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on Experimental Economics |
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Issue of 2018‒02‒12
sixteen papers chosen by |
| By: | Grimalda, Gianluca; Farina, Francesco; Schmidt, Ulrich |
| Abstract: | We examine experimentally individual preferences for redistributions in the US, Italy, and Norway. Twenty-one subjects were assigned initial earnings from a discrete uniform distribution. The source of earnings was manipulated and depended either on luck or on individual relative performance in some tasks. All subjects chose a redistribution rate to be applied to group members' earnings. One choice was then randomly selected to determine final earnings. Four different experimental decisions altered whether subjects' choice applied only to others, thus making self-interest irrelevant (impartial decision), and the degree of information over one's earnings. Norwegian subjects demanded significantly higher levels of redistribution both in the impartial decision and when self-interest offered the most clear-cut prescription, as uncertainty over one's earnings was removed. The demands for redistributions by US and Italian participants were instead similar. Conversely, country differences disappeared in decisions where earnings were uncertain. Contrary to widely held views, no evidence was found that US subjects were more "meritocratic" than others. Italian subjects reacted the most to the source of inequality, decreasing demand for redistribution in Performance treatments compared to Luck treatments. While behaviour of subjects whose earnings were above the median level (the "rich") did not differ significantly across countries, large differences emerged for people below the median level (the "poor") in the fourth decision. Italian "poor" were agreeable to let the "rich" receive a large share of their earnings, particularly so in Performance treatments. Conversely, Norwegians "poor" demanded full earnings equalisation. The behaviour of US subjects fell between these two extremes. This evidence shows the existence of relevant cross-country difference in demand for redistribution and opens new perspectives on what may be considered "fair" or "unfair" inequality in Western countries. |
| Keywords: | inequality,Redistribution,individual merit,cross-country experiments |
| JEL: | D63 D71 C92 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2099&r=exp |
| By: | Francisco B. Galarza (Universidad del Pací fico) |
| Abstract: | We use experimental data to examine the effect of ethnicity (foreign, indigenous, and mestizo) and gender on trust and trustworthiness in Peru. We find that, compared to the foreign group, the indigenous group is more trusted (positive discrimination), while the mestizo group is less trustworthy (negative discrimination). Likewise, subjects reciprocate more in favor of males. We further analyze whether cognitive ability, the Big Five Personality Traits, and the social dominance orientation scale (SODS) can predict trust and trustworthiness. We find that the Cognitive Reflection Test score is positively correlated with trust, while the cumulative college GPA is negatively correlated with trustworthiness. And neuroticism is correlated with trusting behavior, while the SODS is (negatively) correlated with the trustworthiness ratio. |
| Keywords: | Trust, trustworthiness, cognitive reection, personality traits, social dominance, discrimination, experiments |
| JEL: | C72 C91 J15 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:117&r=exp |
| By: | Takashi Yamada (Faculty of Global and Science Studies, Yamaguchi University); Nobuyuki Hanaki (UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur , GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur , UCA - Université Côte d'Azur) |
| Abstract: | We experimentally study Lowest Unique Integer Games (LUIGs). In a LUIG, N (>= 3) players submit a positive integer up to M and the player choosing the smallest number not chosen by anyone else wins. LUIGs are simplified versions of real systems such as lottery games and Lowest/Highest Unique Bid Auctions that have been attracting attention from scholars, yet experimental studies are still scarce. Here, we consider four LUIGs with N={3,4} and M={3,4}. We find that (a) choices made by a majority of subjects over 50 rounds of a LUIG were not significantly different from that in the symmetric mixed-strategy Nash equilibrium (MSE) of the LUIG; however, (b) those subjects who behaved significantly differently from what the MSE predicts won the game more frequently than those who behaved similarly to what the MSE predicts. |
| Keywords: | Laboratory Experiment,Lowest Unique Integer Game |
| Date: | 2016–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01204814&r=exp |
| By: | Anne Corcos (CURAPP-ESS UMR 7319; CNRS; Université de Picardie); François Pannequin (CREST; ENS Paris-Saclay; Université Paris-Saclay); Claude Montmarquette, (CIRANO; Université de Montréal) |
