Conference Programme
(For all talks, please
bring your laptop or memory stick)
Welcome Reception: Wine
tasting from
Atrium of the University
Lumiere Lyon 2 – 16 18, Quai Claude Bernard, 69007 Lyon
Opening Session
Location: Main Lecture Hall
Plenary Session
Lise VERTERLUND: "Gender differences in attitudes towards
competition: Recent developments"
Location: Main Lecture Hall
Break 10:00-10:30am – Atrium
Session A1 VOTING AND PUBLIC GOODS
Chair: Rupert SAUSGRUBER
Co-author(s):
GAISSMAIER, Wolfgang (Max Planck Institute for Human Development)
Abstract: The
legitimacy of procedures is an important determinant of people’s willingness to
cooperate with one another in social dilemmas. In a public goods game, we
allowed participants to vote on a set of rules vs. imposing the same
institutions exogenously. As hypothesized, average contributions to the public
good were much higher in the voting than in the control condition (85.2% vs.
58.5%). Contradicting the explanation that subjects might interpret the outcome
of the vote as a signal for cooperativeness, the size of the effect did not
depend on the set of rules participants actually decided for. Also, it made no
difference whether the subjects actually received the institutions they
personally voted for, or whether they were pro-social or pro-selfish orientated.
Participation in the procedure was sufficient. Finally, we have shown that the
effect is driven by the perceived legitimacy of the procedure. We replicated
the experiment in a country where the dominant culture does not perceive the
democratic majority rule as particularly legitimate: in
Keyword: Self-governance,
Social Dilemmas, Legitimacy, Cross cultural Comparison, C 90; C91; H41;
Co-author(s):
JIMENEZ, Natalia (
Abstract: There
are many situations in which an action that affect many people is taken by the
winner (either a single person or a group) of a voting system. Candidates'
objective in elections use to be twofold: they care about winning, and they
care about the policy finally implemented. In this paper we try to separate and
to measure both candidates' preferences, i.e, preferences for winning and
preferences for policy in a lab experiment. In particular, we consider candidates'
policy as a punishment to voters' behavior in a public good game.
Keyword: Experiments,
voting, punishment, opportunism.
Co-author(s):
NOUSSAIR, Charles (CentER,
Abstract: In
this paper we consider a voluntary contributions game with the availability of
decentralized punishment after contributions are made and observed.
Productivity of contributions, as captured in the marginal-per-capita return,
differs between individuals, so that there are two types: high and low
productivity. Every three or twelve periods, depending on the treatment,
individuals vote on a punishment regime, in which certain individuals are
permitted have punishment directed toward them. The punishment regime can
condition on type and contribution history. The results indicate that the most
effective regime, in terms of contributions and earnings, is one that allows
punishment of low contributors only, regardless of productivity. Individuals
vote to punish low contributors, as well as types other than their own.
Keyword: Voting,
Punishment, VCM, Heterogeneous, Public good game
Co-author(s):
KERSCHBAMER, Rudolf and RAUCHDOBLER, Julian (
Abstract: Economists
are skeptical about the efficacy of voluntary agreements (such as the
Keyword: social
dilemma games, strategic complements, non-binding contracts,
SESSION A2 PUNISHMENT
Chair: Louis PUTTERMAN
Co-author(s): FATÁS, Enrique (Lineex and
Abstract: Agricultural cooperatives usually provide low quality products
as a result of a freeriding problem: individual incentives are not aligned with
group gains because while individual member has to bear all costs associated
with higher quality, the benefits of delivering higher quality have to be
shared among all members. We propose a mechanism which can be applied to solve
this problem. Specifically, we focus on a non competitive punishment mechanism
based on random exclusion. This device has some interesting properties: first,
the individual information requirements are null; second, the probability of
being matched comes from the own group’s performance; third, random punishment
does not depend on the willingness to pay for punishing; fourth, for extreme
risk adverse players, fully contributing to get the highest quality is an
equilibrium strategy and, last, we do not consider permanent firing. We present
a theoretical model to examine the free-riding behaviour and evaluate the
efficiency properties of the punishment mechanism based on blind fines within
an agricultural cooperative. To test for the effectiveness of random
punishment, we run an experiment with two games (no-punishment and random
punishment games) and two treatments (high and low quality cost levels) under a
within-subject design. Both treatments have two blocks of twenty periods each.
Our experimental research confirms the theoretical predictions. It shows
efficiency gains of 200%. Subjects increase significantly the quality when the
environment includes random punishment, regardless the cost level. Moreover, we
find statistically significant treatment effects. Without punishment, the
high-cost treatment gets lower quality than the low-cost treatment although
quality decreases over time in both. After introducing the random fines, the
quality of final product declines sharply in the high-cost treatment while
maintains at a greater level in the low-cost treatment. In fact, a convergence
towards the efficient equilibrium (maximum quality) is only observed in
low-cost treatment with random punishment.
Keyword: Random punishment, free-riding behaviour, collective action,
agricultural cooperatives
Co-author(s): SUTTER, Matthias (
Abstract: The recent literature on norm enforcement establishes that
many social norms are not only enforced by second parties – who are immediately
affected in their well-being by a violation of norms – but also to a large
extent by unaffected third parties. The latter enhance the scope of norm
enforcement way beyond what would be possible with second-party interventions
only. Third-party norm enforcement obviously relies on the willingness to bear
costs for rewarding or punishing others even if such activities do not provide
any present or future monetary benefits for the third party. This kind of
behavior has been termed strong or social reciprocity (Gintis, 2000; Fehr and
Fischbacher, 2003, 2004; Carpenter et al., 2006). So far, the literature on
third-party interventions has focused on third-party punishment. We extend this
literature in three dimensions.
(1) We investigate the influence of third-party observation on
cooperation in a prisoner’s dilemma game. Note that observability is a
precondition for any kind of third-party intervention, and it is unclear how
being observed by third parties affects cooperation.
(2) We also study third-party rewards and compare it to the influence of
third-party punishment on cooperation.
(3) We examine whether the presence of multiple third-parties creates a
free-rider problem among third-parties, which may ultimately have a negative
effect on cooperation.
In the experiment we let players (the “first” parties) interact in a
repeated prisoner’s dilemma game with random rematching. In addition to a
control treatment without any third party we have four different treatments
where a single third party can either observe, reward, punish, or both reward
and punish first parties, and another four treatments where three third parties
can either observe, reward, punish, or both reward and punish. Based on a
sample of 430 participants we find the following results.
(1) Third-party intervention through a single party doubles cooperation
rates in relation to the control treatment. There is no significant difference,
though, between third parties being able to observe only, reward, or punish.
(2) Having multiple third parties does neither increase, nor decrease,
cooperation rates, compared to the single third-party case.
(3) Third-party reward and third-party punishment work through different
channels. First parties get already more cooperative by the mere presence of
third parties with an option to reward; actual rewards only add further to this
effect. Punishment, however, has to be applied, though, because the mere threat
of punishment does not increase cooperation rates.
Keyword: Social dilemma, norm enforcement, third party intervention
Co-author(s): SCHLAG, Karl (University Pompeu
Fabra); VAN DER WEELE, Joel (
Abstract: We investigate experimentally whether
the introduction of sanctions can adversely influence the beliefs of agents
about the behaviour of others. We study a two-period minimum effort
coordination game between two players, in the presence of a third player or
‘principal’. This principal benefits from coordination on higher effort, and is
the only one informed of pre-sanction coordination levels. We compare the
effects of a mild sanction, when it is imposed exogenously by the experimenters
and when t is imposed by the superiorly informed principal. Our results
indicate that exogenously introduced sanctions are effective in inducing
optimistic beliefs about others and in raising effort levels, but endogenously
introduced sanctions are not. This is true only for subjects who play
cooperatively in the first round. The results supports the idea that the
sanctions have an expressive dimension which can undermine their effectiveness
by discouraging optimistic players.
Keyword: Keywords: Expressive law, social
norms, deterrence, coordination, minimum effort game
Co-author(s):
TYRAN, Jean-Robert (
Abstract: We
let subjects playing a finitely repeated linear voluntary contribution game in
partner groups decide by vote on the parameters of a centralized penalty scheme
capable of resolving the free rider problem if they make appropriate choices.
Most groups in the simpler of two voting treatments learned to choose
parameters inducing efficient outcomes, whereas their counterparts in a
treatment inviting strategic reasoning about claims on redistributed penalties
were significantly less successful, although they too outperformed groups with
no opportunity to impose a penalty scheme. Analysis shows that individual
differences in cooperative orientation (measured by VCM strategy profiles),
intelligence (measured by a short IQ test), and political orientation (based on
post-experiment survey responses) help to predict voting. Correlations among
the latter measures are also discussed.
Keyword: public
goods experiment, voluntary contribution, punishment, voting
SESSION A3 GAME THEORY
Chair: Antonio J MORALES
Co-author(s): HEUGUES, Mélanie (LAMETA,
Université de Montpellier I); WILLINGER, Marc (LAMETA, Université de
Montpellier I)
Abstract: This study investigates a two-players
experimental sequential game in which both players have private information.
Each player has a private “strength index” and must choose between two
alternatives. The first player has to choose between a small project that
yields smalls gains and small risk and a big one far more riskier that yields
greater gains. The second player must decide to fight or fold. The only
equilibrium of this game is a semi-separating equilibrium where the first
players bluff and choose the big project for high and low strength indexes and
the small project for and intermediate indexes. We use the strategy method to
elicit players’ strategies and we repeat the game ten times with strangers to
measure a learning effect. We observe that theory does not predict well.
Bluffing behavior is nevertheless observed and significant. In a second
treatment we try to improve this behavior by telling first players that they
are matched with computers that always play the same equilibrium strategy. We
do not find any significant differences between the two treatments and no
learning effect.
Keyword: Bluff, experiment, sequential game,
semi-separating equilibrium, strategy method.
Co-author(s):
SAIJO, Tatsuyoshi (
Abstract: Strategy-proofness
of a rule requiring that truth-telling be a dominant strategy in the direct
revelation mechanism associated with the rule, is a condition that has been
central in the mechanism design literature. Cason, Saijo, Sjostrom and Yamato
(2006) show that this requirement has serious drawbacks in practice. Many
strategyproof mechanisms have a continuum of Nash equilibria, including
equilibria other than dominant strategy equilibria, and these happen to work
pretty badly in practice. For only a subset of strategy-proof mechanisms do the
set of dominant strategy and Nash equilibria coincide. These mechanisms are
called secure and are by definition implementable both in dominant strategy and
Nash equilibria. The presence of unwanted Nash equilibria creates some “noise”
and its consequence is a clear difference in the rate of dominant strategy
equilibria play between a secure and a non-secure (but strategy-proof)
mechanism. Because of the experimental failure of non-secure mechanisms, there
seems to be an important behavioral wedge between secure and non secure
mechanisms.
In this
paper, we introduce some new insights following the findings of Cason, Saijo,
Sjostrom and Yamato (2006). We are interested in an experimental investigation
of the so-called division problem under single-peaked preferences: a limited
stock of a resource, say food, has to be divided among agents whose sum of
demands cannot be satisfied. A central mechanism for this type of rationing
problem is the so-called uniform rule (Benassy, 1982; Sprumont 1991), which
happens to be the unique efficient, symmetric and strategy-proof mechanism in
this environment. However the uniform rule is plagued with “bad” Nash
equilibria and thus fails the secure requirement emphasized in Cason et al.
(see Bochet and
Using a
design similar in spirit to Cason, Saijo Sjostrom and Yamato (2006), we
investigate the behavioral implications of this result. Knowing that the
uniform rule is not secure –and thus won’t perform well in practice– how does
the experimental investigation compares with the theoretical predictions of
Bochet and
The
experiment for this paper is currently run at
Keyword: Experiment,
Strategy Proofness, Secure Implementation, direct revelation games, uniform
rule, proportional rule, learning.
Co-author(s): BASU, Kaushik (
Abstract: The Traveller's Dilemma highlights
that the assumption of rationality commonly made in game theory and economics
does not hold in practice. When the game is played experimentally, people
consistently reject the rational choice. Indeed, by acting illogically, they
end up obtaining larger rewards. Becker et al. (2005) show that even when the
TD is played by experts, so that ignorance of backward induction can be ruled
out, average bids are much higher than the Nash Equilibrium (NE). Expected bids
are also higher than the NE, so that it is rational not to play NE. Capra et
al. (1999) show that, in contrast to the theoretical predictions, the size of
the bonus- penalty (R) matters: if R is small people play high (indeed, bids
converge to 100); if R is high, people play low (bids converge to Nash
Equilibrium). These results suggest that, in a setting such as TD, agents
choose strategically to play non-NE. The question is: how do they choose? This
paper provides an experimental investigation to discriminate between two
alternative frameworks for decision making: pragmatism and rule of thumb. In
the former, agents do not assume that rationality is common knowledge, but try
to formulate an expectation about other player's bid and maximize their
expected payoff accordingly. If this hypothesis is correct, changes in the
other player's payoff structure, keeping fixed own payoffs, should affect
agents's bids. In the latter framework, agents disregard the determinants of
other player's choice and focus only on their own payoff under a given (fixed)
scenario about other player's move. If this hypothesis is correct, changes in
own payoff should affect agents' bids, whereas changes in other player's
payoff, keeping own payoff fixed, should not affect agents' bids. Our
experiment investigates these two alternative frameworks for decision making.
Consider the result by Capra et al. (1999) that when R=10 people play high,
whereas when R=80 they play low and converge to NE. In changing R from 10 to 80
two things are changing at the same time: the structure of the player's own
payoff and that of the other player's payoff. The objective of our experiment
is to disentangle the effects of these two components, in order to identify
what leads people to play low and converge to NE when R=80: different own
payoff structure, different beliefs about opponent's bid, or both. We run four
sessions with 24 subjects per session and one-shot interactions in a between
and within subjects design: in each session each player plays the 4 treatments,
then only one is drawn randomly to determine payoffs. Subjects know that no
subject will ever interact more than once with the same subject, to avoid
strategic bidding. Subjects only receive feed-back about decisions and outcomes
at the end of the 4 treatments. The effect of repetition is controlled for by
the randomization of treatments within subjects.
Keyword: Cooperation, Microeconomic Behavior,
Experimental Economics. JEL codes: C72, C91, D01.
Co-author(s):
FATAS, Enrique (LINEEX and
Abstract: In
this paper we analyse the role played by a plausible source of bounded
rationality: the simplification of complex strategic situations by discretising
a continuous strategy set. We show that discretisation alters the set of Nash
equilibria of those games for which the best response of a player is to undercut
his rivals’ strategy; examples of this type of games include Bertrand
competition and the traveller’s dilemma. The new equilibria structure of the
games explains quite nicely some experimental results observed in labs, which
have been previously considered as failures of traditional game theory.
Keyword: Complexity,
Discretisation, Prominent Numbers, Price Competition, Experiments.
SESSION A4 CHILDREN
Chair: Bettina ROCKENBACH
Co-author(s): SCHMIDT, Carsten (University
Abstract: We observe preferences over time of
school children and young adults in a slightly modified version of the food
choice experiment by Read and van Leeuwen (1998). We use individuals aged
between 6 and
Keyword: quasi-hyperbolic discounting, time
consistency, field experiment
Co-author(s): HOUSER, Daniel (
Abstract: Envy and altruism have been studied
extensively in adults. Here, we report data from an experiment studying envious
and altruistic behavior in children. We study a sample of German school
children aged seven to ten in a natural setting. We run two treatments. One
treatment investigates envy, the other one studies altruism. Additionally, we
collect data on the children’s cognitive and social skills, and on their
socio-demographic background. Controlling for these factors, we find that
children attending higher classes care significantly less for their relative
position and are more altruistic. Boys care more about their relative position
than girls. Socio-demographic information has some predictive power in the
treatment that studies envy, but not in the treatment that studies altruism.
Keyword: experimental study, social
preferences, envy, altruism, children
Co-author(s):
VAN DE VEN, Jeroen (
Abstract: This
paper investigates favouritism practices among children, and in particular,
examines the role of friendships and position in the social network in these
practices. Using experimental data from school children in
Co-author(s):
FEHR, Ernst (
Abstract: Human
social interaction is strongly shaped by other-regarding preferences. These
preferences are key for a unique aspect of human sociality – large scale
cooperation with genetic strangers – but little is known about their
developmental roots. We show here that young children’s other-regarding
preferences assume a particular form – egalitarianism – that develops strongly
between the ages of 3 and 8. At age 3-4, the overwhelming majority of children
behave selfishly, while the vast majority at age 7-8 prefers resource
allocations that remove advantageous or disadvantageous inequality. Moreover,
inequality aversion is strongly shaped by parochialism, a preference for
favouring the members of one’s own social group.
Keyword: social
preferences, fairness, children
SESSION A5 INSURANCE
Chair: Louis LEVY-GARBOUA
Co-author(s): OECHSSLER, Jörg (
Abstract: Sick pay is a common provision in
most labor contracts. Even when not required by regulations, firms often choose
to offer sick pay in case workers become ill. In this paper we conduct a first
systematic study of sick pay provision in labor contracts by using a controlled
laboratory experiment. We adopt a modified gift-exchange environment in which
the labor contract is a lottery with the regular wage being the high prize and
sick pay being the low prize. Firms can benefit from sick pay provision in two
different ways: directly, from workers reciprocating higher sick pay with
higher efforts; and indirectly, from self-selection of reciprocating workers
into contracts with higher sick pay. Our main finding is that the direct effect
is rather weak (actually negative) but the self-selection effect can have an
important impact on a firm’s output. Thus, the unexpected value of sick pay
provision could be in attracting cooperative workers. This, in turn leads to a
higher provision of sick pay when firm compete for workers relative to a
monopsonistic labor market.
Keyword: JEL codes: C72; C91; C92; D43; L13.
Co-author(s):
LAURY, Susan K. (
Abstract: It
is widely accepted that individuals tend to underinsure against
low-probability, high-loss events relative to high-probability, low-loss
events. This conventional wisdom is based largely on .field studies, as there
is very little experimental evidence. We reexamine this issue with an
experiment that accounts for possible confounds in the few prior insurance
experiments. Our results are counter to the prior experimental evidence, as we
observe subjects buying more insurance for low probability events than the
higher-probability events, given a constant expected loss and load factor. Our
results suggest that, to the extent underinsurance for catastrophic risk is
observed in the field, it can be attributed to factors other than the relative
probability of the loss events.
Abstract: The paper reports on a laboratory
study on the moral hazard problem in social safety nets. A social dilemma game
is proposed that involves risk taking and self-protection. On the basis of the
experimental data, collective risk taking in presence and in absence of a
social safety net is analyzed. The data show that the group takes more risk in
a safety net than when each individual has to self-protect against risk.
However, the difference in risk taking is much less notable than predicted by
theory
Keywords : Experiment, social safety net, risk
transfer, moral hazard Experiment,
social safety net, risk transfer, moral hazard
Co-author(s):
MONTMARQUETTE, Claude (CIRANO and
Co-author(s):
Deficits in the public funding of health care are usually covered by raising
taxes or by rationing the supply of health care. This paper compares the
efficiency of taxation and rationing, and their influence on individual
contribution behavior. We report the results of a 2x2 experiment based on a
game, in the first stage of which subjects can voluntarily contribute to a
public fund that is being used to compensate for random losses incurred by the
victims of a disaster. In the second stage of the game, in case of a deficit,
we introduce either taxation or rationing. Each treatment is subjected to two
conditions: the burden of covering the deficit is either uniform for all subjects,
or tailored to the individual first-stage contributions. We show that the
individualized treatments favor the public provision of health care through
voluntary cooperation whereas the uniform treatments encourage free-riding.
Individualized taxation brings the voluntary contributions closer to the
optimum, while uniform rationing appears to be the worst system since
free-riding restrains the provision of health care.
Keyword: Public
health care system, taxation, rationing, responsibility, public insurance,
experiment.
SESSION A6 LABOR
Chair: Daniel ZIZZO
Co-author(s): ALTMANN, Steffen (Institute for
the Study of Labor, IZA); FALK, Armin (
Abstract: For decades, the effectiveness of
minimum wage regulations has been discussed controversially. Besides examining
employment effects, economists have recently started to explore potential
incentive effects associated with minimum wages using laboratory experiments.
