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on Experimental Economics |
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Issue of 2019‒02‒04
twenty-one papers chosen by |
| By: | Saucet, Charlotte (University of Lyon 2); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | The memory people have of their past behavior is one of the main sources of information about themselves. To study whether people retrieve their memory self-servingly in social encounters, we designed an experiment in which participants play binary dictator games and then have to recall the amounts allocated to the receivers. We find evidence of motivated memory through selective recalls: dictators remember more their altruistic than their selfish choices. A causal effect of the responsibility of decisions is identified, as the recall asymmetry disappears when options are selected randomly by the computer program. Incentivizing memory accuracy increases the percentage of dictators' correct recalls only when they behaved altruistically. In contrast, there is no clear evidence of motivated memory through biased, i.e., overly optimistic recalls: dictators recall selectively but they do not bias strategically the direction and magnitude of these recalls. |
| Keywords: | motivated memory, selective recall, self-image, Dictator Game, experiment |
| JEL: | C91 D91 D63 D64 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12058&r=all |
| By: | Makarewicz, Tomasz |
| Abstract: | Behavioral and experimental literature on financial instability focuses on either subjective price expectations (Learning-to-Forecast experiments) or individual trading (Learning-to-Optimize experiments). Bao et al. (2017) have shown that subjects have problems with both tasks. In this paper, I explore these experimental results by investigating a model in which financial traders individually learn how to use forecasting and/or trading anchor-and-adjustment heuristics by updating them with Genetic Algorithms. The model replicates the main outcomes of these two threads of the experimental finance literature. It shows that both forecasters and traders coordinate on chasing asset price trends, which in turn causes substantial and self-fulfilling price oscillations, albeit larger and faster in the case of trading markets. When agents have to learn both tasks, financial instability becomes more persistent. |
| Keywords: | Financial Instability,Learning-to-Forecast and Learning-to-Optimize Experiments,Genetic Algorithm Model of Individual Learning |
| JEL: | C53 C63 C91 D03 D83 D84 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:141&r=all |
| By: | Wendelin Schneder (University of Paderborn); Nina Lucia Stephan (University of Paderborn) |
| Abstract: | Previous experimental studies show that subjects who receive little in a dictator game, pass on less to a third person when they become dictators themselves. However, when subjects can write a letter to their dictator, they act more kindly. The prevailing explanation for this phenomenon is that letter writing helps them to emotionally ‘close the case’. Alternatively, being asked to write a letter may be seen as a signal that something is wrong with the dictator’s behavior and lead to less imitation of this behavior. We examine whether letter writing also helps to increase kindness when the second explanation is excluded by design. In our experiment, subjects face choices in different domains, so that imitation is not possible. Instead of deciding how to split money, the first decision consists in assigning an annoying work task (the unkind option) instead of an enjoyable one. We find that letter writing nevertheless increases giving in a subsequent dictator game, confirming the validity of letter writing as a remedy against the chain of unkindness. |
| Keywords: | experimental economics, chain of unkindness, emotional closure, cooling down |
| JEL: | D91 C91 D03 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:dispap:45&r=all |
| By: | Francesco Fallucchi; Simone Quercia |
| Abstract: | We conduct a real-effort experiment to test the effects of an affirmative action policy that reserves a share of the prize to subjects of a disadvantaged category in rent-seeking contests. We test three potential pitfalls of the affirmative action policy: (i) whether the introduction of the policy distorts effort and selection in the contest, (ii) whether it leads to reverse discrimination, that is, discourages entry from the advantaged category and (iii) whether the possibility of ex-post retaliatory actions undermines the effectiveness of the policy. We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. This increases overall effort in the contest. However, we find that the possibility of retaliation can undermine the benefits of the affirmative action policy reducing contest participation. This suggests that retaliation is an important aspect to consider when implementing affirmative action policies. |
| Keywords: | rent-seeking, contest design, affirmative action, retaliation |
| JEL: | C72 D72 J78 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_012&r=all |
| By: | Jeroen (J.) Hinloopen (University of Amsterdam; CPB); Sander (A.M.) Onderstal (University of Amsterdam); Leonard Treuren (University of Amsterdam) |
| Abstract: | Using laboratory experiments, we compare the stability of bidding rings in the English auction and the first-price sealed-bid auction in a heterogeneous-value setting. In both a re-matching condition and a fixed-matching condition, we observe that biddings rings are more stable in the English auction than in the first-price sealed-bid auction. In both conditions, the first-price sealed-bid auction dominates the English auction in terms of average revenue and the revenue spread. The English auction outperforms the first-price sealed-bid auction in terms of efficiency. |
