|
on Experimental Economics |
|
Issue of 2019‒07‒08
thirty-one papers chosen by |
| By: | John Gibson (University of Waikato); Steven Tucker (University of Waikato); Geua Boe-Gibson (University of Waikato) |
| Abstract: | We conducted a salient purchasing experiment to test if an information intervention alters fizzy drinks demand. Subjects in our experiment initially made five rounds of purchases, for 14 items (energy drinks, colas, and lemonades) selected from a stratified sample of retailers. Subjects faced seven pricing environments, reflecting baseline prices, two ad valorem taxes, two specific taxes, and ad valorem and specific price cuts to reflect retailer discounting. Subjects then watched a video presentation by celebrity chef Jamie Oliver, which highlighted adverse health effects of sugary drinks. The five rounds of choices were then repeated, to generate within-subject before and after demands that show an overall 25 percent reduction in purchases due to the information intervention. Demand for one sugar-free option, Diet Coke, rose 36 percent after the intervention. The impacts under baseline prices were little different to those seen in conjunction with tax-induced price rises. Effects of the information intervention were larger for females, for the young, for the less educated, for those usually spending more on soft drinks, and for those who usually ignore sugar content when making purchases. |
| Keywords: | experiment; health; information; Jamie Oliver; soda taxes; sugar |
| JEL: | C91 D83 I18 |
| Date: | 2019–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:19/08&r=all |
| By: | Charness, Gary (University of California, Santa Barbara); Garcia, Thomas (GATE, University of Lyon); Offerman, Theo (University of Amsterdam); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | We consider the external validity of laboratory measures of risk attitude. Based on a large-scale experiment using a representative panel of the Dutch population, we test if these measures can explain two different types of behavior: (i) behavior in laboratory risky financial decisions, and (ii) behavior in naturally-occurring field behavior under risk (financial, health and employment decisions). We find that measures of risk attitude are related to behavior in laboratory financial decisions and the most complex measures are outperformed by simpler measures. However, measures of risk attitude are not related to risk-taking in the field, calling into question the methods currently used for the purpose of measuring actual risk preferences. We conclude that while the external validity of measures of risk attitude holds in closely related frameworks, this validity is compromised in more remote settings. |
| Keywords: | lab-in-the-field experiment, elicitation methods, risk preferences |
| JEL: | C91 C93 D81 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12395&r=all |
| By: | Puzon, Klarizze (Institute of Social and Economic Research, Osaka University); Willinger, Marc (University of Montpellier) |
| Abstract: | We study experimentally a two-stage common pool resource game. In the first stage, selected members of the group determine the level of protection for the resource. The protected fraction of the resource is equally shared among group members. In the second stage, the unprotected fraction of the resource is competed for. We consider three institutions varying in the extent by which subjects participate in the first stage: vote (all group members participate), dictator (only one member decides), and outsider (no one participates). We also vary the initial level of the resource: scarce or abundant. We establish the following results. First, we find that voting provides more frequent protection and leads to higher protection levels than other institutions. Second, collective rent-seeking is larger when the level of the resource is high, but this tendency is sharply reduced in the presence of democratic institutions. Third, collective rent-seeking is negatively affected by the level of protection, but significantly so only when the highest protection level is implemented. These experimental results are stronger in the case of a resource boom than in the case of a resource bust. |
| Keywords: | voting; commons; natural resources; property rights; experiments |
| JEL: | C90 D02 D72 P48 |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2019_009&r=all |
| By: | Yoshitaka Okano (School of Economics and Management, Kochi University of Technology); Eiji Goto (Nichinan Gakuen Junior High School) |
| Abstract: | This study experimentally examines the lying behavior of individuals and two-person groups, using a dice-rolling experiment developed by Fischbacher and Follmi-Heusi (2013). We found strong evidence of lying in both individuals and groups,but partial lying (not lying to the maximum extent possible) is more pronounced under group decisions. Furthermore, from the experimental data, we estimated thepreference parameter(s) of existing models for lying aversion. The results reveal thatgroups are more sensitive to the social image concern of not being perceived as a liar and have a lower cost of lying than individuals. |
| Keywords: | Lying, group decision, experiment |
| JEL: | C72 C91 C92 D63 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2019-7&r=all |
| By: | Francesca Cornaglia; Michalis Drouvelis; Paolo Masella |