In this paper we not only explore the minimum wage effects within the covered
sectors of the market but also within sectors that are legally exempt from the
law. In contrast to previous experiments, we do not find a negative effect on
the provision of work-effort in sectors for which the minimum wage is a binding
constraint. However, we do observe a substantial decrease of work-effort in
sectors that are left uncovered from the regulation. In line with research on the
effects of relative income and reference-dependent preferences, our
questionnaire provides evidence that the non-binding minimum wage had
affectively altered workers’ perceptions of a “fair-wage”.
Keyword: minimum wage, relative income effects
Co-author(s): GüTH, Werner (Max Planck
Institute of Economics); KOCHER, Martin (
Abstract: This study investigates
experimentally the effort choices of workers as a reaction to linear incentive
contracts that may be perceived as (un)fair. A principal repeatedly interacts
with a permanently hired worker, in addition to whom he may contract a
temporary worker. While permanent workers stay with the same principal for a
certain time – thus allowing for reputation building and retaliation –
temporary workers are randomly assigned to a (new) principal in each round.
Knowing the principal's contract offer and (possibly) being informed about the
co-worker's contract details, workers decide on how much costly effort to
provide. Thereby their decisions may be influenced by other-regarding
preferences. We find that principals mostly offer equal contracts, especially
when offers are visible to both workers. When contracts remain private
information, discrimination against temporary workers takes place. Both
permanent and temporary workers react negatively to discrimination against the
temporary worker, with the temporary worker withholding a significantly higher
amount of effort.
Co-author(s):
FALK, Armin (
Abstract: We
test theories of reference-dependent preferences that assume the reference
point to be a function of individual expectations. In a real-effort laboratory
experiment, we manipulate the rational expectations of subjects and check
whether this manipulation influences their labor supply. The experiment is
designed such that risk aversion or status-quo reference dependence cannot
cause a treatment difference. We find that labor supply is significantly
different between treatments in exactly the way predicted by models of
expectation-based reference-dependent preferences.
Keyword: Reference
Points, Expectations, Loss Aversion, Risk Aversion, Disappointment, Real-
Effort Experiment
Co-author(s):
TAN, Jonathan (University of
Abstract: Macroeconomic
growth research shows that there is a negative correlation between inequality
and growth, but why such correlation exists, how it should be interpreted and
thus what its potential implications are for policy, remain unclear. We present
an experimental investigation of how inequality affects trust, trustworthiness
and labour market decisions. We consider three experimental treatments, one
with no inequality in income, one with income inequality but no knowledge of
the income of other agents, and one with inequality and knowledge of the income
of other agents. There are no redistributionary flows in the direction of
inequality aversion in the labour markets, while in the trust games rich
subjects are returned less than poor subjects when their income is known;
however, this effect operates not by making subjects return more to poorer subjects
than if income is unknown, but rather by making them return less to richer
subjects. While trust rates are of more limited use, trustworthiness in trust
games can be successfully used as a predictor of work effort in the labour
market setting. Inequality possibly induces a lower number of wage offers.
Inequality lowers the return rate by around 20-25% in trust games. In our
labour markets, when the income of other agents is known, wages and work effort
also go down also by around 20-25%. Our findings are consistent with a causal
connection between inequality and growth.
Keyword: Inequality,
growth, trust, trustworthiness, labour market, efficiency wages
SESSION
A7 ENVIRONMENT
Chair:
David MASCLET
Co-author(s):
VAN DER WOERD, Hans and KUIK, Onno (Institute for Environmental Studies, Vrije
Universiteit
Abstract: Global
Earth Observation (GEO) is one of the most important sources of information for
environmental resource management and disaster prevention. With budgets for GEO
increasingly under pressure, it is becoming important to be able to quantify
the returns to informational investments. For this, a clear analytical
framework is lacking. By combining Bayesian decision theory with an empirical,
stakeholder oriented approach, this paper attempts to develop such a framework.
The
analysis focuses on the use of satellite observations for Dutch water quality
management in the
The results
indicate that the expected welfare impact of investing in satellite observation
is positive, but that outcomes strongly depend on the perceived accuracy of the
information system and the range of informational benefits perceived. Bayesian
decision theory offers a suitable framework for assessing the value of
information, provided decision-making is non-strategic and consensus-based.
Keyword: Value
of information; Bayesian decision theory; Expert elicitation; Marine water
quality; Environmental economics
Abstract: Nonpoint source pollution is
characterized by a situation in which an area is polluted by several
firms whose individual emissions are unobservable. Here we assume that
the environmental agency can observe these individual emissions with costly
individual inspections. We compare in the lab the efficiency of (i) a
traditional random inspection policy, in which the agency announces an
inspection probability and then fines noncompliant firms and (ii) a
variant introduced by Franckx (2002), in which the agency has the opportunity
to carry out a preliminary inspection of the level of ambient pollution before
implementing individual inspections. The advantage of observing the level of
ambient pollution is that it is directly related to the firms’ aggregate
emissions. We are also interested in the impact of the agency’s commitment
power on the efficiency on these policies: In reality the agency may have an
incentive to announce very high inspection probabilities to induce high
compliance rates and then secretly renege on its announcement to avoid the implementation
of costly inspections. Our preliminary results are the following.
Overall we confirm that ambient
inspections increase the efficiency of random inspection policies. But this effect
is weaker than expected when the agency has no commitment power, and could even
be negative if the cost of ambient inspection was very large. The main reason
seems to be that firms’ efforts are much higher than expected when
no ambient inspections are used and the agency has no commitment power. Our
experiment therefore casts doubts on the theoretical prediction that ambient
inspections can serve as a substitute for a lack of commitment power.
Keyword: Experiments;
Regulation of pollution; Random inspections; Nonpoint source pollution;
Commitment problems.
Abstract: We
implement a laboratory experiment to evaluate harvesting behavior of a
renewable Common-Pool Resource, in an N-person discrete-time deterministic
dynamic game of T periods fixed duration. Dynamic problems resolution gives
scope for the implementation of ‘rules of thumb’ as a consequence of its’
intrinsic complexity. Moreover, the appropriators in a single population may
use various decisions rules. In order to identify the different decisions rules
and to classify appropriators within them, we implement a Bayesian
classification algorithm adapted to our experimental data and based on Houser
et al (2004) work. This algorithm allows performing inference on the number and
the shape of decision rules present in a population. The application of this
econometric procedure has allowed us to identify two types of appropriators:
“Quasi Myopic” (QM) appropriators and “Perturbed Farsighted” (PF) appropriators.
The algorithm has classified near 85% of the appropriators in our sample as QM,
and 5% as PF; the lasting agents could not be identified. Additionally, it has
allowed us to identify the impact of a theoretically no relevant variable, the
cumulated wealth. In order to evaluate the impact of context variables (i.e.
natural recharge, initial wealth and its distribution between types), we used
the empirical model resulting from the estimated types to perform simulations.
Also in this framework, we have tested the efficiency of different kinds of
taxes to manage the CPR exploitation. Some results are: (i) natural recharge of
the resource does not impact behavior; (ii) initial wealth increase the
efficiency of exploitation; (iii) when initial wealth is high (low), a more
equally (unequally) distribution of wealth between types results in higher
efficiency in the exploitation of the resource; (iv) a crowding out effect on
the exploitation efficiency is identified between wealth and tax policies.
Keyword: Renewable
Common-Pool Resources, Tax, Bayesian classification, Time preferences
Co-author(s): BOUGHERARA, Douadia (INRA Rennes); DENANT BOEMONT, Laurent (CREM, Université Rennes 1)
Abstract:
Conservation policies provide farmers with strong incentives to contribute to
environmental protection. One concern of such policies is to create and/or
maintain a variety of valuable public goods. One main difference between
creating and maintaining public goods is that while in the former, farmers are
asked to create resources, in the latter, they have to maintain unchanged an
existing level of resources. While conservation policies are aimed
indifferently at both creating and maintaining a variety of public goods -
since they provide similar incentives for both - farmers may behave differently
in the two contexts. This paper aims to test this framing effect. Our approach
is original in that it combines both framing and threshold dimensions by
comparing maintaining and creating contexts using threshold public goods
experiments. First, the creating treatment corresponds to a classical Voluntary
Contribution Mechanism whereas the maintaining treatment corresponds to a
setting in which all tokens are initially placed in the public investment and
subjects can withdraw tokens. Second, we test for this hypothesis in the case
of Provision Point Mechanism experiments with three different threshold levels.
The results are that first, consistent with theoretical predictions,
contributions rise with threshold level, with the exception of the highest
level. Second, individuals tend to be less cooperative in the maintaining frame
than in the creating frame. Finally, framing effects seem to be more effective
under higher threshold levels. These results may have important consequences
for the management of agrienvironmental resources.
Keyword: Public
goods experiment; Threshold; Framing effects; Conservation policies.
SESSION A8 COOPERATION
Chair: Vivian LEI
Co-author(s): YANG, Chunlei (Academia Sinica)
Abstract: In this paper, we use a lab
experiment to study the effects of providing information on opponents’ history
in a Prisoner’s Dilemma game. 12 subjects form a group and play prisoner’s
dilemma game for 40 or 20 rounds with random matching in each round. The four
treatments are constructed on two factors: whether information on opponents’
past decisions and their previous opponents past decisions are available
through request, and whether an outside option (quitting the game) is allowed.
Our experimental results show that with or
without the outside option, information on opponents’ history can significantly
improve the rate of cooperation. This effect is realized through the following
mechanism: Subjects are more likely to cooperate with those who have a history
of cooperation. Thus, those who usually cooperate will get a high cooperation
rate in return. Therefore, to get higher earnings, those who would not
cooperate without information on history now choose cooperation to build a good
reputation. Towards the end of the game, the reputation building incentive
dries out and the rate of cooperation falls to the level in treatments without
information.
In treatments with outside option, the rate of
cooperation is slightly higher, but the difference is not statistically
significant.
Keyword: Experiment, Prisoner’s Dilemma,
Information, Cooperation
Co-author(s): BUCHAN,
Abstract: Although recent developments in
evolutionary theories offer sound accounts of large scale cooperation, the
actual patterns this takes in today’s societies remain unexplored. Large-scale
co-operation is likely shaped by parochialism – a preference for favouring
members of one’s ethnic, racial or language group. We suggest that
globalization – the increasing interconnectedness of people worldwide –
broadens the boundaries defining the group(s) to which individuals perceive
they belong. We analyse the relationship between globalization and individual cooperation
with distal others in multi-level public goods experiments conducted on general
population samples within the United States, Italy, Russia, Argentina, South
Africa, and Iran. We show that as country and individual levels of
globalization increase, so too does individual cooperation at the world level
vis-à-vis the local level. We also show that social identity mediates this
relationship. This indicates that ‘globalized’ individuals draw broader group
boundaries than others, eschewing parochial motivations in favour of
cosmopolitan ones. Globalization may thus be fundamental in shaping
contemporary large-scale cooperation.
Keyword: Globalization, cooperation, social
identity
Co-author(s):
PHAN, Denis (GEMAS & University
Abstract: A
large body of literature in experimental economics is concerned by cooperative
behavior in a public good context. Several factors are considered important for
sustaining cooperative behavior. These are, among others, the net gain from
cooperation, privacy of decision, social disapproval or the existence of a
punishment mechanism. We discuss the impact of these features on cooperation in
the framework of a single model. More specifically, we consider that
individuals support some moral costs deviating from the cooperative behavior. A
game theoretical framework enables us to identify a polymorphic equilibrium in
which cooperators and defectors coexist. Players with high moral costs
cooperate while those with low moral costs defect. The equilibrium with
cooperative behavior depends on the distribution of moral cost in the society.
We show how the attractiveness of the group, the gain from cooperation or the
distribution of moral cost affects the equilibrium probability of cooperation.
More generally we introduce the notion of emotional game which is a Bayesian
game with individual types given by moral costs where the utility function of
an individual depends on the deviation from a prescribed action (an implicit
norm).
Keyword: Norms,
collective action, emotions, cooperation, psychological games, population
games.
Co-author(s):
VESELY, Filip (University of Wisconsin-Milwaukee); YANG, Chun-lei (Academia
Sinica,
Abstract: We
investigate the scope and patterns of cooperation in voluntary and thus
potentially long-term bilateral partnerships. In our experiment, subjects must
first play a prisoner’s dilemma game and then decide if they want to continue
playing the game with the same partner for at least one more period or with a
new counterpart. A separation can be unilaterally determined by one of the two
partners and as such long term partnerships must be formed endogenously by
mutual agreement. We observe decisions consistent with simple unconditional cooperation
or defection strategies as of Rob and Yang (2005), as well as with more complex
strategies with trust-building periods of Fujiwara-Greve and Okuno-Fujiwara
(2007). We find that because the conditional cooperation payoff-dominates the
unconditional defection, the threat of unilateral separation serves as a
discipline device for cooperation in the long-term.
LUNCH 12:30 – 1:30pm
SESSIONB1 ETHICS, CORRUPTION AND PIRACY
Chair: Anna MAFFIOLETTI
Abstract: This
research analyzes perceptions of unethicality when performed through an
intermediary, especially when there is evidence to suggest the intermediary is
not the source of culpability. We have three main experimental results. First,
we find that study participants punish a principal less when an unethical
action is performed by an intermediary; more specifically, although punishment
of the principal always increases when less money is sent in a dictator game,
it increases less when the allocation decision is made by an intermediary.
Second, the punishment dynamics are no different for subjects who previously
played the game as a principle. And third, 90% of the principles use the
intermediary rather than take the action themselves, correctly predicting that
using an intermediary is the profit-maximizing strategy. That is, subjects
correctly expect punishment to be less when they extract rents through an
intermediary, but they are themselves none the wiser when it is their turn to
punish. Together, the results show that it can be profitable for a public
relations-sensitive firm to hire an intermediary to perform an unethical
behavior on its behalf - a notion we call "Strategic Intermediation".
Moreover, this result is robust to learning and thus more generalizable to a
market setting.
Co-author(s):
BARR, Abigail (
but not the
graduate students in our sample, would engage in bribery with reference to the
level of corruption prevailing in their home countries. We conclude that
corruption is, in part, a cultural phenomenon.
Abstract: Working
with a sample of students from over 30 countries, including some of the most
and least corrupt in the world, in November 2005 we run an experiment in which:
“private citizens” had to decide whether and how much to offer “public
servants” in exchange for corrupt services; “public servants” had to decide
whether and how much to accept; and offered and accepted bribes did harm to
other members of society. We could predict who, among the undergraduate
students, but not the graduate students, in our sample would offer bribes with
reference to the level of corruption prevailing in their home countries. In
November 2007 we run a new bribery experiment involving a new sample of
students from over 20 countries, including again some of the most and least
corrupt in the world. By pooling the 2005 and 2007 experimental data, and
looking at different sub-samples, we can still predict who, among the
undergraduate
Keyword: corruption,
experiment, culture, social norms
Co-author(s):
MIGHELI, Matteo (
Abstract: The
strategy of suing consumers for copyright infringement when they illegally
download music adopted by major recording companies is premised on the
assumption that actual suit raises the price of downloading and dissuades use
of downloads in favor of legal CDs. This experiment suggests that this
assumption is questionable since a market for downloaded and copied music
exists despite the fact that it is costless to copy, absent the prohibitions of
copyright law. Consumers are willing to pay a non-zero price for a downloaded
or copied music file, a price in general quite a bit below their willingness to
pay for a CD, but quite a bit more than what would be expected for a product
that can be obtained at zero cost. To prove this, we asked our participants
their wtp for original and burned CDs using hypothetical as well as real
choices. We compare our results with the usual market pricing and we explore
infringing behaviors in order to verify if an increase in lawsuits is effective
in reducing infringing activities and raising legal demand. In the experiments
and in the surveys we also asked subjects questions about their ethical
attitudes toward burning CD and awareness about present legislation. Comparing
WTP prices with this more behavioral question we found that perceptions about
illegality of burning CD positive influence WTP for original CD and negatively
influence WPT for burned CD. Moreover , the declared WTP is influenced by
gender age and income. These results can be very important to infer useful
consideration in order to redefine public policy towards piracy more
effectively.
SESSION
B2 COMPETITION
Chair:
Marie Claire VILLEVAL
Co-author(s): REQUATE, Till (
Abstract: Laboratory experiments in Economics
are often criticized for using students as subjects. The criticism is “whether
the observe sample can be informative on the behavior of the population” (
The literature in experimental economics
provides contradicting evidence on the effect of subject pool selection on
behavior. On the one hand, numerous studies reviewed by Ball and Cech (1996)
show only little evidence of subject pool effect between students and market
professionals. On the other hand, Fehr and List (2004) find that CEOs are
considerably more trusting and exhibit more trustworthiness than students in a
trust game conducted in
Since 1959 quantity-setting (classical Cournot)
oligopoly is of major interest in experimental economics, since then, numerous
studies have been published in the area. However, until now Cournot oligopoly
experiments were not conducted with managers. This study aims at filling that
gap. In particular, the motivation of this study is to learn whether managers
behave differently than students in the context of Cournot oligopoly. In
addition, we test whether cultural differences (Malaysians vs. Germans) affect
subject’s performance.
An interesting result in a study by Huck et al.
(2004) is that in Cournot triopoly the Nash equilibrium is a good predictor for
the firm’s behavior. Our experiment replicates the design of Huck et al. (2004)
for the triopoly case, yet, for different subject pools (hence, the experiment
consists of three treatments: with German students, with Malaysian students and
with Malaysian managers).
33 middle-level managers mainly from small and
middle size industries, such as plastic and textile, but also from financial
institutions such as banks, in the region of Penang, Malaysia, participated in
the treatment conducted at the Universiti Sains Malaysia campus. In addition,
39 Malaysian students participated in the treatment conducted at the Universiti
Sains
We find that subject’s selection does matter.
The behavior of German students (from the
Averaging quantities across individuals at each
time period yields that the mean and median quantity of the Malaysian students
at each time period is significantly larger than in the other two treatments.
In addition we find that German females are significantly more cooperative than
German males. Nevertheless, we do not observe significant gender effect in the
Malaysian treatments.
Keyword: artefactual field experiment, Cournot
oligopoly, managers, noncooperative behavior
Co-author(s):
FEHR, Dietmar (
Abstract: Contest
designers are frequently concerned with a trade-off between contest homogeneity
and including contestants with high valuations. Based on the theoretical
analysis by Clark and Riis (AER 1998), we experimentally investigate how two
different distribution mechanisms for multiple prizes (simultaneously and
sequentially) can solve this trade off. We find that contestants considerably
overexert, while the degree of heterogeneity has only little influence on the
overall performance. Contestants with low valuations tend to drop out in both
mechanisms. However, unlike the theoretical prediction this drop out is less
severe when prizes are distributed sequentially. Whereas in the simultaneous
distribution mechanism the contestants' sensitivity to the valuations is
qualitatively well described by theory, in the sequential distribution
mechanism the contestants do not seem to fully capture its strategic aspects.
The behavior in both distribution mechanisms is also prone to individual
characteristics such as gender and risk aversion.
Co-author(s):
KUHN, Peter and CHARNESS,
Abstract: In
an environment with imperfect information about the employees’ ability, the
ratchet effect is predicted to occur when firms who choose a low output
standard in period one are tempted to switch to a higher output standard in
period two if their worker chooses a high first-period output, thus signalling
he has high productivity. Anticipating this, high-productivity workers might
choose to ‘masquerade’ as low productivity workers in the first period. This
generates inefficient pooling at the low output level in the first period.
However, Kanemoto and MacLeod (1992) have shown theoretically that the
competition among firms can prevent incumbent firms from exploiting
high-productivity workers who reveal their type in the first period. We have designed
a laboratory experiment to measure the influence of competition on the impact
of the ratchet effect. Our results are compelling. First, we provide evidence
of the ratchet effect and of strategic dissimulation by high-skilled employees.