| Keywords: | Cartel stability; English auction; First-price sealed-bid auction; Laboratory experiments |
| JEL: | C92 D44 L41 |
| Date: | 2019–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190009&r=all |
| By: | Dávid Kopányi (University of Amsterdam and Tinbergen Institute); Jean Paul Rabanal (Monash University); Olga A. Rud (University of Melbourne); Jan Tuinstra (University of Amsterdam and Tinbergen Institute) |
| Abstract: | We conduct a Learning to Forecast asset pricing experiment where the market impact of individual forecasts evolves endogenously based on the forecasters’ past accuracy. We investigate how endogenous impacts affect price stability and mispricing relative to the fundamental price. Our results suggest that endogenous impacts can destabilize markets when impacts are quite sensitive to forecast accuracy: Price dispersion increases compared to the baseline treatment where impacts are constant and independent of forecast accuracy. On the other hand, mispricing can be reduced when markets are relatively stable and impacts are moderately sensitive to forecast accuracy. |
| Keywords: | Experimental finance, market impact, expectation formation, asset pricing, learning to forecast |
| JEL: | C91 C92 D53 D84 G12 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:140&r=all |
| By: | Nadja R. Ging-Jehli; Florian H. Schneider; Roberto A. Weber |
| Abstract: | We experimentally study settings where an individual may have an incentive to adopt negative beliefs about another’s intentions in order to justify egoistic behavior. Our first study uses a game in which a player can take money from an opponent in order to prevent the opponent from subsequently causing harm. We hypothesize that players will justify taking by engaging in “strategic cynicism,” convincing themselves of the opponent’s ill intentions. We elicit incentivized beliefs both from players with such an incentive and from neutral third parties with no incentive to bias their beliefs. We find no difference between the two sets of beliefs, suggesting that people do not negatively bias their beliefs about a strategic opponent even when they have an incentive to do so. This result contrasts with Di Tella, et al. (2015), who argue that they provide evidence of strategic cynicism. We reconcile the discrepancy by using Di Tella, et al.’s, data, a simple model of strategic belief manipulation and a novel experiment in which we replicate Di Tella, et al.’s, experiment and also elicit the beliefs of neutral third parties. Across three experimental datasets, the results provide no evidence of negatively biased beliefs about others’ intentions. However, Di Tella, et al.’s, results and our novel data indicate that those with a greater incentive to view others’ intentions negatively exhibit relatively less positive beliefs than those without such incentives. |
| Keywords: | Motivated beliefs, strategic cynicism, bias, experiment |
| JEL: | C72 D83 C92 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:315&r=all |
| By: | Daniel Kassler; Ira Nichols-Barrer; Mariel Finucane |
| Abstract: | Researchers often wish to test a large set of related interventions or approaches to implementation. A factorial experiment accomplishes this by examining not only basic treatment–control comparisons but also the effects of multiple implementation “factors†such as different dosages or implementation strategies and the interactions between these factor levels. |
| Keywords: | methodological development, content area, design and evaluation of programs and policies, experimental design, factorial design, Bayesian modeling |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:f5702436ca9d46d5ad4ae54bb032e7e8&r=all |
| By: | Walkowitz, Gari |
| Abstract: | Driven by methodological concerns, theoretical considerations, and previous evidence, we systematically test the validity of common dictator-game variants with probabilistic incentives. We include four approaches and compare them to a standard dictator game: involving fewer receivers than dictators; paying only some subjects or decisions; role uncertainty at the time of the transfer decision. We also relate the dictator-game variants to established complementary individual difference measures of pro-sociality: social value orientation, personal values, a donation to charity, and Big Five personality facors. Our data show that dictator behavior is quite sensitive to the applied methods. The standard version of the dictator game has the highest validity. Involving fewer receivers than dictators and not paying for all decisions yields comparably valid results. By contrast, when only some subjects are paid or where subjects face uncertainty about their final player role, the expected associations with complementary pro-sociality are distorted. Under role uncertainty, generosity is biased upwards. We conclude that the validity of the dictator-game outcomes is highly sensitive to the applied methods. |
| Keywords: | Dictator Game, Probabilistic Incentives, Social Value Orientation, Personal Values, Donation, Big Five Personality, Experiment, Methodology |
| JEL: | C72 C91 D3 |
| Date: | 2019–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91541&r=all |
| By: | Claude DIEBOLT; Magali JAOUL-GRAMMARE |
| Abstract: | In this paper, we are interested in the behaviors taking place before the decision-making in terms of educational study choices. We report on an experiment whose aim is the production of data controlled in order to test the cliometric model of glutting developed by Diebolt (2001), and especially the sensitivity of individuals to expected wages and to the risk as related to a limited number of positions on the labor market. |