| Abstract: | The emergence of competition is a defining aspect of human nature and characterizes many important social environments. However, its relationship with how social groups are formed has received little attention. We design an experiment to analyze how individuals’ willingness to compete is affected by group identity. We find that individuals display substantially stronger competitiveness in within group (ingroup) matchings than in between group (outgroup) matchings or in a control setting where no group identity is induced. We also find that the effect of group identity is stronger for subjects who participated more actively in the team-building task. |
| Keywords: | competition, social distance, group identity, laboratory experiment |
| JEL: | C92 D03 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7643&r=all |
| By: | Gary Charness (Department of Economics, University of California - UCSB - University of California [Santa Barbara]); Thomas Garcia (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); Theo Offerman (CREED - Center for Research in Experimental Economics and Political Decision Making - UvA - Universiteit van Amsterdam); 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: | We consider the external validity of laboratory measures of risk attitude. Based on a large-scale experiment using a representative panel of the Dutch population, we test if these measures can explain two different types of behavior: (i) behavior in laboratory risky financial decisions, and (ii) behavior in naturally-occurring field behavior under risk (financial, health and employment decisions). We find that measures of risk attitude are related to behavior in laboratory financial decisions and the most complex measures are outperformed by simpler measures. However, measures of risk attitude are not related to risk-taking in the field, calling into question the methods currently used for the purpose of measuring actual risk preferences. We conclude that while the external validity of measures of risk attitude holds in closely related frameworks, this validity is compromised in more remote settings. |
| Keywords: | elicitation methods,Risk preferences,lab-in-the-field experiment |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02146618&r=all |
| By: | Laurent Bouton; Jorge Gallego; Aniol Llorente-Saguer; Rebecca Morton |
| Abstract: | We study experimentally the properties of the majority runoff system and compare them to the ones of plurality rule, in the setup of a divided majority. Our focus is on Duverger's famous predictions that the plurality rule leads to a higher coordination of votes on a limited number of candidates than the majority runoff rule. Our experiments show that, in contradiction with Duverger's predictions, coordination forces are strong in majority runoff elections. We indeed observe similar levels of coordination under both rules, even when sincere voting is an equilibrium only under majority runoff. Our results suggest that the apparent desire to coordinate, and not vote sincerely, under the majority runoff rule is to some extent not rational. Finally, we find insignificant differences between runoff and plurality systems in terms of both electoral outcomes and welfare. This is so exactly because coordination forces are strong under both rules. But, this does not mean that the two rules are equally socially desirable. Majority runoff rule entails an additional cost: second rounds that take place frequently. |
| JEL: | C92 D7 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25949&r=all |
| By: | Meub, Lukas; Runst, Petrik; von der Leyen, Kaja |
| Abstract: | We use a field experiment on energy billing in a German region to evaluate the effect of two behavioral nudges (consumption feedback and social comparison) on electricity consumption. Similar experiments have revealed significant treatment effects, yet the individual variance has proven substantial. On the grounds of these heterogeneous treatment effects and the possibility of cross-country behavioral differences, additional experiments are warranted. For our German participants with low pre-treatment consumption compared with many other countries, we find no treatment effects. Accordingly, we deduce from this that the effect of consumption feedback and social comparison is highly context dependent. |
| Keywords: | Energy efficiency,energy conservation,climate policy |
| JEL: | C9 D1 D8 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:372&r=all |
| By: | Bosworth, Steven J. (Kiel Institute for the World Economy); Clot, Sophie (University of Reading); Della Giusta, Marina (University of Reading) |