Second, we show that the ratchet effect is not robust to the introduction of
competition between firms even when outside firms do not observe workers’
first-period outputs. Third, in a symmetric environment, we find that
efficiency is also increased when there is a competition between agents. Most
likely, this is because workers are less sure they will be matched with the
same firm in the future, reducing their incentives to hide their type from
their current employer. Firms however impose the high standard more than they
should rationally do, probably due to the overestimation of their probability
to be matched with a high-type agent.
SESSION B3 AUCTION I
Chair: Ernan HARUVY
Co-author(s): BROOKS, Peter (Barclays Wealth);
LOOMES, Graham and SUGDEN, Robert (
Abstract: Several studies have recently
reported that anomalies commonly observed in one-shot decision experiments tend
to be reduced in repeated markets. This finding has been interpreted by some
commentators as a confirmation of markets’ ability to promote the truthful
revelation of preferences. Contrary to this interpretation, there is now some
experimental evidence suggesting that instead of revealing pre-existing
preferences, market procedures may shape them. Bids tend to be influenced by
announced market prices in repeated Vickrey auctions (Knetsch et al., 2001;
Loomes et al., 2003) and irrelevant pieces of information are found to have
persistent effects on valuations (Ariely et al., 2003). In this paper, we
report on an experiment designed to address two important issues about the
demand-revealing properties of Vickrey auctions. The first is whether it is
possible to shape valuations by manipulating the price feedback. The second is
whether the effects of induced price feedback and anchoring manipulations are
removed by repetition of the market. When we use induced feedback, we find
significant shaping effects: valuations are strongly pulled towards the market
price. This effect is stronger when the price feedback is high than when it is
low. When this manipulation is removed, we find that these effects decay
somewhat, but persist overall, especially when the price feedback is relatively
low. Similarly, the effect of anchoring manipulations survives repeated market
exposure, and appears to be reinforced by the group-specific feedback. Overall,
our data suggest that market prices have a strong impact on shaping individuals’
valuations in the direction of theoretically irrelevant cues, raising serious
doubts about the ability of repeated markets to lead to truthful revelation of
preferences, and questioning the very existence of preferences as economists
usually interpret them.
Keyword: WTA-WTP disparity, shaping, Vickrey
auctions, price sensitivity
Co-author(s): BENZION, Uri (The Ben-Gurion
University); SHAVIT, Tal (The
Abstract: This experimental study uses two
auction mechanisms – the Second-Price-Auction and the BDM mechanism – to
examine buying and selling bidding patterns of individuals in two types of
binary lotteries: a pure lottery that includes only real products (two types of
mugs), and a mixed lottery that includes both real products (mugs) and a
monetary value outcome. The results show that subjects' WTP and WTA for the
pure lottery do not differ from the calculated expected value of this lottery
(based on subjective individual biddings for each mug). In contrast, subjects'
bidding prices for the mixed lottery are lower than the calculated expected
value of the lotteries. These results may suggest that for pure lotteries,
which include real product, individuals exhibit a neutral risk attitude, while
for mixed lotteries individuals exhibit a risk-averse attitude. These results
are consistent with both the expected utility model and the prospect theory.
Keyword: WTA, WTP, Auction, Lotteries.
Co-author(s):
KATOK, Elena (
Abstract: We
investigate on-line procurement auctions in which suppliers bid based on price,
but buyers do not commit to awarding the contract to the supplier who submitted
the lowest bid. In designing these auctions buyers must decide on the amount of
price visibility during the auction, as well as on the amount of the
transparency of the buyer selection criteria. In terms of price visibility we
consider two extreme cases: the sealed bid request for proposals (RFP), and the
open-bid dynamic reverse auction event. In terms of buyer selection
transparency we also consider two extreme cases: a setting in which all
suppliers know the non-price attributes of all other suppliers, as well as the
buyer’s trade-offs between those attributes, and the case in which suppliers
know only their own non-price attributes, but not those of their rivals. We
find that the RFP format is consistent in generating higher buyer surplus
levels than does the open-bid dynamic format. This advantage is independent of
the information transparency. In contrast, the open-bid format is highly
sensitive to information transparency, generating significantly lower buyer
surplus levels when the information about all non-price attributes is made
public.
Keyword: Bidding,
Procurement, Reverse Auctions, Multi-Attribute Auctions, Behavioral Game
Theory, Experimental Economics
SESSION B4 DECISION MAKING
Chair: Graham LOOMES
Co-author(s): HOLLARD, Guillaume (
Abstract: Simple exchange experiments have identified that participants
trade their endowment less frequently than standard demand theory predicts.
This implies that subjects are likely to miss beneficial trades. List (2003)
finds that experienced dealers acting on a well functioning market are not
subject to the “endowment effect”. This does, however, require very high levels
of experience, which suggests that the market is a rather poor teacher. We
argue that two types of uncertainty can lead to an “endowment effect”, choice
uncertainty and trade uncertainty. Markets should be good teachers to reduce
choice uncertainty, but not trade uncertainty. We design an experimental
framework to test for the importance of trade uncertainty, while controlling
for choice uncertainty. We find that a few rounds of training, using a special
procedure to force subjects to give away their endowment, are enough to
eliminate the “endowment effect” in a subsequent experiment. This supports the
view that trade uncertainty is crucial for the “endowment effect”.
Keyword: endowment effect, robustness, experimental economics
Abstract: The endowment effect: the perception
of value changes depending on whether an exchange in the market is perceived as
a loss or a gain, has been a well investigated phenomenon in behavioral experiments.
Previous studies show that even if the property right is arbitrary, the mere
endowment of a good presents to the fortunate owner an increase in perceived
market value.
This paper uses experiments with first and
second-year undergraduates from China, Singapore, Australia and the Malaysia
controlling for race and birthplace to investigate how much of their allocated
inheritance people are willing to pay in order to gain access to a public good,
or prevent the loss of a public good or to just take part in a national
lottery. Public/welfare goods that are examined are unemployment insurance and
hospitalisation benefits. The impact on government’s financing of such public
goods is thus directly compared to in this paper.
Keyword: endowment effect, inheritance,
taxation
Co-author(s):
Prof. PINTO PRADES, Jose Luis (
Abstract: When
individuals take part in decision experiments, their answers are typically
subject to some degree of noise / error / imprecision. There are different ways
of modelling this stochastic element in the data, and the interpretation of the
data can be altered radically, depending on the assumptions made about the
stochastic specification. This paper presents the results of an experiment
which gathered data of a kind that has until now been in short supply. These
data strongly suggest that the 'usual' (Fechnerian) assumptions about errors
are inappropriate for individual decision experiments. Moreover, they provide
striking evidence that core preferences display systematic departures from
transitivity, which cannot be attributed to any 'error' story.
Keyword: Stochastic
specification; imprecision; error; decision theory.
SESSION B5 COORDINATION I
Chair: Timothy CASON
Co-author(s): DEVETAG, Giovanna (
Abstract: Following the path-breaking work by
Van Huyck, Battalio, and Bail (1990), a steady trickle of laboratory studies of
the weak-link game has documented the speedy unraveling toward the worst
equilibria (i.e., coordination failure).
The attention that the weak-link game has
attracted seems owed to the frequent claim that it is an excellent model for a
host of organizational situations (Camerer, 2003; Weber, 2000; Brandts and
Cooper, 2006). Notwithstanding other recent attempts to introduce realism in
the lab (see Devetag and Ortmann, 2007, for a review), concerns about the
external validity of laboratory studies of the weak-link game remain and have
gained new momentum with experimentalists’ rediscovered interest in the
transferability of laboratory data to the wild (e.g., Levitt and List, 2007).
A critical maintained assumption in the
experimental literature is that the choice of cost on a convex or linear
function is a reliable indicator for real effort. However, in actual
organizations, work “involves effort, fatigue, boredom, excitement and other
affections not present in the abstract experiments” (van Dijk et al., 2001:
189).
We introduce a real-effort weak-link game and
report experimental results on how the introduction of real effort affects
coordination under various parameterizations and bonus schemes. Our results
seem in sharp contrast with evidence from previous weak-link experiments; our
subjects were able to overcome initial coordination failures. We relate our
results to the literature.
Keyword: weak-link lab experiments, external
validity, chosen effort, real effort
Abstract: This
paper examines the determinants of strategic behavior in a series of
experimental coordination games. More specifically, we investigate two classes
of 2*2 coordination games: converging interest games and diverging interest
games. Usual approaches used to describe players' behavior in repeated games
postulate adaptive learners who do not take into account strategic interactions.
Previous research (Camerer, Ho and Chong 2002, Ehrblatt, Hyndman, Ozbay and
Schotter 2007, Terracol and Vaksmann 2007) examine the limits of these
approaches and emphasize the fact that players are likely to make good use of
strategic interactions to manipulate their opponents, or in other words,
players might be likely to use strategic teaching. In this paper, we
particularly emphasize elements which trigger such a strategy and make it
successful. More precisely, our treatments vary according two parameters which
are expected to alter strategic teaching. Teaching implies playing an action
which might be suboptimal at a given time but which is likely to make a
preferable outcome emerge in the future. Thus, when players attempt to drive
coordination towards the basin of attraction of a particular equilibrium, they
might take into account, both the cost of deviating from a safer equilibrium
and the improvement of payoffs induced when converging to the equilibrium
selected by the teacher. So we use two parameters corresponding to these two
notions, namely the deviation cost (DC) and the teaching premium (TP), and
design our experiment to test the impact of each parameter on strategic
behavior and on the equilibrium attained. This makes, for each class of games,
four treatments according to the size of each parameter. More precisely, in
each treatment, the DC and the TP can take two different values (High or Low).
Eliciting
players' beliefs using an appropriate quadratic scoring rule, we first show
that players' beliefs, across all treatments, differ from purely myopic proxies
used to describe players' belief formation process in usual approaches.
Moreover players' own past actions significantly explain the difference between
elicited beliefs and myopic proxies, which means that players perceive that
their own actions are likely to impact their opponent's behavior in the future.
In other words, players think more strategically than postulated by usual
approaches. This finding represents a precondition for players to play
strategically through teaching.
Thus, in a
second step, we exhibit the fact that players not only think strategically but
also play strategically in treatments where they are given incentives to do so.
We find particularly strong evidence of strategic teaching in treatments where
the deviation cost is low (i.e. when teaching is relatively less risky) and the
TP is high (i.e. when teaching is relatively more profitable). Indeed, in these
treatments, players are significantly more likely to over respond the action
supporting their preferred equilibrium, i.e. to play this action even if it is
not a best response to their static beliefs. Consistently, this tendency is
significantly weaker when we increase the DC and/or decrease the TP. We find
that usual learning theories are limited to account for players' behavior in
treatments which trigger over responses. Thus, we devise a model which extends
previous models of learning to introduce strategic teaching and find that this
model performs particularly better than learning models to track behavior of
these players who prominently over respond.
Finally, we
examine the consequences of strategic considerations on coordination. Our
results emphasize the fact that teaching significantly impacts coordination so
that tenacious teachers manage to make their preferred equilibrium emerge in
treatments where they are given more incentives to teach. It is worth noting
that these differences in coordination are salient despite the fact that the
games' structure is the same within each class of games.
Keyword: Game
theory, Teaching, Coordination, Beliefs, Experiment
Co-author(s):
LAU, Sau-Him Paul (
Abstract: This
paper studies the evolution of a turn taking norm in a laboratory common pool
resource “assignment” game that is characterized by conflict and incentives for
coordination. The 2x2 stage game has a unique Nash equilibrium in dominant
strategies, but this game is played by pairs of subjects repeatedly for a
random, indefinite horizon. Players can earn considerably greater average
payoffs than the stage game equilibrium payoffs if they take turns earning
asymmetrically greater payoffs. Consistent with a repeated game equilibrium
that features mixed strategies, pairs reach the turn taking path less
frequently when the stage game has a greater degree of conflict. We also find
that subjects’ behavior is strongly affected by their turn-taking experience in
earlier pairings. Turn-taking increases across pairings, and the data provide
evidence about how subjects teach each other to adopt turn-taking strategies
even though they cannot communicate beyond their within-game interaction.
SESSION
B7 ENVIRONMENT II
Chair:
Laurent DENANT-BOEMONT
Co-author(s): TRAUB, Stefan (Universität
Abstract: In this paper, we experimentally
study green electricity customers’ preferences with regard to additionality. We
define additionality as a situation where private demand for green electricity
induces utilities to increase the share of renewables in their total
electricity generation, for example, above the current level or a level
required by law such as
Keyword: green electricity, willingness-to-pay,
public goods
Co-author(s):
MEINHOLD, Gerd (
Abstract: We
design a laboratory experiment that allows for testing unregulated selfish
route choice behavior in a road pricing environment where the introduction of a
road toll may generate network effects or excess burdens that are known from
Braess’s Paradox. We consider three alternative treatments: no tolls (NOT), a
Braess’s Paradox generating toll (BPT), a maximum toll that does not generate
Baress’s Paraodx (MAT). Among other things, our results indicate that the
actual excess burden generated by the BPT treatment is significantly higher
than the excess burdens generated by either the NOT or MAT treatment. We
therefore conclude that road tolls should not exceed the MAT level. To this
extent, our findings have important implications for the optimal design of road
pricing schemes.
Keyword: road
pricing, transport infrastructure, Braess’s Paradox, access burden,
Co-author(s):
HAMMICHE, Sabrina (
Abstract: In
transport economics, an increase in road capacities, by causing shifts from
public transit to private transport, could lead to new traffic equilibrium
where total transport costs are higher. Indeed, by implementing an additional
road capacity (eg a new route or more generally a new transport alternative),
road speed increase, attracting public transit users towards road transport.
Then, as public transit traffic decreases, there is a loss of revenue for
public transit operator, who, in the absence of subsidies, might raise faire or
cut service. This well-known phenomenon has been called “Downs-Thomson” paradox
(Downs, 1962; Thomson, 1977; Mogridge et al, 1987; Mogridge 1990a,b, Mogrigde
1997; Arnott and Small 1994; Jones 2002, Litman 2005).
Although
the possibility of the Downs-Thomson Paradox seems to be well accepted, there
is little in the literature to indicate when it might occur. Holden (1989)
suggests that it may occur "in a city like
The aim of
this paper is to provide empirical support about this famous paradox. To this
end, we build an experiment in which subjects have to choose between two
markets, e. g road and public transit. Our theoretical framework is built upon
a class of coordination games named Market Entry Game (MEG, See Selten and
Guth, 1982). Basically, in a MEG, players have to choose to enter a market or
not to enter: The payoff is a decreasing function of the number of entrants
whereas option to stay out gives a constant payoff. In such games, Nash
equilibriums will give excess entry, implying a social dilemma. Of course, such
games are a very elegant stylisation of congestion process that frequently
occurs in the transport field. Experimental studies about MEG had been numerous
and have yielded evidence to suggest that repeated play leads to coordination
on any type of Nash equilibrium, although in many experiments the average
frequencies of entry in market entry games look remarkably like those generated
by Nash equilibrium play (See Sundali et al., 1995; Erev and Rapoport, 1998;
Rapoport et al. 1998, 2000, 2002; Camerer and Lovalo, 1999; Camerer et al. 2004;
Duffy and Hopkins, 2005; Anderson et al. 2006).
Our
experimental game is a two-stage game where a first mover A (the operator) has
to choose the public transit capacity. Then, given a road capacity that is
fixed exogenously by the experimenter (the planner), subjects B (travellers)
have to choose between road transport (option X) and public transit (option Y).
As in a usual MEG, the payoff from the first market decreases with number of
entrants and increases with exogenous capacity. For the second market (public
transit) things are quite different: The payoff from the second market
increases both with the number of entrants and with the capacity chosen by the
operator, i.e. player A. Thus, entry generates negative externality on the road
market, and, on the contrary, entry generates a positive externality on the
public transit market. At the traffic users Nash equilibrium, the entry rate on
road increases with exogenous capacity of road and decreases with endogenous
capacity of public transit. As the marginal revenue of public transit entry is
less than the marginal revenue of road entry, the optimal strategy for player A
is to fix the lowest possible level for public transit capacity; The Perfect
Equilibrium Subgame corresponds to a situation where player A chooses the
minimum capacity, implying too much entry on road and lack of efficiency for
the transport system (Transport cost is not minimized at the traffic
equilibrium). In such a game, an exogenous increase in road capacity generates
shifts from public transit to road that leads to new traffic equilibrium where
efficiency level is lower.
Our
experimental design consists in groups of 15 subjects with 1 subject A and 14
subjects B. At each period, subjects A and B play a two-stage game where
subject A choose first a capacity level for public transit. Being informed
about A’s choice, subjects B have to choose between two options, X (road) and Y
(public transit). In each session, subjects play 2 treatments of 20 periods
(within-subject design). For some sessions, subjects play first 20 periods of
low capacity for road market and second 20 periods of high capacity for road
market (condition ADD). In other sessions, subjects play first the high
capacity condition during 20 periods and then play 20 periods in low capacity
condition (condition
16 sessions
(8 sessions in the ADD condition and 8 sessions in the DELL condition) of 15 subjects
(namely 240 participants, students from various origins, economists, lawyers,
psychologists, etc.) have been held in LABEX,
Keyword: Coordination,
Market Entry Game, Traffic Congestion, Welfare.
SESSION B8 RECIPROCITY
Chair: Luca STANCA
Abstract: In
this paper we examine experimentally the role of intentions and effort on the
perceived kindness of an action and the reciprocating behaviour of the receiving
subject. We test experimentally the hypotheses that an action is perceived to
be more kind if (a) it is intentional and (b) it is costly. As a consequence,
for a given outcome, reciprocity is expected to be stronger in response to
actions that are perceived to be intentional and or costly. We consider a
two-player sequential move symmetric gift-exchange, with four treatments in a
between-within design. The first treatment, used as a benchmark, is a standard
direct reciprocity setting, in which A's action is intentional and costly.
Treatment 2 removes intentions by making common knowledge for all subjects that
A's choice is determined exogenously and randomly. In this treatment A's action
is therefore costly but not intentional. Treatment 3 removes cost-effort by
making common knowledge for all subjects that A subjects will be compensated by
the experimentar for the amount sent, so that they will not bear any cost. In
this treatment A's action is therefore intentional but not costly. Treatment 4
removes both intentions and cost-effort by making common knowledge for all
subjects that A's choice is determined exogenously and randomly, and that A
subjects will be compensated by the experimenter for the amount sent, so that
they will not bear any cost. In this treatment A's action is therefore neither
intentional nor costly. The four treatments therefore differ with respect to
the presence-absence of intentions and costs of the first mover, whereas the
outcome of the first mover's action is kept constant across treatments. Our
results indicate that both effort and intentions significantly affect the
perceived kindness of an action. The results also indicate that effort, more
than intentions, is what makes an action kind and elicits stronger positive
reciprocity.
Keyword: Reciprocity,
Effort, Intentions, Laboratory Experiments. JEL codes: D63, C78, C91.
Co-author(s): SALZ, Tobias (
Abstract: This article reports on a field study
that has been conducted in the online computer game Word of Warcraft. In a
simple gift exchange game, players (who are unaware that they participate in an
experiment) are asked to fish in exchange for gold coins, which they received
in advance. We test for the effect of social status on reciprocation rates
among participants. We find solidarity among players with low social status:
Low status players send significantly more fish when they received the gold
coins from a character with a low social status. Generous salaries upfront,
however, eliminate the solidarity effect.
Keyword: field experiment, reciprocity,
solidarity, status, virtual world
Abstract: This
paper presents an experimental investigation of strong indirect reciprocity. We
examine both generalized indirect reciprocity (if A helps B then B helps C) and
social indirect reciprocity (if A helps B then C helps A) in a setting where
reciprocal behavior cannot be explained by strategic motivations, using a
treatment for direct reciprocity as a benchmark. We use a variant of the
strategy method to control for differences in first movers' actions across
treatments. We find evidence of strong reciprocity within each treatment, both
for strategies and decisions. Generalized indirect reciprocity is found to be
significantly stronger than social indirect reciprocity and, interestingly,
than direct reciprocity. This finding is interpreted as reflecting the
relevance of first movers' motivation for second movers' reciprocal behavior.
Keyword: Reciprocity,
Cooperation, Microeconomic Behavior, Experimental Economics. JEL codes: C72,
C91, D01.