| Abstract: | This paper compares the Holt and Laury’s risk attitude elicitation with a risk attitude classification associated with insurance behavior. The standard Holt and Laury’s procedure (2002) is implemented in the loss domain, while the second tool is based on contextualized experimental hedging choices for insurance and loss reduction (secondary prevention). Our findings highlight the high consistency between the two procedures for more than two-thirds of the subjects, both measures leading to the same risk-attitude assignment. Interestingly, cases where the two measures do not coincide concern the only subjects whose Holt and Laury’s risk aversion coefficient is borderline. For these participants, using both measures allows for a more accurate assessment. Finally, the HL-irrational behavior of participants uncovers specific risk-averse behavior signature, while contextualized-irrational behavior reveals a risk-loving behavior. |
| Keywords: | risk-attitude classification, insurance demand, self-insurance demand, loss reduction, secondary prevention, multiple price list method, experimental study |
| JEL: | C91 D81 |
| Date: | 2017–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2017-79&r=exp |
| By: | Cason, Timothy; Masters, William; Sheremeta, Roman |
| Abstract: | This study provides a unified framework to compare three canonical types of contests: winner-take-all contests won by the best performer, winner-take-all lotteries where probability of success is proportional to performance, and proportional-prize contests in which rewards are shared in proportion to performance. We derive equilibria and observe outcomes from each contest in a laboratory experiment. Equilibrium and observed efforts are highest in winner-take-all contests. Lotteries and proportional-prize contests have the same Nash equilibrium, but empirically, lotteries induce higher efforts and lower, more unequal payoffs. Behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes, such as risk-aversion and the utility of winning. Finally, we find that subjects exhibit consistent behavior across different types of contests, with subjects exerting higher effort in one contest also exerting higher effort in another contest. |
| Keywords: | contests, rent-seeking, lotteries, incentives in experiments, risk aversion |
| JEL: | C72 D72 D74 J33 |
| Date: | 2018–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84246&r=exp |
| By: | Oren Bar-Gill (Harvard Law School); Christoph Engel (Max Planck Institute for Research on Collective Goods) |
| Abstract: | In a full-information, zero transactions costs world, the degree of protection afforded to an entitlement does not affect the likelihood of efficient trade. In reality, imperfect information is often inevitable. Specifically, a party will usually have incomplete information about fairness norms held by the other party – fairness norms that affect the other party’s willingness to pay (WTP) or willingness to accept (WTA). Importantly, these fairness norms may depend on how strongly the entitlement is protected. We experimentally test the effect of the degree of protection on the parties’ WTP and WTA and on the likelihood of efficient trade by varying the legal remedy for infringing upon the owner’s entitlement. We show that our participants can be divided into three groups corresponding to three different fairness norms: negative types whose WTP and WTA are decreasing in the strength of the legal remedy; positive types whose WTP and WTA are increasing in the strength of the legal remedy; and flat types whose WTP and WTA do not depend on the strength of the legal remedy. We find that type is role-dependent, such that a higher WTP and a lower WTA – the combination most conducive to efficient trade – is obtained with a weaker legal remedy. |
| Keywords: | property rule, liability rule, damages, compensation, Coase theorem, bargaining, fairness, equality, desert, entitlement, taking |
| JEL: | C78 C91 D12 D63 K11 K12 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2017_05&r=exp |
| By: | Ivar Kolstad; Arne Wiig |
| Abstract: | Does self-serving elite behaviour make citizens more politically active? This paper presents the results of a randomized field experiment where voters in Tanzania were given information about elite use of tax havens. Information provided in a neutral form had no effect on voting intentions. Information phrased in more morally charged terms led to a reduction in voting intentions. Additional evidence suggests that rather than increase the perceived importance of voting, charged information tends to undermine confidence in political institutions and the social contract. The effects are particularly pronounced among the less well-off, indicating that increased transparency in the absence of perceived agency may not improve democratic accountability. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2018-11&r=exp |
| By: | Ronald Peeters (Department of Economics, University of Otago, New Zealand); Marc Vorsatz (Departamento de An´alisis Econ´omico, Universidad Nacional de Educaci´on a Distancia, Calle Senda del Rey, Madrid, Spain) |
| Abstract: | We introduce simple guilt into a generic prisoner’s dilemma (PD) game and solve for the equilibria of the resulting psychological game. It is shown that for all guilt parameters, it is a pure strategy equilibrium that both players defect. But, if the guilt parameter surpasses a threshold, a mixed strategy equilibrium and a pure strategy equilibrium in which both players cooperate emerge. We implement three payoff constellations of the PD game in a laboratory experiment and find in line with our equilibrium analysis that first- and second-order beliefs are highly correlated and that the probability of cooperation depends positively on these beliefs. Finally, we provide numerical evidence on the degree of guilt cooperators experience |