| Abstract: | We design an experiment to assess the effect of beliefs about gender in selecting oneself or a designated person to carry out a volunteering task. Participants in a volunteering task are given the option of selecting oneself or nominating someone from their group, and the group is described to them in terms of cartoons depicting women and men displaying different emotional states: happy, neutral or unhappy. We introduce a treatment consisting of gender priming, in which we elicit gender views with a set of 12 questions routinely used in social attitudes surveys to determine the degree of sexism of respondents. We find that women offer to volunteer more than men, and that while neither the emotional affect or the gender of the nominated person per se influence designation, men in the unprimed condition are more likely to choose the happy female face. Gender priming reduces designations and increases volunteering for all, but the treatment effect differs across genders: though both women and men are likelier to volunteer when primed, the men nominate fewer women across the spectrum of moods once gender primed, and the effect is stronger for the more sexist men, whilst women are reducing their delegation more uniformly once gender-primed, never nominate the neutral woman, and nominate the happy woman more often the less sexist they are. Our results provide evidence of both stereotyping by men and self-stereotyping by women: men are happy to pick any woman for the volunteering, though they display a preference for the happy woman, whilst women are both more sensitive to the mood displayed and prefer to pick women who might be happy to do it the less sexist they are. When it comes to actually carrying out the volunteering task, we find that, conditional on volunteering, women are more likely to actually follow through than men. |
| Keywords: | facial emotions, gender priming, stereotyping, volunteering |
| JEL: | J16 D91 C93 J23 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12406&r=all |
| By: | Amalia R. Miller; Ragan Petrie; Carmit Segal |
| Abstract: | This paper develops a novel field experiment to test the implicit prediction of tournament theory that competition increases work time and can therefore contribute to the long work hours required in elite occupations. A majority of workers in the treatment without explicit financial incentives worked past the minimum time, but awarding a tournament prize increased work time and effort by over 80% and lowered costs of effort or output by over a third. Effort was similar with alternative (piece rate, low-prize tournament) bonuses. Men worked longer than women in the high-prize tournament, but for the same duration in other treatments. |
| JEL: | J16 J22 J33 J44 M52 M55 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25948&r=all |
| By: | Michael Razen; Michael Kirchler; Utz Weitzel |
| Abstract: | Risk-assessment and risk-taking in various forms are among the most important tasks financial professionals face in their daily work. A large body of experimental studies has shown a substantial effect of the decision domain (gain vs loss domain) on risk-taking, predominantly among students. In a series of experiments set in different contextual frameworks, we investigate whether this domain effect is also present among experienced finance professionals and compare their decisions with people from the general population. Our results show that employees in the finance industry are equally prone to the domain effect in risk-taking than the general population. Interestingly, for domain-specific risk-taking in a finance context, we find that professionals are more reluctant to sell loser stocks than non-professionals. |
| Keywords: | Experimental Finance, Financial Professionals, Domain-specific risk-taking |
| JEL: | C91 C93 D81 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2019-12&r=all |
| By: | Bodnar, Olivia; Fremerey, Melinda; Normann, Hans-Theo; Schad, Jannika |
| Abstract: | Private damage claims against cartels may have negative effects on leniency: whereas whistleblowers obtain full immunity regarding the public cartel fines, they have no or only restricted protection against private third-party damage claims. This may stabilize cartels. We run an experiment to study this issue. Firms choose whether to join a cartel, may apply for leniency afterwards, and then potentially face private damages. We find that the implementation of private damage claims decreases cartel formation but makes cartels indeed more stable. The overall impact of private damage claims is positive: cartel prevalence declines. |
| Keywords: | private damage claims,cartel stability,laboratory experiment,leniency |
| JEL: | C90 L41 L44 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:315&r=all |
| By: | Ahrens, Steffen (TU Berlin); Bosch-Rosa, Ciril (TU Berlin) |
| Abstract: | One of the reasons for the recent crisis is that financial institutions took \"too much risk\" (Brunnermeier, 2009; Taylor et al., 2010). Why were these institutions taking so much risk is an open question. A recent strand in the literature points towards the \"cognitive dissonance\" of investors who, because of the limited liability of their investments, had a distorted view of riskiness (e.g., Barberis (2013); Benabou (2015)). In a series of laboratory experiments we show how limited liability does not affect the beliefs of investors, but does increase their willing exposure to risk. This results points to a simple explanation for the over-investment of banks and hedge-funds: When incentives are not aligned, investors take advantage of the moral hazard opportunities. |
| Keywords: | moral hazard; cognitive dissonance; behavioral finance; |
| JEL: | C91 D84 G11 |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:162&r=all |
| By: | Sylvain Marsat (CLERMA - Clermont Recherche Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne) |