Break 3:00-3: 30pm –
Atrium
SESSION C1 INCENTIVES I
Chair: Bernd IRLENBUSCH
Abstract: Many
previous experiments suggest that people exhibit "relative thinking":
they often consider relative price differences even when only absolute price
differences should matter. The article reports the results of an experiment
that tests whether relative thinking exists in a context never explored before,
of task performance with mixed compensation schemes that include both fixed and
pay-for-performance components. Such compensation schemes are prevalent in many
occupations (for example salespeople and managers) and therefore the article
addresses an important practical issue. Surprisingly, relative thinking
disappears in this context: the ratio between the pay-for-performance
compensation and the fixed compensation does not affect effort. To test whether
the different context or the introduction of financial incentives (which were
not used in previous studies of relative thinking) is the reason that relative
thinking disappears, a hypothetical condition where subjects make similar
decisions but without incentives was run. Relative thinking was not documented,
suggesting that in the context of task performance people do not exhibit
relative thinking regardless of financial incentives. The article therefore
contributes both to the literature on relative thinking and to the area of
personnel economics and designing incentive schemes in firms.
Keyword: Relative
thinking; Experimental economics; Compensation schemes; Task performance;
Behavioral economics; Judgment and decision making; Pay-for-performance
Abstract: This paper reports on the results of
an experiment testing whether the agents self- select between a competitive
payment scheme and a revenue-sharing scheme depending on their inequity
aversion. Average efficiency should be increased when these payment schemes are
endogenously chosen by agents. We show that the choice of the competition is
negatively affected by disadvantageous inequity aversion and risk aversion. In
the second half of the experiment, the effect of individual preferences is
indirect through the effect of past results. The self-selection of agents
increases the efficiency of the competitive scheme but not that of the
revenue-sharing scheme, due to a heterogeneity of behaviors.
Keyword: performance pay, incentives,
self-selection, inequity aversion, competition, revenuesharing scheme
Co-author(s):
SLIWKA, Dirk (
Abstract: We
study the connection between goal setting and incentives. A principal agent
model is investigated in which the agent gets a reward only if his performance
attains a certain goal. It is shown that up to a certain threshold level higher
goals lead to higher effort levels but that the agent exerts no effort when the
goal is beyond this threshold. Effort levels are increasing in the reward but
non-monotonic in the variance of the agent’s performance. These theorectical
results are then tested in an experiment.
Keyword: Goals,
Target, Incentives
SESSION C2 ELECTRONIC MARKETS
Chair: David REILEY
Co-author(s): MASCLET, David (CREM, Université Rennes 1 and CIRANO); PéNARD, Thierry (CREM, Université de Rennes 1, Marsouin)
Abstract: Several
empirical studies have shown that feedback systems play a key role in
electronic marketplaces like eBay. Feedback exerts a deterrent effect on the
opportunistic behavior of buyers and sellers. The feedback system in place on
eBay is however far from being perfect and has proven especially vulnerable to
strategic ratings (or non-ratings) that reduce the informational content of
feedback profiles. In this study we investigate to what extent the feedback
mechanism may also suffer from both buyer and sellers’ manipulations by
modifying their reputation profile. For example, agents may change their own
profile by changing their email address or by inciting their partner to modify
her evaluation. In this paper we consider these issues by allowing agents to
change with a fixed cost their reputation profile. In particular we investigate
to what extent such opportunity may induce negative effects on the reputation
system. Additionally, we also investigate how such feedback mechanism is
affected by strategic motives for evaluating ones’ partner. In particular, we
investigate in detail the “last minute” evaluations.
Keyword: reputation
mechanism, reputation manipulation, informational content, reciprocity, fear of
retaliation, last minute feedback
Co-author(s): USKE, Tobias
(Max-Planck-Institute of Economics)
Abstract: To study reputation effects and the
underlying mechanisms we establish an experimental setting that introduces an
anonymous and competitive market on which customers and vendors interact,
referring to each other only via the reputation scores of vendors and the
posted prices. Using a reputation mechanism a double premium can be achieved:
lower prices for customers and more trades for vendors, ensuring in total
higher profits for them, hence, higher efficiency as compared to a market
without such a mechanism. The mere application of a reputation mechanism induce
significantly more customers to expect vendors to be trustworthy already in the
very first round. The imposed chance for vendors to demonstrate trustworthiness
is anticipated by customers, increasing their trusting behavior. Contrary to
our theoretical considerations, even though costly, customers post considerable
amounts of reliable feedback. We observe the punishing behavior to be severe,
while the thanking behavior by posting positive feedback was still frequent and
evident. Even though, reputation information induced higher levels of price
competition, resulting in lower product prices, vendors acquired more customers
and realize a reputation premium on prices with more accumulated positive
feedback. Whether vendors acquired a customer heavily depended on the
reputation score, revealing that customers weight negative feedback information
relatively more than positive. Positive reputation does not significantly
increase the vendor's payoffs, but negative decreased it. Even rare negative
feedback suffice to discipline markets. We conclude that competition fosters
trust if the competition can find ways to reliably signal the will to
cooperate. A feedback mechanism, in turn, fosters trust, trustworthiness and
efficiency.
Keyword: reputation mechanism, lemon markets,
trust, trustworthiness, endogenous partner selection, price competition
Abstract: In
a large-scale field experiment, we identify previous customers at a clothing
retailer who are also users of Yahoo! We identify 1.5 million matches between
the two databases, and then assign 80% of the matched individuals to a
treatment group and 20% to a control group. The treatment group, identified
when logged in to the Yahoo network, sees an advertising campaign consisting of
millions of ad views. The control group sees none of the ads in this ad
campaign, nor do any other Yahoo users who happen not to be logged in to the
Yahoo network. We then match data on advertising views for each individual with
purchase behavior at the retail store during and immediately after the ad
campaign. The results show statistically and economically significant returns
to advertising.
Co-author(s): JIMéNEZ JIMéNEZ,
Francisca (
Abstract: In this paper our aim is to study the individuals' rationality
behavior under different incentives schemes bases on a two-person Beauty
Contest Game (BCG). Specifically, we design eight different guessing games
sharing the same structure: Over six rounds two persons simultaneously choose a
number in the [0,100] interval with a partners design. In each round, the
winner is the person whose number is the closest to 2/3 of the average (the
lowest number in a two-person BCG). After each round, subjects receive feedback
information related to the last played round: the individual choices, the
average, the target number, the inner(s) and the own payoffs. We analyze the
impact of three different factors on the individual rationality: price nature,
rivalry in the payments and communication. So, we use a 2 X 2 X 2 design: i)
Fixed/variable payoffs, depending on if the winner gets a fixed or variable
prize. ii) Rival/Non rival payoffs, with regard to if the prize is shared among
winners or each one receives the full prize in case of a tie. iii) No
communication/Communication, whether subjects are not allowed to communicate
between them or if one can send a choice proposal to her partner before choice
is made.
A preliminary analysis permits us to say that: 1) As usual in the BCG
experiments, the individuals' behavior is quite different to the theoretical
prediction: only 12 % of choices were equilibrium over the whole experiment.
2) We find statistically significant marginal effects for two of our
three design variables: prize nature and payment rivalry. Both of them
influence negatively on the individual elections. Moreover, there is a
significant decreasing trend of choices over time provoked by the four
treatments with fixed payments.
3) The no existence of communication effect may be due to the fact that
only about 30 % of people use the communication mechanism. As we expected, the
treatment with variable and non-rival payoffs where a greater number of essages
are sent (about 70 % of cases).
Keyword: rationality--- beauty contest game --- fixed/variable payoff
--- communication --rival/no rival payoffs
Co-author(s): HEINEMANN, Frank (TU Berlin)
Abstract: Some recent theoretical papers
following Morris and Shin (2002) have emphasised the role of agents'
overreaction to public information in beauty contest games, which leads to
reconsider the benefits from transparency. We present an experiment on a beauty
contest game that is characterised by both fundamental and strategic
uncertainty: agents receive public and private information about a fundamental
state. They have an incentive to choose actions that are close to the
fundamental state but they also have an incentive to coordinate their actions.
We find that, in line with theoretical predictions, subjects put a larger
weight on the public signal. However, the weight is smaller than theoretically
predicted. These weights can be explained by limited levels of reasoning. In
the extreme case of a pure coordination game (without incentive to meet
fundamentals) subjects still use their private signals, which prevents full
coordination. These results indicate (i) public information is less detrimental
to welfare than predicted by theory, (ii) providing private information matters
and is eventually reducing welfare, even though it is intrinsically irrelevant
to choices.
Keyword: coordination games, strategic uncertainty,
private information, public information
Co-author(s):
NAGEL, Rosemarie (Universitat Pompeu Fabra)
Abstract: We
used functional magnetic resonance imaging (fMRI) to investigate human mental
processes in a competitive interactive setting - the “beauty contest” game.
Actual choices revealed different levels of iterated reasoning, “what I think
that you think that I think”, about what players expect the others to do.
Highlevel reasoning and a measure of strategic IQ correlate with the neural
activity in the dorsal and ventral medial prefrontal cortex, areas associated
with third person perspective-taking and thinking about others as ‘like me’.
This pattern of neural activity suggests that high-level strategic reasoners
considered other players as similar to themselves and used cognitive skills to
predict others’ thinking and behaviour, while low-level reasoners used a simplified
model of other players. This supports a cognitive hierarchy model of human
brain and behaviour, a manifestation of bounded rationality.
Keyword: Neuroeconomics,
Beauty Game Theory, Contest, fMRI, Level of reasoning
SESSION
C4 INNOVATION
Chair:
Donja DARAI
Abstract: This paper reports the results of
patent race experiment with zero-intelligence players and differences to
earlier studies with same design. A modified design, where subjects play
against `known' computer, is introduced and implemented. The strategy of
zero-intelligence players is pre-determined and is independent of subject's
strategy. Two different strategies, fixed and random, are examined in paper.
Results of this experiment show that by controlling other human player out of
experimental design we end up to more consistent results from theoretical point
of view. However, the Harris and Vickers (RES, 1987) theory does no longer
apply as such, so modification can be categorized as a critical experiment and
a stress test for the theory. Preliminary results suggest that experiment is
successful and we can generalize results and elaborate theory further. Although
there are some differences and random variation between experiment and earlier
studies the overall results are basically in line with previous designs and
earlier studies. Earlier replication study with similar design can be taken as
control to see how this `treatment' affects experimental setting. The
characteristics of experimental data seems to be rather similar in general
compared to previous replication experiment.
Keyword: experimental design, patent races,
critical experiment
Co-author(s): ØSTBYE, Stein E. (
Abstract: This paper uses experimental
methodology to study how firms share information in an uncertain innovative
environment. Firms are endowed with an initial allocation of information and
make R decisions to add to their knowledge where the greater the accumulated
knowledge, the higher the probability that the innovation will be successful.
Once the R decision is made, firms compete in the product market. Theoretical
work by Clark and Østbye (2007) suggests that tough product market competition
and initial asymmetry in terms of knowledge tend to lead to less cooperation
and more R, while soft competition and initial equality lead to more
cooperation and less R. .
In the experiment subjects are randomly paired
to form an industry. The industry is endowed with an allocation of initial
knowledge that is either divided equally between the two subjects or allocated
entirely to one of them. Subjects are informed of the degree of product market
competition for the period as well as any sharing rules that are in place –
sharing of initial knowledge, sharing of new knowledge that comes from
subjects’ R decisions, neither or both. Subjects are then asked to make an R
decision for that period. Once all R decisions have been made and information
has been shared (if appropriate) a subject is informed of their total level of
knowledge, which is the sum of their initial knowledge (endowment), new
knowledge (R) and any knowledge gained through sharing. A random draw is
compared to this total knowledge level to determine if the subject’s innovative
effort is successful and payoffs are reported.
Preliminary results support most of the
theoretical predictions for both R levels as well as profitability. R levels
fall as product market competition gets tougher and as the amount of sharing
increases. In addition, levels of R investment (aggregated across treatments)
closely match the Nash prediction. Profits comparisons across treatments
largely match the theoretical predictions from a qualitative perspective,
though the overall level of profitability in the various treatments is much
lower than the Nash prediction.
Co-author(s):
GROßER, Jens (
Abstract: This
paper investigates the effects of patents and subsidies on R investment
decisions. The theoretical framework is a two-stage game consisting of an
investment and a market stage. In equilibrium, both patents and subsidies
induce the same amount of R investment, which is higher than the investment
without governmental incentives. In the first stage, the .firms can invest in a
stochastic R project which might lead to a reduction of the marginal production
costs and in the second stage, the .firms face price competition. Both stages
of the game are implemented in a laboratory experiment and the obtained results
support the theoretical predictions. Patents and subsidies increase investment
in R and the observed amounts of investment in the patent and subsidy treatment
do not differ significantly across both instruments. Observed prices in the
market stage converge to equilibrium price levels.
SESSION C5 COORDINATION II
Chair: Klaus ABBINK
Co-author(s): PAICHAYONTVIJIT, Tirnud (
Abstract: We use experiments to investigate how
to resolve coordination failures in a stag-hunt type coordination game with multiple
Pareto-ranked equilibria, often referred to as a “weak link” game.
Specifically, we focus on a modified version of the minimum effort coordination
game studied by Van Huyck, Battalio and Beil (1990), which has seven
Pareto-ranked equilibria. Participants routinely find it difficult to
coordinate to the payoff-dominant outcome in this game.
We study two types of interventions: (1) a
“credible assignment”, which is a nonbinding pre-game announcement made by an
external arbiter instructing the players to adopt a particular strategy. A
strict equilibrium in a game is defined as an assignment to each player of a
strategy that is a unique best response for him when the others use the
strategies assigned to them. A credible assignment has the desirable property
that the prescribed behavior is individually rational and mutually consistent.
(2) We also look at a “performance bonus”, which provides an additional payment
given to the players every time they manage to coordinate to the
payoff-dominant outcome.
We look at performance in both fixed and
randomly re-matched groups. Prior studies looking at behaviour in the minimum
effort game have tended to focus on fixed groups, conceivably because such
coordination problems are endemic to groups whose composition remains unchanged
over time. But a number of group interactions in real life are better modeled
as one-shot, or at least, short-lived, interactions. Thus random re-matching is
better protocol to study the behaviour of these latter groups.
We find that an assignment to the
payoff-dominant outcome is successful in resolving coordination failures with
fixed groups, as long as this assignment is distributed to players in a way
that makes it “common knowledge”. Resolving coordination failures is much
harder with randomly re-matched groups and can only be achieved with the
payment of performance bonuses but not with an assignment.
Keyword: Weak-link games, Coordination,
Assignments, Performance Bonus, Experiments
Co-author(s): IRLENBUSCH, BERND (
Abstract: Coordinating the actions of people is
one of the utmost challenges of leaders in organisations. Following an
innovative experimental approach by Weber (2006) we investigate whether the
example of a leader might increase coordination efficiency in a weak-link game
in which the group is sequentially enlarged by new entrants who are not aware
of the group's history. The results show that the leader's example indeed helps
the group to better coordinate. However, it does not prevent efficiency from
going down over time if feedback on previous coordination levels is provided.
Co-author(s):
BOSMAN, Ronald (De Nederlandse Bank); HEIJMANS, Ronald (De Nederlandse Bank);
VAN WINDEN, Frans (
Abstract: High-value
payment systems are operated by central banks to facilitate payments between
banks during a day. A bank can choose the time of the day in which it makes its
payments. In an efficient equilibrium all banks pay their obligations
immediately in the morning, since delaying payments inflicts costs. However, if
a bank does not receive payments then the best response is to delay, as
fulfilling its own obligations can be ruinous lacking liquidity. Thus one
obtains co-ordination game with two equilibria – the efficient one mentioned
above and an inefficient, but risk-dominant equilibrium in which all banks
delay payment. We analyse how high-value payment systems handle disruptions
through external shocks like 9/11, during which some banks might be forced to
delay payments. In a laboratory experiment we observe that the efficient
equilibrium is robust except for very high probability of disruption. In the
aftermath of a crisis players return to the efficient equilibrium almost
instantly.
Keyword: Payment
systems, co-ordination games, external shocks
SESSION C6 FEEDBACK
Chair: Anders POULSEN
Co-author(s): KUHNEN, Camelia (
Abstract: We investigate the role of
self-esteem, generated by private feedback regarding relative performance, on
the behavior of agents working on a simple effort provision task for a flat
wage. We isolate the impact of learning one's rank in the group on one's
behavior from any social status, reputation, strategy-updating or peer effects.
Feedback has both ex-ante and ex-post effects
on the productivity of workers and on the dynamics of social hierarchies.
Agents work harder and expect to rank better when they are told they may learn
their ranking, relative to cases when they are told feedback will not be
provided. After receiving feedback, individuals who learn that they have ranked
better than expected decrease their output but expect an even better rank in
the future, while those who were told they ranked worse than expected increase
their output and at the same time lower their rank expectations going forward.
These effects are stronger in earlier rounds of the task, while subjects learn
how they compare to their peers in terms of output produced. This rank
hierarchy is established early on, and it remains relatively stable later in
the task. Private information regarding relative standing helps create a
ratcheting effect in the group's average output. This ratcheting effect
(working harder over time) is mainly due to the fight for dominance at the top
of the hierarchy.
These results suggest that moral hazard can be
mitigated by optimally providing feedback to agents regarding their relative
performance, and by changing the reference peer group to take advantage of the
dynamics of social hierarchy effects on productivity.
Keyword: feedback, tournament, ego utility,
ranking, moral hazard
Co-author(s):
GüRTLER, Oliver (
Abstract: Most
real-world tournaments last for a certain period of time which implies that
intermediate performance information of competitors may become available during
the contest. We analyze under which circumstances the principal will disclose
intermediate information on the performance of the competing agents. In our
setting, the principal may decide on the strategy that is optimal for her ex
post, i.e. she cannot commit to giving feedback ex ante or not. In equilibrium
the principal reveals intermediate information if the performance difference is
not too large. The hypotheses derived from our model can mostly be confirmed by
the experimental findings.
Keyword: Tournament,
Commitment Problems, Feedback, Experiment
Co-author(s):
VILLEVAL, Marie-Claire (GATE-CNRS,
Abstract: This
paper experimentally investigates the impact of different pay and relative
performance information policies on employee effort. We explore three
information policies: No feedback about relative performance, feedback given
halfway through the production period, and continuously updated feedback. The
pay schemes are a piece rate payment scheme and a winner-takes-all tournament.
We find that, regardless of the pay scheme used, feedback does not improve
performance. There are no significant peer effects in the piece-rate pay
scheme. In contrast, in the tournament scheme we find some evidence of positive
peer effects since the underdogs almost never quit the competition even when
lagging significantly behind, and frontrunners do not slack off. Moreover, in
both pay schemes information feedback reduces the quality of the low
performers’ work.
Keyword: Performance
pay, tournament, piece rate, peer effects, information, feedback, evaluation,
experiment
Plenary Session
Location:
Main Lecture Hall
SESSION D1 PUBLIC GOOD I
Chair: Ananish CHAUDHURI
Co-author(s): BOUGUERARA, Douadia, (INRA, Structures et Marchés Agricoles, Ressources Territoires); GROLLEAU, Gilles (INRA-SUPAGRO); IBANEZ, Lisette (INRA, Economie Forestière)
Abstract: When asked to pick which of the two
states of the world they would prefer to live in (A: Your current early income
is $55,000; others earn $25,000 or B: Your current early income is $100,000;
others earn $200,000 ) 56% of respondents preferred a world in which they had
half the real purchasing power, as long as their relative income position was
high (Solnick and Hemenway, 1998). In other words, some people care for their
relative position. Although such motivations for purchase have been identified
early (e.g., Veblen, 1899; Hirsch, 1976; Frank, 1985; Alpizar et al., 2005),
theoretical and empirical investigations about their importance in relation to public
goods remain scarce (e.g., Solnick and Hemenway, 2005). We propose an economic
model and an experimental design enabling to reveal the existence of positional
concerns in individuals' contributions to a public good. Individuals may have
(i) positive positional concerns if they gain utility from contributing more
than the average contribution, or (ii) negative positional concerns if they
gain utility from contributing less than the average contribution.