| Keywords: | Economics of Education, Experiment, Glutting, Study Choices. |
| JEL: | C91 N3 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2019-01&r=all |
| By: | Pia Pinger; Sebastian Schäfer; Heiner Schumacher |
| Abstract: | We document that an internal locus of control can be hindering in financial mar- ket situations, where short-term outcomes are determined by chance. The reason is that internally controlled individuals may tend to (over-)react to random out- comes. Our evidence is based on an experiment in which subjects repeatedly invest in two identical, uncorrelated, risky assets and observe previous outcome realiza- tions. Under mild restrictions, the optimal strategy is to make the same choice in each period. Yet, internals are more likely to make inconsistent risk choices. The effect size of locus of control is comparable with that of cognitive ability. Among inconsistent subjects, average switching behavior is in line with the gambler’s fal- lacy. However, choices of very internally controlled individuals tend to correspond to the hot hand fallacy. |
| Keywords: | Locus of Control, Risk Preferences, Investment Decisions, Cognitive Ability |
| JEL: | D03 G02 C91 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_015&r=all |
| By: | Rémi Suchon (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In a laboratory experiment we test the interaction effects of status and group identity on interpersonal trust. Natural group identity is generated by school affiliation. Status (expert or agent) is awarded based on relative performance in a math quiz that is ex ante less favorable to the subjects from one group. We find that "promoted" trustors (individuals from the disadvantaged group that nevertheless achieve the status of expert) trust less both in-group and out-group trustees, compared to the other members of their group. Rather than playing against the effects of natural group identity, status promotion singles-out individuals. In contrast, trustworthiness is not affected by status and there is no evidence that interacting with promoted individuals impacts trust or trustworthiness. |
| Keywords: | Trust,status,group identity,social mobility,experiment |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01978269&r=all |
| By: | Benny Moldovanu; Alex Gershkov; Philipp Strack |
| Abstract: | We study the revenue maximizing allocation of m units among n symmetric agents that have unit demand and convex preferences over the probability of receiving an object. Such preferences are naturally induced by a game where the agents take costly actions that affect their values before participating in the mechanism. Both the uniform m + 1 price auction and the discriminatory pay-your-bid auction with reserve prices constitute symmetric revenue maximizing mechanisms. Contrasting the case with linear preferences, the optimal reserve price reacts to both demand and supply, i.e., it depends both on the number of objects m and on number of agents n. The main tool in our analysis is an integral inequality involving majorization, super-modularity and convexity due to Fan and Lorentz (1954). |
| Keywords: | revenue maximization, endogenous values , investments, majorization |
| JEL: | D44 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_031&r=all |
| By: | Thomas Dohmen; Simone Quercia; Jana Willrodt |
| Abstract: | We show that the disposition to focus on favorable or unfavorable outcomes of risky situations affects willingness to take risk as measured by the general risk question. We demonstrate that this disposition, which we call risk conception, is strongly associated with optimism, a stable facet of personality and that it predicts real-life risk taking. The general risk question captures this disposition alongside pure risk preference. This enlightens why the general risk question is a better predictor of behavior under risk across different domains than measures of pure risk preference. Our results also rationalize why risk taking is related to optimism. |
| Keywords: | risk taking behavior, optimism, preference measures, risk conception |
| JEL: | D91 C91 D81 D01 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_023&r=all |
| By: | Olivier Coibion; Yuriy Gorodnichenko; Michael Weber |
| Abstract: | We study how different forms of communication influence the inflation expectations of individuals in a randomized controlled trial. We first solicit individuals’ inflation expectations in the Nielsen Homescan panel and then provide eight different forms of information regarding inflation. Reading the actual Federal Open Market Committee (FOMC) statement has about the same average effect on expectations as simply being told about the Federal Reserve’s inflation target. Reading a news article about the most recent FOMC meetings results in a forecast revision which is smaller by half. Our results have implications for how central banks should communicate to the broader public. |
| Keywords: | expectations management, inflation expectations, surveys, communication, randomized controlled trial |
| JEL: | E31 C83 D84 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7464&r=all |
| By: | Luc Behaghel (PSE - Paris School of Economics); Karen Macours, (PSE - Paris School of Economics); Julie Subervie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier) |