| Abstract: | We test hypotheses on herd behavior in a simple investment decision through an experimental setting. Subjects were given some fundamental information about a specific firm and asked for a recommendation, buy or sell. This personal judgment was then confronted to the opposed consensus of analysts, in order to determine if subjects revise their recommendations. In this binary choice setting, we show that herding takes place, and is inversely correlated to perceived individual ability. Moreover, when reputation is at stake, conformist subjects are even more prone to follow the consensus in their decision making. Herding behavior is, among other behavioral biases, a frequently cited phenomenon by both money managers and academics to explain booms and crashes in financial markets (Denevow and Welch [1996]). Sometimes, agents on the market are presumed to act according to the behavior of others. Although such behavior is often analyzed in the literature (e.g. Scharfstein and Stein [1990], Bikhchandani, Hirshleifer and Welch [1992], Graham [1999], or Chamley [2004]), empiric evidence is still quite scarce (Welch [2000]). Since Lakonishok, Shleifer, and Vishny [1992], many works (e.g. Wermers [1999], Wylie [2005]) have tried to show clusters among individuals, who act together on the market, compared to a "normal" behavior. However, most of these studies are not convincing since they come up against the detection of actual herding. The fact that individuals acted in the same manner is not always the consequence of herding, and can merely be a common reaction to a common |
| Keywords: | Herding Behavior,Decision Making,Behavioral Finance,Reputation |
| Date: | 2019–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02156562&r=all |
| By: | Berger, Eva M.; Hermes, Henning (Dept. of Economics, Norwegian School of Economics and Business Administration); Koenig, Guenther; Schmidt, Felix; Schunk, Daniel |
| Abstract: | Existing evidence suggests that self-regulation plays an important role in the job search process and labor market reintegration of unemployed persons. We conduct a randomized natural field experiment embedded in an established labor market reactivation program to examine the causal effect of conducting self-regulation training on the job search behavior of long-term unemployed participants. Our treatment involves teaching a self-regulation strategy based on mental contrasting with implementation intentions (MCII). We find that the treatment has a positive effect on the quality of application documents as well as on the probability of participants submitting their documents on time. However, we do not find a positive effect on labor market reintegration—possibly due to the short-term horizon of the data. Because the intervention is very low cost, a rollout to other programs might have high individual and social rates of return. |
| Keywords: | active labor market policy; natural field experiment; job search behavior; unemployed; self-regulation; non-cognitive skills |
| JEL: | C93 J24 J64 |
| Date: | 2019–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2019_013&r=all |
| By: | Ahrens, Steffen (TU Berlin); Bosch-Rosa, Ciril (TU Berlin); Roulund, Rasmus (Danmarks Nationalbank) |
| Abstract: | Overconfidence is one of the most important biases in financial markets and commonly associated with excessive trading and asset market bubbles. So far, most of the finance literature takes overconfidence as a given, \"static\" personality trait. In this paper we introduce a novel experimental design which allows us to track different measures of overconfidence during an asset market bubble. The results show that overconfidence co-moves with asset prices and points towards a feedback loop in which overconfidence adds fuel to the flame of existing bubbles. |
| Keywords: | overconfidence; experiment; asset markets; |
| JEL: | C91 D84 G11 |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:161&r=all |
| By: | Jonathan Hall; Rudolf Kerschbamer; Daniel Neururer; Eric Skoog |
| Abstract: | We present the results of a pre-registered natural field experiment designed to uncover a sophisticated form of discrimination against an immigrant minority in a market for credence goods. For this purpose, we introduce two markups: (i) the credence goods markup defined as the difference between the price paid by the same person for an ordinary service and an otherwise equivalent credence goods service; and (ii) the discriminatory markup defined as the difference between the price paid by a member of an immigrant minority group and the price paid by a member of the majority group for the same kind of service. We document the existence of a large credence goods markup of about 40\%, on average. Moreover, we find a sizeable discriminatory markup for the credence goods service but no discriminatory markup for the ordinary service. The results of an ex-post survey suggest that this sophisticated form of discrimination is mainly due to the prejudicial behavior of sellers belonging to an established local ethnic minority group towards buyers belonging to a low-status immigrant ethnic minority group. |
| Keywords: | patience, time preferences, group decisions, payoff heterogeneity, experiment |
| JEL: | C93 D82 J15 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2019-11&r=all |
| By: | Josse Delfgaauw (Erasmus University Rotterdam); Robert Dur (Erasmus University Rotterdam); Okemena Onemu (Leiden University); Joeri Sol (University of Amsterdam) |