A sizeable theoretical or experimental
literature devotes attention to multiple explanations for positive
contributions to public goods (e.g., warm-glow, reciprocity [Croson, 2007]).
Disentangling positional motivations from other motivations such as reciprocity
constitute a challenge. In our theoretical model of contribution to a public
good, we consider individuals motivated by reciprocity and relative standing.
First, one's contribution may induce (or deter) others in the community to
participate in the public good in the following period (incentive effect).
Second, one's contribution may secure a certain position in the community as
being a larger or lower contributor than the average contributor in the
community (positional effect).
The incentive and positional effects will
interact. Let us suppose that the incentive effect is negative. When increasing
his contribution, individual i will expect a decrease in others' contributions.
Assume further that individual i has simultaneously positive positional
concerns (deriving utility from contributing more than the average
contribution). This will trigger the incentive of individual i to contribute
more, thus inducing others to contribute less and securing a higher position in
the group. On the other hand, if we assume that individual i has negative
positional concerns (deriving utility from contributing less than the average
contribution), this will trigger the incentive of individual i to contribute
less, thus inducing others to contribute more and securing to the individual a
lower position in the group. On the other extreme, suppose the incentive effect
is positive. When increasing his contribution, individual i will expect an
increase in others' contributions. Then, the behavior of individual i will
depend on the magnitude of the incentive effect as compared to the positional
effect.
Experiments in the laboratory provide a unique
setting for controlling the variables of interest of our economic model. We use
two experimental designs: a partner design where individuals are associated to
the same group from period to period and a stranger design where individuals
are randomly re-matched at each period with other individuals to form a group.
While the partner design includes both incentive and positional effects, the
stranger design should include only positional effects. In the stranger design,
individuals will not play with the same other players from one period to
another and will try only to secure a certain position and not to induce a
certain contribution behavior. To investigate these two effects and their We
find empirical evidence of positional concerns in public good games. We find
that (i) There is a significant positive
incentive effect only in the partner treatment. When incentive effects are
present (partner treatment), individuals adapt their contribution according to
the beliefs on how their contribution may induce (or deter) others in the
community to participate in the public good in the following period. (ii) Individuals have positional concerns in
both in the partner and stranger treatments.
(iii)
The positional effect is less important in the partner treatment than in the
stranger one. Positional concerns might be counterbalanced by reciprocity
concerns. In the partner treatment, the individual can adopt punishment or
reward behavior which reduce the positional effect.
Keyword: public good, position, consumer
behavior, experiment
Co-author(s):
MUNRO, Alistair (National Graduate Institute for Policy Studies)
Abstract: Green
and ethical goods are increasingly becoming available in many markets for
conventional goods giving pro-environmentally and pro-socially motivated
consumers a convenient option to contribute to a public good. However, what is
the impact of the presence of these impure public goods for the private
provision of public goods? Does their presence foster or decrease pro-social behaviors?
Based on the expanding experimental economics research on pro-social behavior,
we design an experiment to test how the presence of impure public goods affects
pro-social behaviors. From a theoretical point of view we would expect no
behavioral relevance of the presence of impure public goods. However, we
observe that on aggregate pro-social behavior is reduced when the impure public
good favors the private component. Some individuals do not alter their
decisions, but two fifths decrease their contribution in the presence of the
impure public good. On the contrary, in the case where the impure public good
favors the public good component at the expense of private earnings,
individuals are unaffected in their behaviour. We argue that the self-interested
impure public good serves as an easy moral escape route and allows individuals
to justify acting less pro-socially. Therefore in the presence of ethical goods
which have only a small pro- social component, pro-social behaviors may be
reduced.
Keyword: impure
public goods, ethical goods, green goods, pro-social behavior, social norms,
experimental dictator games
Co-author(s):
PLONER, Matteo (
Abstract: Previous
studies have shown that defaults are likely to influence individual choices.
Defaults are predefined choices which become effective when decision makers do
not take an action to change them. They are often used in dichotomous questions
(e.g., yes/no, accept/not accept), in which one of the options is already
selected. The effect of defaults has been investigated in decisions about
health (Johnson and Goldstein, 2003), participation in marketing programs
(Bellman et al., 2001), and intertemporal transfer of wealth (Choi et al.,
2004). These studies have shown that welfare improvements can be obtained by
manipulating default choices in individual decision making. Our study considers
these implications for welfare in an experimental strategic interaction
setting. In particular, we consider a voluntary contribution game played over
two independent periods. In the first period, alternative default answers are
provided, while in the second period participants can freely choose their level
of contribution. Observations in the first period will inform us about the
power of defaults on cooperative behaviour, while observations in the second
period allow us to identify the persistence of a “default effect”. Cognitive
limits of decision makers may favour the reliance on predefined answers. We
test this hypothesis by using a dual-task procedure to manipulate the cognitive
load of the participants.
Keyword: Defaults,
public good game, experimental economics
Co-author(s):
PAICHAYONTVIJIT, Tirnud (
Abstract: It
is commonly observed that in finitely repeated laboratory public goods games
contributions start at about 40%–60% of the social optimum and decay from there
onwards with increasing free-riding. The reason behind this decay in
contributions over time has been the subject of much study.
Andreoni
(1988) looks at two possible explanations behind this phenomenon of decay –
“learning” and “strategies”. The “learning” hypothesis suggests that
contributions decay because players do not realize that free-riding is the
dominant strategy of the game but learn so gradually over time leading to
contributions dropping off. The “strategies” hypothesis suggests that some
players may realize that free-riding is the dominant strategy but they do not
want to educate their peers about it and hence the more sophisticated players
mimic the others in the initial stages of the game and then bail out and
free-ride towards the end of the game. But Andreoni does not provide a
definitive answer and neither do a number of researchers who have replicated
this study subsequently.
In our
study we appeal to the ideas of “conditional cooperation” and “strong
reciprocity” to suggest that in the presence of reciprocal preferences it is
possible to think about the public goods game as a “coordination problem” with
high contributions being an efficient equilibrium and low contributions being
an inefficient equilibrium with others in between. (Fischbacher, Fehr and
Gachter, 2001; Rabin, 1993). Thus the problem is essentially one of equilibrium
selection.
We elicit
player beliefs regarding the contributions to be made by their peers in the
game and find that these beliefs play a crucial role in determining the
player’s subsequent contributions.
In a
treatment where players do not get to observe others’ contributions till the
very end of the game there is no decay in contributions at all. Participants
who believe that others will contribute 70% or more on average contribute in
the same range on average for the entire duration of play. Similarly those who
believe others will contribute between 40% and 60% (less than 40% respectively)
contribute similar amounts. Hence in the absence of social learning about the
contributions of others there is no decay in contributions.
The fact
that contributions seem to depend more on beliefs about others’ contributions
and not on the availability of signalling opportunities provides evidence
against the strategies hypothesis. Furthermore the fact the contributions do
not decay unless players get to observe the contributions of their peers
provides evidence against introspective learning/learning-by-doing arguments.
In
treatments where players do get feedback about others’ contributions we see the
familiar pattern of decay suggesting that it is social learning that is
primarily responsible for this phenomenon. We find that the contributions by
players possessing different beliefs regarding their peers converge towards the
average contribution in the long run and this is particularly true in
treatments where the players get to observe the contribution of others every
fourth round as opposed to in every round. We also find that those players who
initially contribute higher than the groupaverage decrease their contribution
over time and those who initially contribute lower than the group-average
increase their contribution over time. The overall contributions therefore
decay over time because increases in the contributions by subjects who
contribute below the average do not offset the decrease in contributions by
those who contribute above the average.
We also look
at how subjects update their beliefs about others’ contributions as the game
progresses.
Keyword: Voluntary
Contributions Mechanism, Experiments, Beliefs
SESSION D2 GENDER
Chair: Mats PERSSON
Co-author(s): BOOTH, Alison (
Abstract: Women are under-represented in
high-paying jobs and some recent experimental studies have investigated the
degree to which these outcomes might be explained by gender differences in
feedback preferences, liking for competition, and risk aversion. Why women and
men might have different preferences has been discussed but not tested by
economists. For example, preferences for competition shown by males and a
disinclination for competition shown by females could be due to nurturing from
parents and peers. While the relevant experimental economics literature has
been conducted with college-age men and women attending co-educational
universities, it is well-known that the academic achievement of girls and boys
responds differentially to co-educational environments, suggesting that nurture
might play a role. We therefore sampled a a different subject pool to that
normally used in the experimental economics literature in order to investigate
the role that nurturing might play in preferences for competition. We use
students from years 10 and 11 who are attending either single-sex or
coeducational schools. As in Gneezy et. al. (2003), Niederle and Yestrumska
(2007) and Gupta et. al. (2005), we used paper mazes. Our results indicate that
there are robust differences between the choices made by girls at single-sex
and co-ed schools, and that girls from single-sex schools behave more like boys
even when allocated to mixed-sex groups in the laboratory experiment. This
suggests that observed gender differences might reflect social learning rather
than inherent gender traits.
Keyword: Gender, Competition
Co-author(s): SCHWIEREN, Christiane (
Abstract: Gneezy et al. (2003) offer a partial
explanation for the wage gap between men and women. In an experiment they found
that women react less to competitive incentives. The task they used in their
experiment can however be considered a male task. This allows for an
interpretation of their results as stemming from stereotype threat rather than
from a general behavioural tendency of women. We replicate the experiment and
extend it by a treatment with a gender neutral task. For the male task we
replicate the results from Gneezy et al. (2003), but for the neutral task women
react as strongly to incentives than men. Our findings suggest a stereotype
threat explanation. Women tend not to compete with men in areas where they
(rightly or wrongly) think that they will lose anyway.
Keyword: Gender differences, competition,
stereotype threat
Co-author(s):
YAN, Huibin (
Abstract: To
shed light on the societal influences on gender differences, we run the
dictator game and a competition experiment with the Mosuo, a matrilineal ethnic
minority group in southwestern
Keyword: field
experiment, gender difference, Matrilineal Society, dictator game, competition
Co-author(s):
BOSCHINI, Anne and MUREN, Astri (
Abstract: Is
the difference between men and women a social construct? Formulated in such a
general fashion, the question is almost meaningless. However, a hint of the
answer can be sensed in an experimental setting where we try to find gender
differences in terms of, for instance, egoism and altruism. If such differences
tend to be accentuated by gender stereotyping, this is an argument supporting
the idea of gender as a social construct.
Stereotyping
means gently reminding each participant of his or her gender. In this paper we
use two kinds of stereotyping of the participants in a dictator game: letting
the subjects enter their gender on the questionnaire before making their
dictator decisions, and letting female participants play in one room and male participants
in another. We find that such stereotyping does have an effect as compared to a
control group where the participants sit in a gender-mixed room and enter their
gender after having made their decisions. It turns out that stereotyped med are
more egoistic than men in the control group, while stereotyped women are more
generous than women in the control group.
Regardless
of whether maleness and femaleness are social constructs, they are not
homogenous categories. Each gender is composed of a number of basic personality
types, and it appears that within each gender these types are represented in
different proportions. For instance, among women the “egalitarians” are
significantly more frequent – while among men the “egoists” are more frequent.
And stereotyping accentuates these differences in composition of types.
SESSION D3
BARGAINING
Chair: Jordi BRANDTS
Co-author(s): DE GROOT RUIZ,
Abstract: We study a three-player legislative bargaining game. Point of
departure is a coalitional game where we can use cooperative game theory to
predict outcomes. We vary the environment to create distinct levels of
polarization, which yield varying outcomes with respect to the core and
uncovered set. Then, we introduce two bargaining structures that differ in the
rules they impose on the process of negotiations (one of which is highly
structured, the other lowly). These yield distinct non-cooperative predictions.
We compare the two structures both theoretically and behaviorally (in a
controlled laboratory environment). In the experiment, we observe that
structure matters more than theoretically predicted. Irrespective of the extent
of polarization, outcomes are closer to the median preference when the
bargaining structure is low than when it is high. Moreover, with moderate
polarization the uncovered set does a better job of predicting outcomes for low
structure. The latter result is an indication that coalitional solution
concepts fare better when there is less structure in the bargaining game.
Keyword: bargaining, Nash problem, experiments
Co-author(s): MONTERO, Maria and SEFTON, Martin
(
Abstract: Power indices suggest that adding new
members to a voting body may affect the balance of power between the original
members even if their number of votes and the decision rule remain constant.
Some of the original members may actually gain, a phenomenon known as the
paradox of new members. We show that the paradox can occur as an equilibrium of
a non-cooperative bargaining game based on the Baron-Ferejohn (1989) model of
legislative bargaining. We implement this game in the laboratory and find
empirical support for the paradox.
Keyword: voting, non-cooperative bargaining,
power indices, experiments, paradox of new members
Co-author(s): KAR, Anirban and PROTO, Eugenio (
Abstract: We study experimentally how varying
the fairness with which initial positions are assigned in a bargaining problem
affects individual preferences for distribution. In particular, we introduce
different randomization rules whereby a player can become the proposer in an
ultimatum games (UG), a position conferring a first-mover advantage over the
responder. In the benchmark case, a player has no chance of becoming the
proposer whereas the other player has certainty to become the proposer. In two
other treatments, the less favoured player has, respectively, 1% and 20% of
becoming the proposer – whereas the other player has complementary
probabilities. In the final treatment both players have 50% probability of
becoming proposers – i.e. players have equal initial opportunities. Both
players submit a proposal in the three treatments, and a lottery determines
which is selected. Furthermore, we study two different conditions under which
opportunities to become the proposer are assigned over time. In the fixed role
condition (FRC) a player remains in the same role for all the 20 rounds. In the
variable role condition (VRC) the role is reassigned randomly before each
round, so that the assignment is inter-temporally fair. Interactions were
anonymous and matching followed a stranger random matching procedure.
The results clearly point to the existence of a
discontinuity in the origin of the opportunity spectrum. Allowing a player a 1%
probability of becoming the proposer brings about significantly lower offers
and higher acceptance rates with respect to the benchmark case. As such
probability is raised to 20% and 50%, this same trend continues, but the
effects are generally small. VRC allocations are overall more unequal and less
conflictual than FRC allocations, showing that players react to the
intertemporal fairness of opportunity assignment. Within this condition, the
monotonic pattern is violated in that the 20% setting brings about lesser
conflictuality (and more inequality) than the 50% treatment. We conclude that
subjects in our experiment appear to be motivated mostly by the purely symbolic
aspect of opportunity whereas the actual fairness in the allocation of
opportunities has little effect. Moreover, ensuring equality of opportunities
in all instances may not necessarily be optimal, provided that a subject
disadvantaged today may be advantaged in the future.
Keyword: Fairness, initial opportunity,
inequality, conflict
Co-author(s):
WHITTA-JACOBSEN, Hans Jørgen (
Abstract: We
report results from experiments with an incomplete information bargaining game
with three types of players, for which we completely characterize all Bayesian
equilibria in pure actions. We study how subjects' behavior changes as the
probability distribution of the uncertain parameter is altered. Simple and
easy-tounderstand changes in the distribution of the different players lead to
identifiable “jumps” in the set of equilibria and in the plausibility and
efficiency properties of the different equilibria. Our results are often
consistent with one of the Bayesian equilibria. However, the selected
equilibrium is not always the most efficient one, but one that exhibits a
simple structure.
SESSION D4 ASSET MARKET
Chair: Helena VEIGA
Co-author(s): SPIWOKS, Markus
(University of Applied Sciences
Abstract: Many examples of bubbles
show that market forces alone are not capable to prevent crises in financial
markets. One of the sources of instability may lie in investment behaviour of
economic agents, for example, with respect to portfolio choice. The aim of the
paper is to identify experimentally whether economic agents tend to
underdiversify their portfolios and to examine possible explanations of this phenomenon.
Field studies reveal substantial
under-diversification, e.g. on retirement saving plans. This problem can occur
because of high transaction costs, the phenomenon of overconfidence, preference
for national equities, as well as herding behaviour etc. There are also studies
identifying so called “naïve” diversification behaviour relying on the “maximum
entropy” heuristics which lead to 1/n resource allocation, and leads investors
into “too much diversification”. “Variety seeking” is especially pronounced if
the expected utility of single choices is uncertain. This paper argues that
another source of naïve diversification as well as under-diversification can be
also seen in the covariance neglect and endeavours to test this in an economic
experiment.
Therefore the experiment is designed
in a way to cover both under-diversification and naïve diversification
phenomena, and to explore the underlying behavioural heuristics. In three
treatments, undergraduates make two investment choices respectively. The treatments
differ on the kind of diversification decisions and informational settings. In
the first treatment the subjects are confronted with a dividend history of two
equities which are slightly negatively correlated. In the second treatment the
same dividend history is explicitly stated to be a random process with specific
expected values and negative covariance. In the third treatment the subjects
are informed that the presented dividend history is a random process with
positive covariance of unity. In the first treatment they have only three
alternatives (complete diversification, complete allocation or resources into a
single asset), in the second decision they choose among five possibilities from
no to some to full diversification.
The main finding of the paper is
that independent of portfolio and informational settings individuals fail to
choose optimal diversification strategies. In the majority of cases this
behaviour results in too little diversification. The most cogent explanation
for this phenomenon is covariance neglect.
Keyword: Portfolio diversification;
covariance neglect
Co-author(s): MENZIES, Gordon (
Abstract: We present an experiment on how agents in financial markets
respond to a stream of news about the value of an asset. We consider two
different market environments: an exchange rate frame in which signals are
received about the future value of the exchange rate, and a stock market frame
in which signals are received about the future stock price. Depending on the
experimental treatment, we allow agents either to know or not to know the
underlying stochastic process determining the value of the asset. Our
experiment allows us to test, in a simple setup, rational expectations against
the hypothesis that agents are conservative in the way they hold their beliefs,
which we model as ‘inferential expectations’, i.e. as the outcome of
Neyman-Pearson classical hypothesis tests.
Keyword: financial markets, expectations, information, exchange rates,
stock prices
Co-author(s): HAYASHI, Takashi (
Abstract: We conduct a portfolio choice
experiment, in which asset framings, portfolio constraints and payoff
opportunities are varied.
We address two questions: (i) do investors have
consistent objectives that are independent of choice contexts, or are they
rather affected by them? (ii) if they are affected, which element of choice
contexts is dominant? .
Our interest is closely related to the naive
diversification phenomenon observed by Benartzi and Thaler (AER 2001), which
they attribute mostly to asset framing. By considering a richer set of
portfolio choice problems, we attempt to distinguish the above three elements.
Our experiment typically consists of three
types of portfolio choice problems: (i) diversification between two negatively
correlated assets, say, A and B, where one can achieve perfect insurance by
combining them; (ii) diversification between asset A and a safe asset which is
equivalent to the perfect insurance portfolio in (i); (iii) diversification
between A and B, in which money allocated to A should be at least large as a
number that corresponds to the perfect insurance portfolio in (i). The sets of
state-contingent payoffs induced by (ii) and (iii) are identical, and they are
a subset of that induced by (i). Relevant probabilities and asset returns are
set so that any expected utility maximizer chooses perfect insurance, in all
problems.
We also change the return rate of the assets,
so that the induced sets of statecontingent payoffs nest to each other, in
order to investigate the effects of changing payoff opportunities.
So far we observe two things. First, both asset
framing and portfolio constraint induce significant number of subjects to take
more risk. This shows that portfolio choices are significantly
context-dependent and that each of two effects has a role. Also, we observe
that expanding payoff opportunities has a significant effect, in the sense that
choice is not made in the additional set of payoffs but it changes how one
chooses from the existing set of payoffs. Put differently, it says that a
statecontingent payoff selected in a larger set is not chosen in a smaller set
which contains it. Second, certain numbers of subjects turn to have rather
safer portfolios in (ii) and (iii), while they rather take more risk in (i).
The latter phenomenon suggests that an explicitly stated safe asset and a
portfolio constraint have a focal-point effect.
