as an explanation for anomalies in consumer choice in a range of settings, such savings, retirement investment, and debt. We contribute to this literature on this by analyzing the link between financial literacy and consumer durables in the context of energy efficiency. Energy efficiency is a compelling setting to assess the role of financial literacy on consumer behavior because purchasing energy durables is a complicated dynamic decision, and there is an extensive literature claiming that consumer investments in energy efficiency are sub-optimal. We augment a standard choice experiment for the purchase of a new hot water system by eliciting data on financial literacy. Financial literacy is an economically important and statistically significant determinant of investment in energy efficiency. A one standard deviation increase in our metric of financial literacy increases the willingness to pay for reduced operating costs by 9%. This result is robust to incorporating incentivized experimentally-elicited individual discount rates and risk aversion, as well as standard controls such as income and education, indicating that financial literacy is not merely a proxy for standard demographic characteristics. We show that financial literacy also makes choices more consistent with standard consumer preferences and increases the probability that respondents select the investments with the lowest lifetime discounted costs. The results establish low financial literacy as a specific mechanism driving low investment in energy efficiency. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2017-04&r=exp |
| By: | Li-Xin Zhong; Wen-Juan Xu; Yun-Xin He; Chen-Yang Zhong; Rong-Da Chen; Tian Qiu; Yong-Dong Shi |
| Abstract: | Facing a heavy task, any single person can only make a limited contribution and team cooperation is needed. As one enjoys the benefit of the public goods, the potential benefits of the project are not always maximized and may be partly wasted. By incorporating individual ability and project benefit into the original public goods game, we study the coupling effect of the four parameters, the upper limit of individual contribution, the upper limit of individual benefit, the needed project cost and the upper limit of project benefit on the evolution of cooperation. Coevolving with the individual-level group size preferences, an increase in the upper limit of individual benefit promotes cooperation while an increase in the upper limit of individual contribution inhibits cooperation. The coupling of the upper limit of individual contribution and the needed project cost determines the critical point of the upper limit of project benefit, where the equilibrium frequency of cooperators reaches its highest level. Above the critical point, an increase in the upper limit of project benefit inhibits cooperation. The evolution of cooperation is closely related to the preferred group-size distribution. A functional relation between the frequency of cooperators and the dominant group size is found. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1702.07423&r=exp |
| By: | Sproten, Alec; Casal, Sandro; Ploner, Matteo |
| Abstract: | Asset management often involves a conflict of interests between investors and fund managers. A main goal of financial regulators is to identify and mitigate this conflict. This article focuses on measures that may foster protection of investors' interests. In an experiment capturing the essential elements of asset management, we find that managers' accountability does not prevent their opportunistic behavior if not backed by a threat of punishment. Further, investors inefficiently sanction managers if not completely aware of managers' choices. To effectively protect investors in financial intermediations, financial regulators should ensure both managers' accountability and a credible sanctioning system. |
| JEL: | C70 D02 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145871&r=exp |
| By: | Schmutzler, Armin; Edlin, Aaron; Roux, Catherine; Thoeni, Christian |
| Abstract: | The paper provides an experimental analysis of above-cost predatory pricing in a multi-period interaction between a monopolistic incumbent and a potential entrant. It shows that, without policy interventions, the threat of post-entry price cuts discourages entry without forcing incumbents to abstain from monopoly pricing. A policy suggested by Edlin that curtails such price cuts encourages entry and reduces the prices set by monopolistic incumbents. An alternative policy suggested by Baumol that prohibits post-exit price increases does less to encourage entry, and it does not prevent high pre-entry prices. However, as expected, it keeps post-exit prices low. |
| JEL: | L13 D43 C92 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145814&r=exp |
| By: | Fugger, Nicolas; Rasch, Alexander; Zeppenfeld, Christopher |
| Abstract: | We examine bidding behavior in first-price sealed-bid and Dutch auctions, which are strategically equivalent under standard preferences. We investigate whether the empirical breakdown of this equivalence is due to (non-standard) preferences or due to the different complexity of the two formats, i.e., a different level of mathematical or individual sophistication. First, we elicit measures of individual preferences and secondly manipulate the degree of complexity by offering various levels of decision support. Our results show that the equivalence of the two auction formats only breaks down in the absence of decision support. This indicates that the empirical breakdown is caused by differing complexity between the two formats rather than non-standard preferences. |
| JEL: | D44 D81 D47 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145849&r=exp |
| By: | Pinger, Pia; Ruhmer-Krell, Isabel; Schumacher, Heiner |
| Abstract: | The compromise effect refers to individuals' tendency to choose intermediate options. Its existence has been demonstrated in a large number of hypothetical choice experiments. This paper uses field data from a specialties restaurant to investigate the existence and strength of the compromise effect in a natural environment. Despite the presence of many factors that potentially weaken the compromise effect (e.g., a very large choice set, the opportunity to choose familiar options), we find evidence for it both in descriptive statistics and regression analyses. Options which become a compromise after a change in the choice set gain on average five percent in market share. We also find that the compromise effect is especially pronounced in groups, while for single customers it is statistically insignificant. |
| JEL: | D03 M31 C93 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145883&r=exp |