| Abstract: | We conduct a field experiment in a Dutch retail chain with 122 stores to study the interaction between team incentives, team social cohesion, and team performance. Theory predicts that the effect of team incentives on team performance depends on a team's social cohesion. In particular, free-riding should be weaker when co-workers care more about each other. Conversely, team incentives may lead to more co-worker support or to higher peer pressure and thereby can affect the team's social cohesion. We introduce short-term team incentives in a randomly selected subset of stores and measure for all stores, both before and after the intervention, the team's sales performance, the team's social cohesion as well as co-worker support and peer pressure. The average treatment effect of the team incentive on sales is 1.5 percentage points, which does not differ significantly from zero. In line with theory, the estimated treatment effect strongly increases in social cohesion as measured before the intervention. We find that social cohesion itself is not affected by the team incentives. Our study illustrates the potential of complementing a field experiment with ex ante and ex post questionnaire data collection for the study of management practices, workplace behavior, and performance. |
| Keywords: | field experiment, team incentives, social cohesion |
| JEL: | C93 M52 |
| Date: | 2019–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190045&r=all |
| By: | Luís Aguiar-Conraria (Department of Economics / NIPE, University of Minho); Pedro C. Magalhães (Institute of Social Sciences, University of Lisbon); Christoph A. Vanberg (Alfred-Weber-Institut, University of Heidelberg) |
| Abstract: | Many political systems with direct democracy mechanisms have adopted rules preventing decisions from being made by simple majority rule. The device most commonly added to majority rule in national is a quorum requirement. The two most common are the participation and the approval quora. Such rules are a response to three major concerns: the legitimacy of the referendum outcome, its representativeness (the concern with the outcome representing the will of the whole electorate), and protection of minorities regarding issues that should demand a broad consensus. Guided by a pivotal voter model, we conduct a laboratory experiment to investigate the performance of different quora in reaching such goals. We introduce two main innovations in relation to previous work on the topic. First, part of the electorate goes to the polls out of a sense of civic duty. Second, we test the performance of a different quorum, the rejection quorum, recently proposed in the literature. We conclude that, depending on the preferred criterion, either the approval or the rejection quorum is to be preferred. |
| Keywords: | Election Design; Participation Quorum; Approval Quorum; Laboratory Experiment |
| JEL: | C91 D72 D02 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:03/2019&r=all |
| By: | Jesal Sheth (University of Nottingham) |
| Abstract: | The theory of voluntary disclosure of information posits that market forces lead senders to disclose information through a process of unravelling. This prediction requires that receivers hold correct beliefs and, in equilibrium, make adverse inferences about non-disclosed information. Previous research finds that receivers do not sufficiently infer non-disclosure as bad news, leading to the failure of complete unravelling. This paper experimentally examines whether competition between senders when receivers strongly prefer disclosed over non-disclosed information increases unravelling. We further examine whether receivers’ naivety about non-disclosed information decreases with competition between senders. We find that complete unravelling fails to occur without competition. However, with competition, there is significantly higher unravelling such that it increases receivers’ overall welfare. Interestingly, receivers’ welfare increases despite no significant difference in their guesses or beliefs about non-disclosed information relative to the treatment without competition. We conclude that competition between senders positively affects disclosure of information and receivers’ welfare. |
| Keywords: | Competition, experiment, disclosure, verifiable information, conflict of interest |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2019-04&r=all |
| By: | Jan Engelmann (University of Amsterdam); Maël Lebreton (University of Geneva); Peter Schwardmann (LMU Munich); Joël van der Weele (University of Amsterdam); Li-Ang Chang (CREED - University of Amsterdam) |
| Abstract: | It is widely hypothesized that anxiety and worry about an uncertain future lead to the adoption of comforting beliefs or "wishful thinking". However, there is little direct causal evidence for this effect. In our experiment, participants perform a visual pattern recognition task where some patterns may result in the delivery of an electric shock, a proven way of inducing anxiety. Participants engage in significant wishful thinking, as they are less likely to correctly identify patterns that they know may lead to a shock. Greater ambiguity of the pattern facilitates wishful thinking. Raising incentives for accuracy does not significantly decrease it. |
| Keywords: | confidence, beliefs, anticipatory utility, anxiety, motivated cognition |
| JEL: | D83 C91 |
| Date: | 2019–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190042&r=all |
| By: | Pogorelskiy. Kirill (University of Warwick); Shum, Matthew (Caltech) |