Keyword: portfolio choice, asset framing,
portfolio constraint, payoff opportunity
Co-author(s):
VEIGA,
Abstract: We
study the conditions under which an uninformed manipulator -- a robot trader
that buys several shares of a common value asset in the beginning of a trading
period and unwinds this position later on -- is able to induce higher asset
prices. We find that the average contract price is significantly higher in the
presence of the manipulator if, and only if, the asset takes the lowest
possible value and insiders have perfect information about the true value of
the asset. We also evidence that the robot trader makes trading gains; i.e., it
earns more than the average trader, independently on whether the informed
traders have perfect or partial information. Finally, not only uninformed
subjects may suffer from the presence of the robot trader, also some of the
imperfectly informed insiders have lower payoffs when the robot trader is added
as a market participant.
Keyword:
Asset Market, Experiment, Price Manipulation, Rational Expectations.
SESSION D5 NEURO-PHYSIOLOGICAL ECONOMICS
Chair: Monica CAPRA
Co-author(s): YU, Chang (
Abstract: The empirical evidence on what is "the
physiological basis" behind the economicbehavior and how it affects the
behavior is inconclusive. Especially, theexperimental result from Chinese
players is even scarce, so our research fills thegaps in this field. We
simulate Ultimatum Game in the lab with EEG monitoring onexperimenters. And we
set both horizontal controls --the same initial endowment and alarge number of
players per session and longitudinal controls --continuously changedinitial endowment
with fixed proposer and responder. The experimental designrepresents an
improvement over the existing literature by providing the economicexperimental
controls and physiological monitor mechanism simultaneously to set
athree-dimensional experimental process so that we can explain the result from
thefeature of the empirical electroencephalogram. That’s beyond the
prevailinganalysis which pays so much attention to justice . Also?our evidence
and analysisis the balance point between the science and art elements in
explaining economicphenomenon.
Keyword: Ultimatum Game; EEG monitored;
Experimental Economics
Co-author(s): PRAVETTONI, gabriella (
Abstract: This experimental paper focuses on
the relation between the influence of task's intricacy on the individual non
strategic decision process and the role of perceived complexity of social and
relational environment in which decisions have to be taken. It is argued that a
meaningful relation exists between how people perceive the complexity of
relational environment and the way in which they deal with task's complication.
In particular the need for accountability in an unclear relational context in
this work is examined as a potential source of change in tastes towards
alternatives different in terms of complication. Utilizing the theoretical
framework found in Sonsino et al. (2002) , 27 students from
Keyword: non strategic decision-making, social
complexity, psycho-physiology
Abstract: Resent
findings in neuroeconomics and behavioral economics have changed much about how
we view economic decision-making. Not too long ago it was believed that humans
made consistent and calculative economic decisions by weighing pros and cons in
accounting for risks and ambiguity. We now understand that this is incorrect;
most decisions are made by hormone-initiated chain of events. Resent research
on the
Keyword: Entrepreneur,
Corporate Leader, Neuroeconomics, Ambiguity, Risk, Cortisol, Testosterone
Co-author(s):
BERNS, Gregory (
Abstract: In
the current experiment, we investigated the behavioral and neural mechanisms
whereby advice from an expert affects an individual’s risk attitude for money.
We used fMRI to investigate two competing hypotheses about how advice
influences decisions taken under risk: 1) by influencing individuals’ valuation
mechanisms (i.e. changing the utility function and/or probability weighting);
or 2) by overriding these valuation mechanisms.
Our results are consistent with the second hypothesis.
Participants
(N=24) made choices between a sure win and lotteries providing ex-ante
probabilities of winning (1%, 10%, 20%, 37%, 80%, 90%, 99%) for a relatively
high payoff. Prior to scanning, a
certainty equivalent (CE) procedure assessed the curvature of the probability
weighting function, w(p), and the level of risk aversion for each individual,
using a modified version of the Parameter Estimation by Sequential Testing
(PEST) procedure. This staircase procedure iteratively adjusts the value of the
sure win to generate choice reversals within each probability condition, while
halving the step-size after every reversal until a threshold value indicative
of choice indifference is reached. To isolate the brain circuitry through which
expert messages exert their effect on risk-taking behavior, fMRI was employed.
Inside the scanner, participants made choices between a sure win (safe option)
and a lottery (risky option) in two conditions: 1) expert messages (MES); and
2) messages were unavailable (NOM). The specific message we used in the MES
condition was provided by a risk-averse satisficing expert (C.N.).
We employed
nonlinear logistic regression to extract each participant’s probability
weighting function from binary decisions using a modified version of Prelec’s
compound invariant form with additional parameters estimating the effect of the
message on probability weighting. The
difference in utility between the lottery and sure win (SW) was given by:
Φ = w(p) x 1000γ - SWγ, where w(p) = exp[-β (-ln
p)α+(δ*m)+(λ*t)], is the curvature of the utility
function, α is the probability weighting parameter, p is the probability
of winning the lottery for 1000 currency units, m is a dummy variable
indicating the presence of message, δ is measures the effect of the
message, t is time, and λ is a
learning rate. The probability of
choosing the sure win (PSW) was estimated as PSW = exp(Φ) / [1 +
exp(Φ)] using nonlinear logistic regression. This method yielded
group-level parameter estimates that agree with findings from behavioral
economics (α = 0.62 and β = 1.46). Importantly, we obtained
behavioral evidence demonstrating that the presence of expert advice led to a
significant increase in the curvature (α) of w(p) in the direction of the
advice.
To isolate
networks that correlated with probability weighting during decision-making, we
modeled activity during the decision phase in terms of the presence of the
message (MES, NOM) and type of decision made by participants (sure win, gamble)
and entered each participant’s weighting function as a parametric modulator in
first-level models. Significant correlations (P<0.001) with w(p) were obtained
when subjects chose the sure win during the NOM condition in bilateral superior
parietal lobe, anterior cingulate cortex, anterior insula, inferior frontal
gyrus and caudate nucleus. The presence of expert messages resulted in a loss
of this relationship of activity to w(p). These findings indicate the presence
of nonlinear probability weighting during choice in a network of structures
previously implicated in risky decision-making, which was offset when
information about the opinion of an expert was displayed.
Keyword: Risk
attitudes, expert advice, Neuroeconomics, fMRI
SESSION D6 INDUSTRIAL ORGANIZATION
Chair: Kenan KALAYCI
Abstract: This experiment tests the effects of
exogeneous entry on the stability of tacit collusion in oligopoly markets.
Theoretical as well as experimental research suggests that a larger number of
firms makes collusion harder to enforce and that entry typically erodes
collusion. In this study we specifically explore the question whether collusion
can be sustained when the groups start off small and when it is common
knowledge that the entrant is informed about the history of the period results
before he enters his group. We do this using a repeated oligopoly game which is
enlarged with an informed entrant.
Keyword: Collusion, Cartels, Entry
Abstract: The tendency of investors to retain
losing investments in their portfolios relatively longer than winning
investments has been labelled the disposition effect (Shefrin &
Statman, 1985). This paper extends the study of this phenomenon to the venture
capital market by creating a new experimental setting simulating such markets
and introducing two important features, prior learning and varying levels of
competition. Participants chose, competed for or were assigned a set of
ventures that they needed to manage by further investing or selling in the
market. Prior to managing their investments, half of the participants were
trained how to distinguish differential quality of ventures using a multiple
cue probability learning task. In this venture capital setting, participants
did not exhibit the disposition effect at either the group or individual level
and there were no effects of training. However, training did teach participants
to make better venture choices in the first place. When overall portfolio
performance (i.e., earnings) is decomposed into elements involving choice of
investments, learning, and management of holdings, it is shown that
participants who faced competition performed better in managing their
investments than the others. The findings also emphasise a positive relation
between learning and subsequent experimental performance.
Keyword: Disposition effect; learning; venture
capital; lens model; multiple cue probability learning
Co-author(s):
GENG, Hong (BonnEconLab,
Abstract: We
experimentally analyse the interaction between competitive and strategic power
on the one hand and relational contracting on the other hand and its effect on
efficiency and rent-sharing in a repeated trading environment with incomplete
contracts. We understand competitive power as the ex-ante bargaining power to
influence contracting terms due to lower competitive pressure while we think of
strategic power as the ex-post ability to unilaterally change contracting terms
after the transacting party decided on its action. We find competitive and
strategic power both matter. Competitive power positively influences
rent-sharing even if contract enforcement is entirely absent. Strategic power
has a larger impact on rent-sharing than competitive power: The strategically
favoured side always gains a larger share of rents regardless of competitive
power. Competitive power does not affect trading efficiency. Strategic power
only influences efficiency in case buyers rely weakly on relational
contracting, as they do in
Keyword: relational
contracting, incomplete contracts, reciprocity, cross-cultural experiments
Co-author(s):
Prof. POTTERS, Jan (
Abstract: We
set up and test a model of spurious product differentiation in a duopoly
market. In our model, partly inspired by Anderson and Renault (2006), each firm
offers one good to boundedly rational consumers that have homogeneous
preferences. Firms decide simultaneously on the number of attributes of their
good and then set their prices. The number of attributes of a good does not
affect its quality or its value to the consumer but adds noise to the
consumers' perception of the net value differences of the goods offered. Our
model suggests that the lower quality firm will always choose the maximum
number of attributes possible while the best quality firm will choose the
minimum number of attributes as long as its quality advantage is large enough.
The equilibrium prices and the seller profits are larger than the standard
Bertrand predictions. Our results from a laboratory experiment with markets
consisting of 2 buyers and 2 sellers are in line with the model's main
predictions. The buyers make more mistakes and the prices and the profits of
sellers are higher when the number of attributes of goods is higher. The number
of attributes that a firm chooses is negatively related to the quality of the
firm's good. Compared to a benchmark treatment with simulated (perfectly
rational) buyers the producer surplus is higher when buyers are real subjects.
In a treatment with 3 sellers and 2 buyers we observe that producer surplus is
lower than in the treatment with 2 sellers and 2 buyers but that spurious
product differentiation and consumer confusion persist.
Keyword: product
differentiation, bounded rationality, laboratory experiments, consumer
confusion
SESSION D7 INCENTIVES II
Chair: Heike HENNIG-SCHMIDT
Co-author(s):
KLOR, Esteban (The
Abstract: We
experimentally study the implications of a model of incentive reversal
introduced by Winter (2007). The model shows that increasing the rewards for
all agents may result in a smaller number of agents who exert effort in
equilibrium, even when all agents are strict money maximizers. This intriguing
phenomenon may occur due to externalities between agents when agents move
sequentially and there is some degree of complementarity. However, theoretical
behavioral considerations compromise the predictions of the model. On one hand,
reciprocal strategies are likely to induce cooperation in a way which washes
out the effect. On the other hand, distributional equity preferences may reduce
cooperation in a way that negates it. We test the predictions of the model in
two experiments, both in the lab and in the classroom, under different
environments, framings and tasks. We find that incentive reversal does occur in
real behavior, and is robust to different designs and parameters. A strong
tendency for reciprocity is evident, only in a natural environment, but is not
enough to overcome the incentive reversal phenomenon.
Keyword: Laboratory
experiment, Classroom Experiment, Principal-Agent models, Incentives in
Organizations, Peer Effects, Reciprocity, Equity Preferences, Subgame Perfect
Equilibrium.
Abstract: Incentive
schemes to induce employees to act according to their employers' interests have
been an active research area in economics. While some empirical studies
indicate that economic incentives work as predicted by self-interest models,
several other studies suggest the need for a broader approach to worker
motivation by taking into account psychological incentives. Such broader
approach to motivation may be particularly relevant as economic and
psychological incentives may have opposing effects. This paper aims to contrast
the effectiveness of two incentive schemes, namely monitoring and
gift-exchange, whose effects have been shown to depend on psychological
factors. To do so, we conduct a real-effort lab experiment in
Keyword: Monitoring,
Gift-Exchange, Lab Experiment, Field Experiment JEL Codes : C91, C93, D73.
Co-author(s):
REILEY, David (
Abstract: We
conducted an experimental investigation of a very simple wine-tasting task. We
invited a hundred of economists attending the last World ESA Congress in
Co-author(s):
SELTEN, Reinhard and WIESEN, Daniel (BonnEconLab,
Abstract: While
reforming a health care system, effects of variations of health care market
institutions are ex ante not necessarily known to policy makers and may
influence actors on the market in an undesired manner. As the general intention
of health care reforms is to enhance efficiency, reduce costs and maintain or
increase quality, a crucial role is attributed to health care providers, i.e.
physicians. Their provision behavior is in turn believed to be influenced by
the payment system. Theoretical health-economic studies have highlighted the
different incentives of commonly used payment systems. The two most prominent
`pure' payment systems analyzed are fee-forservice (FFS) and capitation (CAP).
There is empirical evidence that incentives from payment systems influence
physicians' behavior. Yet, the results are too contradictory for a definite
conclusion about the direction of an effect to be drawn.
Fuchs
(2000) makes the point that health economic research may largely benefit from
incorporating methods of experimental economics. Our study is meant to
contribute to the research agenda suggested by Fuchs (2000). We use a
controlled laboratory experiment to improve the understanding of the
institutional parameter `payment system'. In our study, experimental physicians
decide on the quantity of medical services under the two payment systems.
Patients gain a monetary benefit from these services. No real patients
participated in our experiment. To allow for otherregarding behavior of
physicians the money corresponding to the benefits of all abstract patients
were donated to a charitable foundation caring for real patients. Our main
finding is that patients are overserved under FFS and underserved under CAP.
Financial incentives are not the only motivation for physicians' quantity decisions
though. Patient benefit is of considerable importance as well. Patients in need
of a low level of medical services are better off under CAP, whereas patients
with a high need of medical services gain more health benefit when physicians
are paid by FFS.
Keyword: Physician
payment system; controlled laboratory experiment; incentives
Break 11:00-11:30am
– Atrium
Plenary Session
Bruno BIAIS: "Equilibrium discovery and
preopening mechanisms in an experimental market"
Location: Main Lecture Hall
LUNCH 12:30 – 1:30pm
SESSION E1 PUBLIC GOOD II
Chair: Steffen ALTMANN
Co-author(s): WILLINGER, Marc (
Abstract: Club goods are collective goods with the possibility of
excluding individuals who fail to contribute. Such goods are similar to public
goods with exclusion of freeriders (but not cheap-riders). Exclusion has
conflicting effects on welfare : on one hand it reduces the incentives to free
ride, on the other hand it reduces the number of agents who benefit from the
collective good.
Many clubs require a minimum number of members to provide their activity
(e.g., swimming pool, tennis club, library, etc.). This step-level component
can either be considered as a threshold for the provision of the club good
itself, or as a threshold for maintaining some activity within an existing
club. While previous experimental research focused on fundraising to provide
non-existing public goods, we assume that the club good already exists but
there exist a provision point for it’s maintenance. Aggregate contributions
above the threshold represent an improvement of the club services that benefit
only to the club members.
Our club contribution game admits two Nash equilibria (with and without
exclusion) : contributing the provision point and contributing zero. The first
equilibrium involves a coordination problem. Furthermore, the game involves a
social dilemma, since the social optimum is attained if all agents contribute
their endowment. The baseline treatment is a step level public good game with
linear payoff above the threshold. We compare a high, a medium and a low
provision point, both under moneyback guarantee (MBG) versus non money-back
guarantee (NMBG). Furthermore, we compare treatments without exclusion to
treatments with exclusion (non-contributors are excluded but are informed about
the amount of club good produced).
Our data shows that contributions are significantly higher : when
exclusion is feasible, when the provision point is lower and under MBG. For the
low provision point with exclusion, subjects overcontribute significantly with
respect to the threshold and welfare improves. For the high provision point,
exclusion lowers contributions and welfare (compared to no-exclusion).
Furthermore, exclusion stabilizes contributions over time, and prevents the
decay of average contributions observed in baseline treatments.
Keyword: Club good - Public good - Exclusion - step level
Co-author(s): BREKKE, Kjell Arne; HAUGE, Karen Evelyn and LIND, Jo Thori (
Abstract: In social dilemmas, conditional
cooperators may be able to sustain cooperation if they are matched with other
conditional cooperators. We report results from a public good game experiment
where subjects can choose between two group types: Red and Blue. In Red groups,
a fixed amount of each individual’s payoff is donated to the Red Cross.
Choosing Red can be interpreted as a costly signal that one is of a cooperative
type. Slightly less than half of the subjects chose Red. While contributions in
Blue groups show the usual declining pattern, contributions in Red groups stay
high, leading to substantially higher average overall contributions in Red
groups.
Keyword: Public good games, Endogenous group
formation, Sustained cooperation.
Abstract: An experiment run by Niederle
and Vesterlund (2007) shows that men choose more often than women to enter
tournaments. More precisely, men choose to enter too often and women not often
enough in comparison with the choices which would maximize payoffs. A
substantial part of this gender-gap is attributed by the authors to a difference
in the taste for competition between genders. In this experiment, I built an
experimental protocol aiming at studying the effect of adding the possibility
to enter the tournament as a team on the gender-gap. This protocol also enables
to disentangle the effect of the different possible explaining factors.
Co-author(s):
FALK, Armin (
Abstract: We
analyze the influence of non-binding default rules on voluntary cooperation.
Subjects contribute to a linear public good by sending in a form specifying
their contribution decision. Treatments differ in the decision implemented in
case a subject does not send back the form in due time: in the high default
treatment, subjects who do not send back the form contribute their entire
endowment. In the low default treatment, they contribute the lowest possible
amount. In the active decision treatment, no default choice is implemented.
Cooperation in the high default treatment is significantly higher compared to
both the active decision treatment and the low default treatment. In contrast
to previous studies, our experimental setup allows us to analyze the importance
of several potential determinants of default effects, like subjects’ beliefs,
social preferences, cognitive skills, or transaction costs.
Keyword: default
rules, public goods, cooperation, social preferences
Chair: Luigi MITTONE
Abstract: This paper investigates the effect of uncertain delays in
intertemporal decisions. More specifically, we study individuals’ preferences
between sooner-smaller (SS) rewards and larger-later (LL) rewards, where both
rewards can occur with uncertain delays. Building on the literature on
time-insensitivity and decision-making under ambiguity, we conjecture that when
trading-off among payoff and time dimensions for the purpose of choosing
between SS and LL rewards, the weight accorded to the time dimension diminishes
as delays become uncertain. In order to test this hypothesis, we conducted a
series of experiments in which we manipulated the degree of uncertainty
embedded in the delay component and the attention paid to the time dimension.
As predicted, we found that delay uncertainty bolsters the attractiveness of
the LLrewards. That is, individuals are more likely to choose the LL-reward
under uncertain delays than under certain delays, given that the expected
delays are kept the same. Moreover, in accord with our proposed explanation, we
found that enhancing sensitivity to the time dimension diminishes the
attractiveness of the LL-rewards more strongly in choices under uncertain
delays than under certain delays. In sum, we argue that delay uncertainty is an
important context factor that affects intertemporal preferences systematically
through diminishing sensitivity to the time dimension. Furthermore, the fact
that aversion to delay risk is not capable of explaining our findings indicates
that, when choosing between two delayed rewards, people employ an
attribute-based choice process rather than an alternative-based choice process
(e.g. DU model).
Keyword: decision making, Intertemporal choice, uncertain delays, time
sensitivity
Co-author(s): BISIN, Alberto (
Abstract: In this paper we model a decision
maker who must exert costly effort to complete a single task by a fixed
deadline. Effort costs evolve stochastically in continuous time making this
problem formally equivalent to solving for the optimal exercise boundary of an
American put option. We derive the solution to this model for three cases: (1)
time consistent decision makers, (2) naive hyperbolic discounters and (3)
sophisticated hyperbolic discounters. Sophisticated hyperbolic discounters
behave as if they were time consistent but instead have a smaller reward for
completing the task. We show that sophisticated decision makers will often
self-impose a deadline to ensure early completion of the task. Other forms of
commitment are also discussed. We also report the results of an experiment
which was designed to identify the three possible types of decision makers.