| Abstract: | We illustrate how randomized controlled trials (RCTs) could be used as a learning tool to shed light on various aspects of the Common Agricultural Policy (CAP). RCTs are quasi-absent from the CAP evaluation toolbox, despite their frequent use to evaluate other European Union policies, or agricultural policies in developing countries. We draw upon existing debates on the role of RCTs in policy-making to derive a list of points of attention. We then consider four specific examples of evaluation questions for the CAP, and based on examples drawn from agricultural and social policies in developing and developed countries, argue that the RCT toolbox has the potential to significantly add to existing approaches to evaluating and designing components of the CAP. |
| Keywords: | field experiments,policy design,impact evaluation,Common agricultural policy |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01974425&r=all |
| By: | Olivier Coibion; Yuriy Gorodnichenko; Michael Weber |
| Abstract: | We study how different forms of communication influence the inflation expectations of individuals in a randomized controlled trial. We first solicit individuals’ inflation expectations in the Nielsen Homescan panel and then provide eight different forms of information regarding inflation. Reading the actual Federal Open Market Committee (FOMC) statement has about the same average effect on expectations as simply being told about the Federal Reserve’s inflation target. Reading a news article about the most recent FOMC meetings results in a forecast revision which is smaller by half. Our results have implications for how central banks should communicate to the broader public. |
| JEL: | C83 D84 E31 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25482&r=all |
| By: | Bastani, Spencer (Department of Economics and Statistics, Linnaeus University); Waldenström, Daniel (Paris School of Economics) |
| Abstract: | We study how attitudes to inheritance taxation are influenced by information about the role of inherited wealth in society. Using a randomized experiment in a register-linked Swedish survey, we find that informing individuals about the large aggregate importance of inherited wealth and its link to inequality of opportunity significantly increases the support for inheritance taxation. The effect is almost uniform across socio-economic groups and survives a battery of robustness tests. Changes in the perceived economic importance of inherited wealth and altered views on whether luck matters most for economic success appear to be the main driving factors behind the treatment effect. Our findings suggest that the low salience of inherited wealth could be one explanation behind the relatively marginalized role of inheritance taxation in developed economies. |
| Keywords: | Capital taxation; Tax attitudes; Equality of opportunity; Randomized experiment |
| JEL: | D31 H20 H31 |
| Date: | 2019–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1260&r=all |
| By: | Falk, Armin (briq, University of Bonn); Hermle, Johannes (University of California, Berkeley) |
| Abstract: | Preferences - concerning time, risk and social interactions - systematically shape human behavior, and contribute to differential economic and social outcomes between the genders. Here, we present a global investigation of gender differences in six fundamental preferences. Our data consist of 80,000 individuals in 76 representative country samples with measures on willingness to take risks, patience, altruism, positive and negative reciprocity as well as trust. Gender differences in preferences were positively related to economic development and gender equality. This suggests that greater availability of and equal access to material and social resources for both genders favor the manifestation of gender-differentiated preferences across countries. |
| Keywords: | preferences, cross-country variation, gender |
| JEL: | C91 D91 D63 D64 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12059&r=all |
| By: | Della Giusta, Marina; Clot, Sophie; Di Girolamo, Amalia |
| Abstract: | We investigate endurance, the capacity to maintain levels of performance through internal rather than external motivation in non-rewarding tasks and over sequences of tasks, though a lab experiment. The significant driver of performance is payment scheme order for women and payment schemes for men. Both women and men respond to social cues, through increased intrinsic motivation (ambition) for women and through extrinsic motivation (competition) for men. We suggest implications for reward schemes in the workplace and for selection into executive positions. |
| Keywords: | gender, intrinsic motivation, endurance, monetary incentives, biased beliefs |
| JEL: | J16 J71 M12 M51 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91482&r=all |
| By: | Sandro Sozzo |
| Abstract: | {\it Ellsberg thought experiments} and empirical confirmation of Ellsberg preferences pose serious challenges to {\it subjective expected utility theory} (SEUT). We have recently elaborated a quantum-theoretic framework for human decisions under uncertainty which satisfactorily copes with the Ellsberg paradox and other puzzles of SEUT. We apply here the quantum-theoretic framework to the {\it Ellsberg two-urn example}, showing that the paradox can be explained by assuming a state change of the conceptual entity that is the object of the decision ({\it decision-making}, or {\it DM}, {\it entity}) and representing subjective probabilities by quantum probabilities. We also model the empirical data we collected in a DM test on human participants within the theoretic framework above. The obtained results are relevant, as they provide a line to model real life, e.g., financial and medical, decisions that show the same empirical patterns as the two-urn experiment. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1811.00875&r=all |