| Keywords: | Psychological game theory, Guilt, Prisoner’s dilemma |
| JEL: | C72 C91 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1801&r=exp |
| By: | Landier, Augustin; Ma, Yueran; Thesmar, David |
| Abstract: | In this paper, we measure belief formation in an experimental setting where agents are incentivized to provide accurate forecasts of a random variable, drawn from a stable and simple statistical process. Using these data, we estimate an empirical model that builds on the recent literature on expectation dynamics: It nests rational expectations, but also allows for extrapolation and under-reaction. Our findings are threefold. First, the rational expectation hypothesis is strongly rejected in our setting. Second, both extrapolation and underreaction patterns are statistically discernible in the data, but extrapolation quantitatively dominates. Third, our model coefficients are very robust to changes in experimental setting: They do not depend on process parameters, individual characteristics or framing. These large and stable deviations from rationality occur even though the forecasting exercise is simple and transparent. |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12527&r=exp |
| By: | François Cochard (Université de Bourgogne Franche-Comté, CRESE); Alexandre Flage (Université de Bourgogne Franche-Comté, CRESE); Grolleau Gilles (University Bourgogne Franche-Comté, Burgundy School of Business); Sutan Angela (University Bourgogne Franche-Comté, Burgundy School of Business) |
| Abstract: | Using a loss-framed variant of the dictator game, we investigate how dictators split a loss between themselves and a recipient. In a loss context, we try to disentangle the effects of a more self-oriented preference from that of a higher social responsibility. We find that in the loss context, individuals offer more, and women offer more than men. This could be attributed to a more responsible response to a powerless recipient in a loss context. |
| Keywords: | dictator game, loss, loss aversion, own/other-regarding preferences, social responsibility |
| JEL: | C91 D03 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:crb:wpaper:2018-02&r=exp |
| By: | Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel |
| Abstract: | From a current perspective the Paris Agreement is not sufficient to limit the global mean temperature below 2êC above pre-industrial level as intended. The Agreement stipulates that parties review, compare and ratchet up efforts to combat climate change over time. Within this process, commitments heavily depend on what has been already achieved and this status-quo reflects an important reference point serving either as commitment advice or potential threat. We present an experimental study that is specifically designed to incorporate the effect of a status-quo via pre-existing contribution levels under endowment heterogeneity in a game in which participants make voluntary contributions to a public good. Our participants are sampled from the United Nations Youth Associations Network, representing participants from 51 countries. Members from developed and developing countries take decisions against the background of different initial levels of endowments and pre-existing contributions. Our analysis indicates that starting with ambitious pre-existing contribution levels can foster aggregate mitigation levels. Falling behind this status-quo contribution levels by reducing the public good appears to be a strong behavioral barrier. These observations might provide support for the basic structure of the Paris Agreement with Nationally Determined Contributions and the possibility to adjust them, even if a downward revision of national targets may not be precluded. |
| Keywords: | Paris Agreement,Nationally Determined Contributions,Ratched-up mechanism,International public goods,Online experiment |
| JEL: | H41 C91 F53 Q58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:101&r=exp |
| By: | Barron, Kai; Gravert, Christina |
| Abstract: | Confidence is often seen as the key to success. Empirical evidence about whether such beliefs causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one's own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. Using a hard-easy task manipulation to shift beliefs, we find that beliefs can be shifted, which in turn shifts decisions. In our setting, the beliefs of low ability individuals are more malleable than those of high ability individuals. Therefore, the treatment induces an increase in confidence and detrimental decision making by low ability workers but does not affect the outcomes of high ability workers. Men and women react similarly to the treatment. However, men hold higher baseline beliefs, implying that women make better incentive choice decisions. Policy implications regarding pre-labor market confidence development by means of feedback and grade inflation are discussed. |