Keyword: Procrastination, Hyperbolic
Discounting, Time-Inconsistency, Deadlines
Abstract: We evaluate the effectiveness of optimal and temporally
consistent incentive policies for regulating the exploitation of a renewable
common-pool resource. The corresponding game is an N-person discrete-time
deterministic dynamic game of T periods fixed duration. Three policy
instruments with flexible parameters are evaluated: A pigouvian tax, an ambient
tax and a mixed instrument combining the two previous ones. We test in the
laboratory the predictions of the model solved for 3 distinct behavioural
assumptions: (a) sub-game perfection, (b) myopic behaviour, and (c) joint
payoff maximization. We find that subjects behave myopically in the unregulated
situation, which agrees with previous results in the literature. Conditional on
predictions, the ambient tax is the most effective policy in approaching the
optimum extraction path. However, it shows an extremely low efficiency as a
consequence of coordination failures, rending this instrument hardly
acceptable. The pigouvian tax and the mixed instrument are less effective that
the ambient tax, though they significantly curb the mean extraction path
towards the optimum path. Both instruments are more efficient than the ambient
tax but, as a consequence of cheating behaviour, high penalties are imposed
undermining the efficiency of these policies.
Keyword: Ambient Tax, Pigouvian Tax, Renewable common-pool resources,
Experimental Economics.
Co-authors: SAVADORI, Lucia (
Abstract: In two laboratory studies involving
285 undergraduate students presented with a oneshot real choice we observe a
systematic influence of time delay on the preferences for two lotteries, equal
in expected value, but different in the degree of probability and outcome. The
more the outcome is postponed (2 weeks, 1 month, 3 months, 6 months), the more
individuals prefer the lottery offering a higher value (400 Euro) but a lower
probability (.02) compared to the one offering a lower value (14 Euro) but a
higher probability (.60). We explain these findings assuming a savoring
hypothesis according to which, for highly emotional events, individuals prefer
to postpone the desirable outcome, enjoying the savoring experience of
anticipating the future emotions. It also suggests that for decisions where
uncertainty resolution is postponed in the future, people will underweight the
probability and overweight the outcome.
Keyword: intertemporal choice, time delay, time
horizon, gambles, risk
SESSION E3 PSYCHOLOGY AND DECISION MAKING
Chair: Morten LAU
Co-author(s): GEORGANTZIS, Nikolaos (University
Jaume I)
Abstract: In this paper, we test experimentally
some fundamental hypothesis about the psychological processes underlying the
well-known willingness to accept (WTA)-willingness to pay (WTP) gap. This is
achieved through the elicitation of subjects attitudes, feelings, risk
preferences and personalities at different points of a standard WTA-WTP
economic experiment with market goods (in this case, bottles of wine). The four
main hypothesis tested through our experiment, which account for much of the research
done on the topic, are the following: 1) the WTA-WTP effect can be divided in
two phases ?one of ownership (phase A) and another of possible loss (phase B)?
which correspond to different psychological foundations; 2) phase A contributes
to the gap through attitude changes towards the objective good, produced by an
association of it with the self or by the appearance of cognitive dissonance;
3) phase A contributes to the disparity through the generation of positive
feelings for receiving the good; 4) phase B plays a significant part in the
gap, which operates through ambiguity or regret avoidance. The elicitation of
subjects attitudes towards the objective good both at the beginning of every
session and after subjects receive the good is used to test hypothesis 2; the
elicitation of feelings after participants are given the good is employed to
test hypothesis 3; subjects’ risk preferences and personality measures are used
to test hypothesis 4; and hypothesis 1 is tested indirectly through hypothesis 2,
3 and 4. Our results show that an ownership effect (phase A) in terms of
attitude change is not an important part of the WTA-WTP disparity and it is not
a necessary condition for the gap to appear. Therefore, association with the
self and dissonance reduction are not main driving forces behind the WTA-WTP
gap, as some psychologists have claimed. We find however a significant
ownership effect in terms of enhanced positive feelings for receiving the good,
which seems to account for an important part of the disparity. The phase of
possible loss (phase B) does also make a significant contribution to the gap.
Specifically, ambiguity and regret avoidance seem to be an important driving
force behind the WTA-WTP effect, which makes subjects with different risk preferences
and different personality profiles in terms of extraversion, agreeableness and
conscientiousness display quite different gaps. These findings can help to
predict under what circumstances the WTA-WTP disparity can be expected to
appear and with how much strength. "
Co-author(s):
ROCKENBACH, Bettina and BETSCH, Tilmann
(
Abstract: Experimental
studies have shown that decision making in economic situations often cannot be
explained by standard economic theory and the paradigm of economic rationality.
Nevertheless, little research has been done on the reasons for this behaviour.
So far, the most popular tools to explain individual motivation are the Ring
Measure of Social Values and Decomposed Games. Both of these means ask
participants to make decisions that are very similar to the decisions they try
to explain. The present study sets out to avoid circular reasoning like this by
applying standardized psychological tools. We exploratorily search for
personality factors that can explain behaviour in economic situations.
Therefore, participants filled out the Interaction Anxiety Questionnaire, the
Multi Motive Grid and the 16 Personality- Factor Test. Results indicate that
part of the decisions made in the games can well be explained by differences in
personality traits.
Keyword: Individual
Motivation, Decision Making, Uncertainty
Co-author(s):
WRANIK, Tanja (CISA,
Abstract: In
this paper, we examine the behavioral bias known as myopic loss aversion, and the
environmental and psychological factors leading to different behavioral
reactions. As we discussed in an earlier study (Hopfensitz and Wranik, 2008),
myopic loss aversion is not a general phenomenon. Stable individual differences
lead to different evaluations and emotional reactions concerning feedback. We
particularly identified both an experience effect and a personality effect.
Myopic loss aversion is particularly likely: (1) when initial investment rounds
lead to negative investment experiences (i.e., losses); and (2) for investors
with low self-efficacy concerning the investment situation.
In this
paper we extend our study to an investment situation where taking investment
risk is not necessarily advantageous to the investor. Specifically we give participants
the choice between two investment options: a safe and a risky option. A setting
often used to simulate choices between ‘bonds’ and ‘stocks’. However contrary
to most existing experimental studies, in our case the risky investment option
has a lower expected value than the safe option. Thus on average investment in
the risky option will lead to losses compared to the safe option.
Our
interest concerns the interplay of experience (earnings in early rounds),
personality traits (optimism and self-efficacy) and investment behavior under
different feedback options. We will discuss in particular whether self-efficacy
leads ‘in general’ to risk taking (thus to ‘over confidence’). Or if it is a
personality trait that leads to a healthy amount of risk taking when markets
are such that investment pays off, but to risk avers behavior if markets are
disadvantageous.
Keyword: myopic
loss aversion, personality, optimism, emotions
Co-author(s):
HARRISON, Glenn (
Abstract: The
most popular models of decision making use a single criteria to evaluate
projects or lotteries. However, decision makers may actually consider multiple
criteria when evaluating projects. We consider a dual criteria model from
psychology. This model integrates the familiar tradeoffs between risk and
utility that economists traditionally assume, allowance for rank-dependent
decision weights, and consideration of income thresholds. We examine the issues
involved in full maximum likelihood estimation of the model using observed
choice data. We propose a general method for integrating the multiple criteria,
using the logic of mixture models, which we believe is attractive from a
decision-theoretic and statistical perspective. The model is applied to
observed choices from a major natural experiment involving intrinsically
dynamic choices over highly skewed outcomes. The evidence points to the clear
role that income thresholds play in such decision making, but does not rule out
a role for tradeoffs between risk and utility or probability weighting.
SESSION E4 ASSETS AND BUBBLES
Chair: Praveen KUJAL
Co-author(s):
GONG, Binglin (
Abstract: This
paper uses a field experiment to study individual investment in stock markets
throughout the life cycle of bubbles, especially when a real bubble is going on
in the Chinese stock markets. We invite real individual investors in Shanghai
Stock Exchange to invest in simulated stock markets where historical Nasdaq and
Our
preliminary results show that most people are not able to earn much even when
they are in huge stock market bubbles. Half of the investors earn less money
than the average earning from random investment. Investors' decisions show
strong disposition effect—the buy-in-price serves as a reference point for most
people. When they are making money, they are happy to sell their stocks. But
when the price is below investors' buy-in-prices, most people just hold on to
their stocks and wait till the price jumps back. Once they have experienced a
bubble in the lab, they become more risk averse in the latter investment and on
average earn more in the second bubble. Among our experimental subjects,
student investors on average do much better than non-student investors.
Keyword: individual
investment, stock markets, bubbles, field experiment, disposition effect,
learning
Co-author(s):
SELTEN, Reinhard; KAISER, Johannes and VON HAGEN, Jürgen (BonnEconLab,
Abstract: Variance
of exchange rates around predictions can be from 1) undiscovered fundamentals,
2) efficient markets, 3) destabilising speculation, or 4) complexity resulting
in regime and personality differences in the heuristics used in the stage of
evaluating alternatives. Field and experimental evidence identifies 4) as the
underlying cause, a cause that lies outside expected utility theory that
excludes the evaluation stage. To include the evaluation stage and such damage
from variance, the authorities can use models within SKAT, the Stages of
Knowledge Ahead Theory.
Keyword: exchange
rate regime, unpredictability, experiment, SKAT the Stages of Knowledge Ahead
Theory, variance, outlier analysis, group dynamics, individual differences,
complexity
Abstract: NAKASHIMA,
Kunio (NLI-Research Institute); YONEZAWA, Yasuhiro (
Abstract: In
this paper, we analyzed how market determines prices when private information
is present. When there is private information in a market, a trader (investor)
deduces what private information other investors may have from the price in the
market. Private information in the market can be aggregated through such trader
actions. When the aggregation of private information gives the unique forecast
for the future dividend, the transaction prices in the market converge to fully
revealed rational expectation equilibrium price. If the aggregation of private
information in the market cannot eliminate uncertainties, and does not provide
a unique forecast, a trader may wrongly interpret the price movement and
wrongly infer the existence of private information. As a result, the market may
systematically provide mis-pricing. In order to verify above hypothesis, we
have conducted the experiments. The results of experiments mostly support the
hypothesis. The bubble observed in actual markets, or the phenomenon such as
crashes may have occurred as a result of such trader actions.
Keyword: Efficient
Market, Private information, Asset pricing, Mis-pricing
Co-author(s):
CORGNET, Brice (Universidad de Navarra); PORTER, David (
Abstract: Financial
markets are overwhelmed by daily announcements. We use experimental asset
markets to assess the impact of uninformative communications on asset prices
and trading volumes. We deliver uninformative messages in standard experimental
asset markets and find that trading volumes and prices are impacted by these
messages. In particular, the release of a pre-announced preset message to
traders “The price is too high” in predetermined trading periods decreases the
amplitude and duration of bubbles. Also, the release of the messages “The price
is too high” or “The price is too low” reduces trading volume with
inexperienced subjects.
Keyword: Experimental
asset markets, bubbles, market communications, bounded rationality.
SESSION E5 VOTING
Chair: Ernesto REUBEN
Co-author(s): RUSTICHINI, Aldo (
Abstract: We introduced majority voting into the 3-person ultimatum game
of Guth, van Damme (1998), and investigated it experimentally. In our setup once
a proposal about a split of $30 among 3 players is made all players vote for or
against the split. Thanks to the introduction of voting the strategic situation
of voting-only players, other than the proposer, is symmetric, unlike in Guth,
van Damme (1998). This last feature allows us to study the interpersonal
preferences without priming to discriminate against the inactive player. We
consider 4 treatments with respect to what voting-only players know about the
proposed split under vote: 1) “full information” (FI) – voting-only players
know the shares of each voter in $30; 2) “pivotal information” (PI) - they know
only the share of the proposer; 3) “essential information” (ES) each of
voting-only players knows his share only; 4) “irrelevant information” (II) -
each of voting-only players knows only the share of the other voting-only one;
In the experiment the subjects in the role of a proposing player proposed for
themselves: $13.4 (± $0.231) in FI, $12.6 (± $0.217) in PI, $17.7 (± $0.249) in
EI, $21.6 (± $0.356) in II. This pattern suggests that the proposers tried to
exploit the informational situations of others to their advantage, while
avoiding “spitting in the face” perception by votingonly players. The voting
rejections (at least 2 votes against) were as follows: 6.7% (± 0.0120%) in FI,
6.9 % (± 0.0122%) in PI, 11.7% (± 0.0154%) in EI, 16.6% (± 0.0179%) in II.
Rejections while infrequent increased the less the voting-only players have
known about their shares. This evidence suggests that strategic selfishness
rather than fairness motivates subjects in the 3-person ultimatum game.
Keyword: ultimatum game, voting, experiment
Abstract: I study voter behavior in a setting
characterized by majority rule and mandatory voting, where voters choose from
three options. Because of the possibility of Arrow's cycle, strategic behavior
may emerge. In particular, I focus on how information contained in election
poll results affects voter's choices. By normalizing the utilities of the best
and worst options, each voter preferences across the three options is
characterized by the relative value attributed to the intermediate option. I
therefore also test how this relative importance impacts voting behavior and
how this interacts with information. Quantal response is used to analyze the
game and shows as a good predictor for the experimental data. The main results
are: (i) sincere voting increases as the importance of the intermediate option
decreases; (ii) information brings coordination in favor of the majoritarian
candidate; (iii) the type who has the majoritarian candidate as his second
option vote strategically for this candidate if the benefit is high enough.
Keyword: Voting behavior; Arrow's Cycle;
Quantal Response; Experimental Economics
Co-author(s): GENG, Hong and WALKOWITZ, Gari
(BonnEconLab,
Abstract: We experimentally investigate the
effects of formal voting on trust and trustworthiness in
Keyword: Voting effect, trust, trustworthiness,
investment game
Co-author(s):
GROßER, Jens (
Abstract: We
study a voting game in which candidates compete by proposing different taxation
schemes. In the game, high taxes attract more votes as they redistribute income
from a rich minority into the hands of a poor majority. However, rich voters
may have the opportunity to lobby candidates by means of monetary transfers. We
investigate the conditions under which the lobbying efforts of the rich are
enough to move candidates away from the high taxation equilibrium. We find
that, in situations in which candidates repeatedly interact with the same rich
voters, candidates reciprocate the transfers from the rich by coordinating on
low tax schemes. In cases in which candidates and rich voters are constantly
rematched, the high-tax equilibrium is maintained.
SESSION E6 SOCIAL PREFERENCES AND INEQUALITY
Chair: Fabian PAETZEL
Co-author(s): DUBOIS, Dimitri (LAMETA, Université
de Montpellier I)
Abstract: Attitudes towards risk and inequality
are essential components in - individual and collective - economic
decision-making process. An individual is risk-averse if he is unwilling to
accept a risky gamble: he will prefer the expected payment of the gamble for
sure to the gamble itself. Symmetrically, an individual exhibits inequality
aversion when - other things equal - he is unsatisfied by an unequal income
distribution: in his opinion, the social welfare will be maximized if the total
income is shared equally among individuals. While the concepts of risk aversion
and inequality aversion have received substantial (but distinct) theoretical
and empirical treatments, only few studies have investigated the link between
both dimensions.
Risk aversion and inequality aversion are
nevertheless closely related. In a lot of economic situations it is often
difficult to identify which aversion is the driving force behind the
decision-making process. For example, if a rich individual encourages political
measures to promote equality in the society today (or if he is willing to pay
in order to help other people), it can be interpreted in two different ways. On
the one hand, it may be the look of an inequality-aversion, or even of an
altruistic motivation. However, on the other hand, this support may reflect a
strategic behavior: the individual may want to insure himself against
fluctuations in his future income, by expecting a kind of reciprocity. This is
clearly a risk-averse attitude. Providing a better understanding of the
individual's motivations in such a situation is the aim of this paper.
To this purpose we have elaborated a new
experimental design. The experiment is divided into three parts. The first two
parts aim at eliticiting successively the inequality aversion and the risk
aversion. Following Kroll's & Davidovitz's method (Economica 70 (2003),
pp. 19-29) the subject in the first part is faced to a lottery with a uniform
distribution of probabilities and has to choose between two alternatives: (i) a
common drawn (CD) where all the participants receive the same earnings, and
(ii) an individual drawn (ID) where each participant receives his own earning.
The level of risk in both alternatives is the same, so that risk-aversion can't
influence the choice. The alternative chosen at the majority applies to all the
participants. If the subject is inequality-averse (resp. prone) he will prefer
the CD alternative (resp. ID). Based on a symmetrical procedure, the second
part of the experiment aims at eliciting risk aversion. The subject is now
faced to two options: (i) a lottery with risky earnings (RE), and (ii) the
expected earnings of the previous lottery (CE). It is common knowledge that if
the lottery applies there is only one (common) draw, so that earnings are equal
for all subjects. Thus inequality aversion can't influence the choice. As in
the first part, the option chosen at the majority applies to all the
participants. If the subject is risk-averse (resp. prone) he will prefers the
CE option (resp. RE).
According to subjects' choices in part 1 and 2
of the experiment four types of subject may be identified: (A, A), (A, P), (P,
A) and (P, P), where A means "averse" and P "prone" to
inequality and risk respectively. For example a subject who chooses CD in part
1 and CE in part 2 is of type (A, A), whereas a subject who chooses CD and RE
respectively in part 1 and 2 is of type (A, P). In the third and last part of
the experiment subjects participate to a twenty periods repeated game. Before
the start of the game subjects are grouped by three according to their type.
Note that subjects are only informed they are grouped by three, they do not
know that it is also by type. Each period the subject is faced to the same two
income distributions, namely (10, 70, 70) and (60, 60, 60). At the beginning of
the period the three subjects forming a group are randomly affected to one of
the three possible ranks. The subject's rank determines his potential payoff
(10 or 60 for rank 1, 70 or 60 for rank 2 and 70 or 60 for rank 3). The subject
then must choose a lottery, and the lottery chosen at the majority applies in
the group. Note that in the egalitarian distribution the mean income is equal
to 60, against
Our results (based on 6 sessions with 18
participants each) show that cooperation rates (choice of distribution (60, 60,
60)) in the social dilemma game (part 3 of the experiment) are strongly
influenced by the type of the group. In particular the average cooperation rate
in groups of type (A, A), i.e. inequality-averse and riskaverse, in ranks 2
& 3, is strongly higher than in groups of type (P, P), i.e.
inequality-prone and risk-prone, which is in line with the intuition. Also, the
average cooperation of groups (P, A) and (A, P) are clearly lower than (A,A)'s.
This result shows that aversion in only one dimension is not sufficient to
ensure cooperation in the game. Our lastly and rather counter-intuitive (but to
our opinion very interesting) result is the lower average cooperation of groups
(A, P) compared to (P, A)'s. In social dilemma combining risk and inequality,
cooperation thus seems be more affected by risk aversion than inequality
aversion. In other words, attitudes apparently motivated by inequality
aversion, such as cooperation in our game, might in fact be the consequence of
risk considerations: "I know that my advantageous position today may be
reversed in the future, so I act today to improve the situation of individuals
treated less favorably than me". This latter point merits however further
investigations.
Keyword: risk aversion, inequality aversion,
social preferences, social dilemmas, experimental economics
Abstract: Many
studies have investigated whether economists are more selfish than
noneconomists. Since the seminal work by Gerald Marwell and Ruth E. Ames in
1981 on free-riding in a public good game, there have mainly been two
conjectures on why economics students may behave differently in distributive
situations than other students: either they may initially be more concerned
with economic incentives than other students and therefore select the study of
economics, or exposure to the selfinterested model used in economics changes
the extent to which people behave in selfinterested ways. Marwell and
In this
paper the "Are economists different?" question is addressed. The aim
of the paper is to examine whether economists differ from others in the
following three dimensions: the weight they attach to fairness considerations,
the prevalence of fairness ideals, and how they react to communication about
fairness. To examine the issue a dictatorship game experiment is run with
first-year students of economics and engineering where the distribution phase
is preceded by a production phase and a communication phase. This experimental
design is particularly suited for examining differences in the three
dimensions, and, to the best of my knowledge, previous experimental studies,
have not been able to address the question as comprehensively as the current
study.