| Abstract: | More voters than ever get political news from their friends on social media platforms. Is this bad for democracy? Using context-neutral laboratory experiments, we find that biased (mis)information shared on social networks affects the quality of collective decisions relatively more than does segregation by political preferences on social media. Two features of subject behavior underlie this finding: 1) they share news signals selectively, revealing signals favorable to their candidates more often than unfavorable signals; 2) they naıvely take signals at face value and account for neither the selection in the shared signals nor the differential informativeness of news signals across different sources. |
| Keywords: | news sharing ; social networks ; voting ; media bias ; fake news ; polarization ; filter bubble ; lab experiments |
| JEL: | C72 C91 C92 D72 D83 D85 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1199&r=all |
| By: | Kenneth C. Kehrer; John F. McDonald; Robert A. Moffitt |
| Abstract: | The Gary Income Maintenance Experiment was one of a coordinated series of experiments supported by the Department of Health, Education, and Welfare and the Office of Economic Opportunity to test the work-incentive effects and other consequences of alternative negative income tax (NIT) plans. |
| Keywords: | Gary, IN, Income Maintenance Experiment, labor supply |
| JEL: | J |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:51df25f673f04a369a8883ba4bc00caf&r=all |
| By: | Michał Wiktor Krawczyk (Faculty of Economic Sciences, University of Warsaw); Joanna Rachubik (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | The representativeness heuristic (RH) proposes that people expect even a small sample to have similar characteristics to the parent population. One domain in which it appears to operate is the preference for combinations of numbers on lottery tickets: most players seem to avoid very characteristic, “unrepresentative” combinations, e.g. only containing very low numbers. Likewise, most players may avoid betting on a combination that was drawn recently, because it would seem particularly improbable to be drawn again. We confirm both of these tendencies in two field experiments, building upon Krawczyk and Rachubik (2019, KR19). However, we find no link between these two choices: it is not the same people that show the two biases. In this sense, the RH does not organize the data well. Nevertheless, there are some links related to rationality across the two choices – people who are willing to forgo a monetary payment in order to get the preferred ticket in one task are also willing to do it in the other. We find such preference to be related with misperception of probabilities and providing intuitive, incorrect answers in the Cognitive Reflection Test. |
| Keywords: | Decision making under risk; Gambler’s fallacy; Lottery choice; Perception of randomness; Number preferences in lotteries; Representativeness heuristic |
| JEL: | C93 D01 D81 D91 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2019-11&r=all |
| By: | Nana Adrian, Ann-Kathrin Crede, Jonas Gehrlein |
| Abstract: | There is a long ongoing debate on whether interaction in a market influences moral decisions of individuals. While some studies show that individuals tend to decide less morally when being exposed to a market environment, other studies argue that the experience of mar- ket interaction promotes moral behavior. We add to this discussion by distinguishing between two moral concepts: consequentialism and deontology. According to consequentialism, actions are evaluated only by their consequences. Contrary to that, deontology focuses solely on the morality of the action itself. We design an online experiment in order to investigate the e ect of market interaction on moral deci- sion making in a subsequent moral dilemma. Taking into account how markets make cost benefit considerations salient, we hypothesize that individuals are more likely to focus on consequences if they interacted in a market before. |
| Keywords: | Consequentialism, deontological motivations, double auction, salience, decision theory. |
| JEL: | D91 L1 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1905&r=all |
| By: | Judd Kessler (University of Pennsylvania); Corinne Low (Columbia University); Colin D. Sullivan (University of Pennsylvania) |
| Abstract: | We introduce a new experimental paradigm to evaluate employer preferences, called Incentivized Resume Rating (IRR). Employers evaluate resumes they know to be hypothetical in order to be matched with real job seekers, preserving incentives while avoiding the deception necessary in audit studies. We deploy IRR with employers recruiting college seniors from a prestigious school, randomizing human capital characteristics and demographics of hypothetical candidates. We measure both employer preferences for candidates and employer beliefs about the likelihood candidates will accept job offers, avoiding a typical confound in audit studies. We discuss the costs, benefits, and future applications of this new methodology. |
| Keywords: | preferences, human capital, employment |
| JEL: | J24 J60 C93 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2019-039&r=all |
| By: | Brice Corgnet (emlyon business school); Cary Deck (UA - University of Alabama [Tuscaloosa]); Mark Desantis (Chapman University); Kyle Hampton (Chapman University); Erik Kimbrough (Chapman University) |