| Keywords: | overconfidence,experiment,beliefs,real-effort,grade inflation |
| JEL: | C91 D03 M50 J24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2018301&r=exp |
| By: | Christoph Engel (Max Planck Institute for Research on Collective Goods); Andreas Glöckner (Max Planck Institute for Research on Collective Goods); Sinika Timme (University of Göttingen) |
| Abstract: | From a normative perspective the order in which evidence is presented should not bias legal judgment. Yet psychological research on how individuals process conflicting evidence sug-gests that order could matter. The evidence shows that decision-makers dissolve ambiguity by forging coherence. This process could lead to a primacy effect: initial tentative interpretations bias the view on later conflicting evidence. Or the process could result in a recency effect: the evidence presented last casts decisive light on the case. In two studies (N1 = 221, N2 = 332) we test these competing hypotheses in a mock legal case. Legal orders sometimes even expect judges to provisionally assess the evidence. At least they have a hard time preventing this from happening. To test whether this creates or exacerbates bias, in the second dimensions, we explicitly demand experimental participants to express their leaning, after having seen half of the evidence. We consistently observe recency effects and no interactions with leanings. If the legal order wants to preempt false convictions, defendant should have the last word. |
| Keywords: | criminal procedure, presumption of innocence, recency, primacy |
| JEL: | C91 D01 D02 D91 K41 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2017_24&r=exp |
| By: | Aldrich, Eric M.; Friedman, Daniel |
| Abstract: | Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment. |
| Keywords: | market design,high-frequency trading,continuous double auction,IEX,lab experiments |
| JEL: | C91 D44 D53 G12 G14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmdn:spii2017502&r=exp |
| By: | Gema Zamarro (University of Arkansas & University of Southern California) |
| Abstract: | Social science, more than ever, is drawing upon the insights of personality psychology. Though researchers now know that noncognitive skills and personality traits, such as conscientiousness, grit, self-control, or a growth mindset could be important for life outcomes, they struggle to find reliable measures of these skills. Self-reports are often used for analysis, but these measures have been found to be affected by important biases. We study the validity of innovative, more robust measures of noncognitive skills based on performance tasks. Our first proposed measure is an adaptation, for the adult population, of the Academic Diligence Task (ADT) developed and validated among students by Galla et al. (2014). For our second type of performance task measures of noncognitive skills, we argue that questionnaires themselves can be seen as performance tasks, such that measures of survey effort, e.g. item non-response rates and degree of carelessness in answering, could lead to meaningful measures of noncognitive skills. New measures along with self-reports are then used to study the role of noncognitive skills and personality traits on an individual’s preparation for retirement and financial capability. In a world where individuals are increasingly asked to take responsibility for retirement preparations and when available financial products to do so are growing in sophistication, a better understanding of how noncognitive skills influence retirement preparation could help effective policy design. |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp365&r=exp |
| By: | Maria Semenova (National Research University Higher School of Economics) |
| Abstract: | This paper discusses whether being smart makes depositors less prone to get involved in a panic bank run. We conduct a series of experiments with undergraduate and graduate students from Moscow and Saint-Petersburg, modelling the a-la Diamond-Dybvig deposit market with liquidity shocks, changing macroeconomic conditions and risk-based investment technologies. Our results suggest that withdrawing on time is profitable, as the average returns of depositor investments are higher, especially if the other depositors in the bank also withdraw on time. Smarter depositors – those having better academic achievements – choose the strategy of avoiding early withdrawals more frequently: each additional grade point (out of ten) adds 9 p.p. to the share of rounds where a depositor withdraws on time. This result adds to the evidence that financial literacy – even measured in a very simple way – may prevent a coordination failure in the deposit market. Our results also suggest that panic withdrawals are more probable in markets with poorer economic conditions (liquidity shocks, less profitable or less liquid investments, costly financial information), but depositors show weak sensitivity to the risks of bank investments. Depositors of medium-sized banks withdraw on time more frequently compared to those in small or large banks |
| Keywords: | Banks run, Experiment, Financial literacy, Academic achievements |
| JEL: | G21 C91 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:64/fe/2018&r=exp |