| Abstract: | The ability of markets to aggregate diverse information is a cornerstone of economics and finance, and empirical evidence for such aggregation has been demonstrated in previous laboratory experiments. Most notably Plott and Sunder (1988) find clear support for the rational expectations hypothesis in their Series B and C markets. However, recent studies have called into question the robustness of these findings. In this paper, we report the result of a direct replication of the key information aggregation results presented in Plott and Sunder. We do not find the same strong evidence in support of rational expectations that Plott and Sunder report suggesting information aggregation is a fragile property of markets. |
| Keywords: | Aggregation,Efficient Markets,Rational Expectations,Experiments,Replication |
| Date: | 2019–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02146611&r=all |
| By: | Sun, Chen (HU Berlin); Potters, Jan (Tilburg University) |
| Abstract: | We investigate how intertemporal allocation of monetary rewards is influenced by the size of total budget, with a particular interest in the channels of influence. We find a significant magnitude effect: the budget share allocated to the later date increases with the size of the budget. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e. utility curvature). The latter effect is consistent with theories in which the degree of asset integration is increasing in the stake. |
| Keywords: | time preference; magnitude effect; convex time budget method; |
| JEL: | C91 D12 D91 |
| Date: | 2019–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:159&r=all |
| By: | Tsekouras, D.; Dellaert, B.G.C.; Donkers, A.C.D.; Häubl, G. |
| Abstract: | Many consumer decisions are assisted by product recommendations. When providing such recommendations, there is an inherent tension between (1) presenting a set of products that are close in attractiveness (fine product set granularity) and (2) presenting a wider range of products that are more different in attractiveness (coarse product set granularity). While the former can maximize the attractiveness of the recommended set of products, the latter makes it easier for consumers to determine which of the recommended products is most attractive, thus boosting consumer response. Evidence from a large-scale field study (with naturally occurring variation in the granularity of recommendation sets) provides strong support for this tension and shows that less fine-grained product recommendation sets promote consumer response. We also find that, in line with our theorizing, coarser set granularity increases the time consumers spend processing detailed information about individual products relative to time they spend comparing products at the set level. These effects are less pronounced when consumer engagement in the decision process is low. The key insights from the field study are replicated in a tightly controlled experiment (using a different product domain). The findings of this research have important implications for how best to integrate large online assortments and product recommendations to stimulate consumer response. |
| Keywords: | product recommendations, product set granularity, online assortments, consumer response, consumer decision-making |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:117409&r=all |
| By: | Mikhail Anufriev (University of Technology Sydney); John Duffy (Department of Economics, University of California-Irvine); Valentyn Panchenko (UNSW Business School, Sydney) |
| Abstract: | We introduce a planar beauty contest game where agents must simultaneously guess two, endogenously determined variables, a and b. The system of equations determining the actual values of a and b is a coupled system; while the realization of a depends on the average forecast for a, a, as in a standard beauty contest game, the realization of b depends on both a and on the average forecast for b, b. Our aim is to better understand the conditions under which agents learn the steady state of such systems and whether the eigenvalues of the system matter for the convergence or divergence of this learning process. We find that agents are able to learn the steady state of the system when the eigenvalues are both less than 1 in absolute value (the sink property) or when the steady state is saddlepath stable with the one root outside the unit circle being negative. By contrast, when the steady state exhibits the source property (two unstable roots) or is saddlepath stable with the one root outside the unit circle being positive, subjects are unable to learn the steady state of the system. We show that these results can be explained by either an adaptive learning model or a mixed cognitive levels model, while other approaches, e.g., naive or homogeneous level-k learning, do not consistently predict whether subjects converge to or diverge away from the steady state. |
| Keywords: | Beauty contest; Learning; Stability; Simultaneous equation systems, Level-k cognitive theory |
| JEL: | C30 C92 D83 D84 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:181907&r=all |
| By: | Casaburi, Lorenzo; Macchiavello, Rocco |
| Abstract: | Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions. |
| JEL: | K12 L66 O13 O17 Q12 Q13 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100180&r=all |