The
subjects in the study comprise first-year economics students from the
Keyword: Different
subject pools, selection effects, fairness norms, fairness consideration,
responsibility, dictator game with production and communication
Co-author(s): HARUVY, Ernan E. and LI, Sherry (
Abstract: In economic exchanges involving
investment, agents must typically decide not only how much to invest but also
with which partner to transact. The focus of the present work is on identifying
the factors that govern this joint decision. In an experimental investigation
on a virtual world platform, we give a proposer a choice between two investment
games with different responders that differ in the investment multiplier as
well in the social distance to the two alternative responders. This allows us
to gauge the value that proposers place on social distance as defined in this
setting. We compare behavior to the benchmark standalone investment game and
pay special attention to three issues: (1) To what extent do proposers prefer
to sacrifice potential payoff in favor of lower social distance, and to what
extent such choices are rational? (2) Is there evidence for reciprocity by the
chosen party? (3) To what extent do preferences over the passive player enter
this decision?
Keyword: Experiments, Trust, Partner Selection,
Communication, Cooperation, Cheap talk, Virtual Worlds
Co-author(s):
TRAUB, Stefan (Chair of Public Finance,
Abstract: We
investigate the macro-founded relationship between inequality and growth in
addition to micro-founded social preferences, more specifically, preferences
affected by relative deprivation. The theory of social preference holds that the
utility of economic agents consider the complete distribution of pay-offs (Fehr
and Schmidt, 1999 and Bolton and Ockenfles, 2000). The concept of relative
deprivation was introduced by Runciman (1966). In macroeconomics, the analysis
of income distributions has focused on cross country and time-series
comparisons (Forbes 2000; Banerjee and Duflo 2003).
We consider
a stylized economy comprising only three heterogenous agents. The agents are
heterogenous with regard to their human capital. Growth is effected by the
choice of the savings-rate and the corresponding change of the stock of human
capital. We hypothesis that people are guided by relative deprivation when
choosing the savingrate, more specifically, highest growth-rates will occur
when the underlying skill distributions are left-skewed. This is due to the
effect that left-skewed income distributions give rise to relatively small
feelings of relative deprivation. Each agent in the society maximizes his or
her individual utility function by choosing the saving decision given the
decision of the other players. Dependent of the savings result the vector of
human capital in period 2.
The above
mentioned hypotheses which are derived from our model, will be tested by a
laboratory experiment. Participants obtain their human capital positions by
means of an intelligence test. This proceeding should induce a feeling of
deprivation. Note that the experiment will involve different distributions of
human capital (mean, variance, skewness). Subjects then are ask to choose their
saving rates. The experiment will be conducted in June 23-
Keyword: social
preferences, savings, skill distribution, growth
SESSION E7 FOOD CONSUMPTION
Chair: Bernard RUFFIEUX
Co-author(s): SCATASTA, Sara and DANNENBERG, Astrid (Centre for European
Economic Research)
Abstract: The introduction of genetically modified (GM) content in food
products has been the object of highly controversial debates in several
countries for over a decade. Opponents, such as Greenpeace International, warn
against potential dangers to the environment and human health that arise from growing
and consuming GM crop. They emphasize unknown health risks, such as allergic
reactions, and environmental risks, such as pest resistance and loss of
biodiversity, and denounce the absence of longterm studies investigating those
risks. On the other hand, proponents, such as the Council for Biotechnology
Information, believe that the approval process in place for the
commercialization of GM foods can be trusted and that GM crops can have
positive environmental impacts due to reduced pesticide and herbicide use,
positive social impacts due to an increase in farmland productivity and
positive health impacts, since they reduce farmers’ exposure to toxic
substances, especially in developing countries.
The distribution of conflicting pieces of information by the
biotechnology industry on the one hand and environmental groups on the other
hand increases consumers’ fears, thus leading to continuous resistance to the
products of agricultural biotechnology. This phenomenon can be observed not
only in countries with a low rate of adoption of GM crops, such as European
countries, but – though to a lower extent – also in countries that are large GM
adopters such as the
Given the marked contrast between scientific judgement and public
opinion on GM foods, politics is facing the huge problem of how to regulate
this market. There are mainly three options: (i) banning GM foods, (ii)
allowing GM foods without segregation from their conventional counterparts and
(iii) allowing GM foods with segregation from their conventional counterparts.
The first two policies have serious potential drawbacks. Banning GM products
may be inefficient as potential welfare gains from the use of biotechnology
will not be realized. On the other hand, allowing the introduction of GM foods
into the food chain without segregation reduces consumer choice and, given
consumers’ strong resistance, may cause the collapse of entire market segments.
The third option implies the creation of two separate production tracks and the
introduction of a labeling scheme allowing consumers to choose between GM and
non-GM food products. The underlying motivation of a labeling scheme in this
case is to avoid adverse selection due to asymmetric information. Because GM
content is a credence attribute that cannot be identified by consumers through
taste or appearance, without labeling, consumers will not have enough
information to express their true preferences for this attribute in their
purchasing behavior. While segregation and labeling of GM products is beyond
dispute the choice of labeling scheme, mandatory or voluntary, is a deeply
controversial issue, and its dimensions increase proportionally to the spread
of GM products into the food chain. A basic difference between voluntary
labeling and mandatory labeling is in the amount of labeling and segregation
costs they generate. While under a mandatory labeling scheme all products must
be tested, under a voluntary labeling scheme only producers who want to place a
label on their products need testing. Economic arguments in favor of voluntary
labeling are based on this difference. In
In this paper we use laboratory experiments to investigate (i) consumers
acceptance of “first generation” GM foods in Germany, (ii) the effect of
neutral information on consumer acceptance of GM foods, (iii) the existence of
a hypothetical bias when consumer preferences are elicited in the absence of an
actual purchase, and (iv) the impact of different labeling schemes on the
ability of consumers to express their preferences for GM foods. For this
purpose we conducted experimental auctions for GM and non-GM food products with
a random sample of the resident population of
Keyword: labeling, genetically modified foods, consumer preferences,
experimental auctions
Abstract: Lorsqu'on évalue par des méthodes expérimentales le désir de consommer un nouveau produit alimentaire, l'on élicite par des mécanismes d'enchère le consentement à payer d'un acheteur potentiel pour un attribut du dit produit. Cette communication s'intéresse à la prise en compte par des méthodes expérimentales des autres consentements qui interviennent dans le processus d'adoption d'un nouveau produit (consentement à croire, à accepter, à essayer, à sentir, à échanger) et leur articulation avec la stratégie de diffusion du produit innovant sur le marché. En effet, peu de recherches, même en économie expérimentale, proposent une démarche intégrée de prise en compte de ces dimensions multiples du consentement.
Nous définissons les produits alimentaires porteurs d'attributs de croyances dans le contexte théorique de l'analyse de Nelson (1970), Darby et Karni (1973), Grolleau et Gasmi (2005). Selon ces auteurs, les produits alimentaires peuvent être considérés comme des paniers d'attributs procurant de l'utilité aux consommateurs. Les stratégies de différenciation des produits alimentaires se réfèrent de plus en plus à des attributs "cachés", dont les consommateurs ne peuvent détecter les propriétés promises avant l'achat ou même après l'achat (le respect de l'environnement lors du processus de production, l'éthique ou le bien être animal - Antle, 1999, la fonction santé, la convivialité de consommation…). Ainsi sont mises en place des stratégies de différenciation informationnelle (produits santé, non-OGM, bio…). Ces attributs exposent les consommateurs à des risques de manipulation d'une information inégalement répartie entre un producteur détenteur de l'information et un consommateur non-informé, d'autant plus lorsque la communication se fait sur des croyances dissonantes (par exemple, le soja est bon pour la santé mais peut être un OGM, les repas traditionnels sont conviviaux, mais gras, la consommation de bière est conviviale, mais nuit à la santé…). Dans ce cadre, l'accent dans la communication est mis sur l'attribut valorisant, vendeur, créateur de "club" d'initiés (membres de slow food, acheteurs de produits bio, clients habituels d'un certain endroit "branché"…), qui est un attribut influent, c’est-à-dire explicitement pris en compte dans le processus décisionnel de l’acheteur (et dans la communication du vendeur), alors que l'attribut dissonant est occulté dans le processus entourant la vente, mais peut rester prégnant dans les croyances de consommation. En fonction de la capacité des consommateurs à vérifier ou à déduire la qualité des attributs proposée, les économistes distinguent trois catégories d'attributs correspondant à des degrés de vérifiabilité de moins en moins accessibles: les attributs de recherche (par exemple la couleur d'un fruit), d'expérience (par exemple le goût d'un fruit) et de croyance (par exemple un fruit issu d'un processus respectueux de l'environnement) .
Nous nous concentrons sur l'étude des attributs de croyance et, dans la multitude des formes que cela peut revêtir, nous nous intéressons aux attributs de tradition, santé et plaisir. Ces trois attributs sont en même temps les plus communs dans les communications liées aux politiques nutritionnelles et les plus cités dans les sondages liés à la recherche de satisfaction des consommateurs.
Puisque ces produits sont porteurs d'attributs liés aux croyances, tout processus décisionnel (du coté vendeur ou acheteur) est lié à la perception des attributs en question ou aux attentes de perception de ces attributs. Ainsi, nous utiliserons dans notre analyse les résultats des investigations portant sur les processus cognitifs de traitement de l'information en les adaptant à notre cas d'étude : l'utilisation de l'information utile (perçue) en cas de dissonance cognitive (et l'incidence sur la rapidité de la fixation de l'équilibre) et le processus de sélection de cette information par la focalisation de l'attention sur l'attribut valorisant.
Premièrement, l’attention est un processus qui "exprime la capacité des ressources de traitement de l’information qui va être engagée par l’individu pour traiter le stimulus auquel il est exposé" (Filser, 1994). Or l'économie expérimentale (entre autres disciplines) a depuis longtemps démontré que les ressources de traitement de l'information des individus étant limitées (voir par exemple Nagel, 1995, ou Camerer, 1998), le producteur (le vendeur) se trouve confronté à un consommateur à l'attention limitée, donc ne peut se contenter de fournir une information factuelle, complète et pertinente, mais devra sur-pointer certains attributs afin de capter l'attention des consommateurs par l'intervention de processus connexes au simple traitement de l'information. Concrètement, les modalités de conception des signaux sur les attributs des produits influent sur leur efficacité. Nous nous concentrons sur quelques facteurs susceptibles de contribuer à cette captation et à l'économie des capacités attentionnelles des individus : (1) l'intégration des repères préexistants (2) la crédibilité de la source de l’information (3) la personnalisation du message (4) la forme de transmission de l'information (Grolleau, Gasmi, 2005), mais traitons ces facteurs dans un contexte expérimental.
En second lieu, nous appuyons notre analyse sur un autre résultat de l'économie expérimentale lié aux environnements informatifs dissonants; en effet, nous avons démontré (Sutan et Willinger, 2005, 2006), qu'en situation cognitive dissonante (où l'individu perçoit des signaux contrevariants sur un équilibre – concrètement, des informations correspondant à des étapes de réflexion de plus en plus profondes mais qui fournissent des indications contradictoires), il est cognitivement plus facile d'approcher l'équilibre qu'en situation d'information à effets provariants (où chaque nouvelle étape introspective confirme uniquement la direction de l'information acquise dans l'étape précédente), parce que l'équilibre est mentalement scanné de manière répétée et donc l'information utile est accrue par la fixation des informations d'un certain ensemble. Il apparaît donc qu'une communication sur un produit porteur d'attributs dissonants peut être plus efficace du moment que les attributs sont identifiés clairement et que la communication se fait sur les deux attributs (ce qui peut sembler paradoxal à première vue). Nous tentons d'approfondir ce point par des résultats d'expériences contextualisées sur quelques produits. Nous adoptons cette démarche parce qu'actuellement, les informations fournies se concentrent uniquement sur un attribut : par exemple, dans le cadre des produits à base de soja qui imitent les yaourts, l'accent est actuellement mis sur le côté santé alors que les études révèlent que les consommateurs sont demandeurs de santé et plaisir, même si la présence des deux attributs augmente la proportion de croyances dissonantes. Une communication sur ces produits en matière de vertus de santé, mais aussi de risques, augmenterait la rapidité de la décision des consommateurs (la sélection de l'équilibre), ainsi que le niveau de confiance exprimée dans leur décision.
Nous allons essayer de montrer que par des
séances d'économie expérimentale une correspondance entre les étapes de
décision dans adoption d'une innovation et les étapes de définition d'un
consentement lié à un produit alimentaire porteur de croyances et donc
inducteur de statut social peut être établie pour les épices de Bourgogne, un
pain santé et une boisson pour sportifs. Nous montrons, aves des
Keyword: willingness to pay -willingness to accept - willingness to
taste - willingness to exchange - willingness to adopt - food attributes -
beliefs and consumption
Co-author(s): MULLER, Laurent (INRA - UMR GAEL);
RUFFIEUX, Bernard (INRA - UMR GAEL)
Abstract: This presentation introduces the
results of an experimental study aimed at assessing consumer preferences for
nutritionally improved dairy products and for their nondairy substitutes, with
a focus on the link between nutritional performance and production process in
consumers’ valuation of food products which are high in fat or perceived as
such by consumers. An experimental campaign was conducted in June,
Fat consumption and its impact on health –
especially on risks of cardiovascular diseases- have become a concern among
consumers and health professionals. Dietary fat intake among the French
population needs to be both reduced in total quantity and improved in quality.
More specifically, the saturated fat/unsaturated fat ratio in the total fat
intake is deemed too high and needs to be reduced. Furthermore, recent studies
show a lack of knowledge among consumers for nutritional properties of food
products. Some products such as milk are perceived as way higher in fat than
they actually are, while others, such as oil, are believed by consumers to be
lower in fat than in reality. This might lead to confusion in the consumers’
buying behaviors for food products.
The dairy industry is particularly concerned by
these nutritional stakes, both because some dairy products are high in total
fat or perceived as such by consumers, and because dairy fat contains a high
quantity of saturated fat and too little unsaturated fat. Solutions to these
problems can be brought at different stages of the processing chain of dairy
products. Two main ways are currently being considered by the French dairy
industry: (1) improvement of the composition of dairy fat “on the farm”, by
adding complements to the cows’ fodder such as flax, or fish flour (2)
improvement of the quality of the fat in the final product, by mixing dairy fat
with other fats with better nutritional performance, such as vegetable or fish
oil. Products resulting from these two processes may have either very different
nutritional performances.
The specific research questions for the present
study are threefold: (i) What is the consumers’ acceptance of food products
whose production process has been modified so as to improved their nutritional
properties? (ii) What is the trade-off between preferences for process and for
nutritional efficiency? (iii) What is the link between the consumers’ level of
knowledge and their purchasing behaviour for this type of products? .
The focus of the majority of studies on
consumer preferences for nutritionally improved food products has been placed
on attitudes and perceptions rather than on economic behaviours (Peng et al.
[2006]). Some economic studies have focused so far on the link between
functional intensity and information (Doyon et al. [2008]) in consumer
preferences. The only studies to our knowledge to have investigated consumer
acceptance for functional food products according to their process, have been
made on Canadian consumers. Consumers' preferences were revealed in these
studies through.
Our study used an incentive-compatible auction
mechanism to study French consumers’ preferences for nutritionally improved
dairy products obtained with different processes. Experimental economics have
been used increasingly over the past years in agricultural economics as a tool
to investigate consumers’ preferences for food products (Lusk [2004], Alfnes
[2006]). Because subjects in the laboratory are placed in real economic
situations that are created and controlled by the experimenter, this technique
of value elicitation is generally believed as superior to declarative surveys.
A fourth price sealed bid auction mechanism was
used to elicit the subjects’ willingness-to-pay for ten types of butters and
butter substitutes, differing by their production process and by their
nutritional performance. The products were sold successively in two different
information conditions so as to measure the extent to which information about
the process and the nutritional properties of the products impacts on
consumers’ economic behaviour.
Preliminary results indicate an impact of
information about the production process on the subjects’ acceptance of
nutritionally improved products. Furthermore, preferences for nutritional
improvement of the products, as well as the reaction to information on
nutritional properties, appear to be linked with the level of prior general
knowledge on nutritional properties of fat products and on nutritional
recommendations. A stronger and much more detailed analysis of the results of
the experiment will be available by the time of the conference.
Keyword: dairy products, dairy substitutes,
consumer preferences, experimental economics, nutrition
Co-author(s):
MULLER, Laurent (INRA); LACROIX, Anne (INRA)
Abstract: We
propose a new protocol design allowing us to introduce hundreds of different
products in the lab (here food and drink). With this protocol, we are able to
collect the entire daily food consumption of individual subjects (here
low-income-women). We then introduce a (price) policy (a -30% reduction for
fruits and vegetables, a +30% increase for 'junk food') and measure the impact
on the subjects diet. We show the limits of a price policy aiming at improving
the nutritional quality of the target population.
Keyword: Food
behavior, consumer's behavior, Preferences, Nutrition, choice, field experiment
Break 3:30-4:00pm –
Atrium
SESSION F1 CHARITABLE GIVING I
Chair: Adriaan SOETEVENT
Co-author(s): FATAS, Enrique (LINEEX and
Abstract: Experimental literature on charity
giving has explored so far the effect of alternative fundraising schemes (e.g.
rebates). However, very little is known about endogenously funded rebates. In
this paper we test two alternative subsidizing schemes: net and gross rebates.
In both treatments, subjects play first a Public Good Game and then a Dictator
Game in which their donations towards a charity are subsidized. While in the
Gross Rebate (GR) treatment both games are independent, in the Net Rebate (NR)
treatment, subsidies are funded from the collective profit of the preceding
PGG; so, games are linked and the rebate becomes endogenously funded. Our
results suggest that, relative to a baseline treatment (with no subsidies),
donations are increased in both treatments. However, no significant differences
are observed between GR and NR, in line with the existence of a constant
contribution rule. Sharing the tax burden of subsidies generates a partial
crowding-out in top contributors, as they donate less in NR (relative to GR),
but behavior changes in a non-significant way. "
Co-author(s):
ALPIZAR, Francisco (CATIE)
Abstract:
Keyword: Field
experiment
Abstract: This
study reports on a door-to-door field experiment on the effects of introducing
portable debit card machines for mobile payment authorization on the
contributions to charity. About 4,500 households are approached, randomly
divided in three experimental treatments, distinguished by the possibility for
respondents to pay with cash, electronically, or both. The study answers two
related questions. First, does the option to contribute electronically increase
the number of households that contribute to the charity and, conditional on
participation, does the average amount given change? Second, does the
availability of the debit card machines increase payment efficiency? The first
tentative results indicate that adding the option to pay electronically does
not increase participation nor revenues. In the combined treatment almost none
of the respondents uses the machine, but a considerable number of people do
donate electronically if the option of giving cash is not available. In
general, young people are more likely to switch to electronic donations than
elderly people.
Keyword: Payment
systems; Charity; Field experiment; Payment Efficiency
SESSION F2 GUILT AVERSION AND LIE
Chair: Marc VORSATZ
Co-author(s):
KUBE, Sebastian (MPI
Abstract: Mimicking
standard features of electoral accountability and selection models, we conduct
a computerized laboratory experiment in order to identify the influence of
other-regarding preferences on democratic outcomes. We find that elected
candidates are more pro-social towards their constituency the more favorable
approval rates are. In contrast, this systematic positive relationship is not
observed if the appointment is unintentionally determined by computer. These
results suggest that a substantial fraction of candidates is motivated by guilt
aversion. We discuss the implications of these findings for the design of
democratic institutions.
Keyword: guilt
aversion social preferences accountability constitutional design public choice
experiment.
Abstract: Monitoring
corruption typically relies on top-down interventions aimed at increasing the
probability of external controls and the severity of punishment. An alternative
approach to fighting corruption is to induce bottom-up pressure for reform.
Recent studies have shown that both top-down and bottom-up mechanisms are
rarely able to keep service providers accountable. This paper investigates the
effectiveness of an accountability system which combines bottom-up monitoring
and top-down auditing using data from a specifically designed bribery lab
experiment. I compare “public officials” tendency to ask for bribes under: 1)
no monitoring; 2) conventional top-down auditing, and 3) an accountability
system which gives citizens the possibility to report corrupt officials,
knowing that reports lead to formal punishment with some low probability (the
same as in 2). The experimental results suggest that “combined” accountability
systems can be highly effective in curbing corruption, even when citizens’
voice leads to formal punishment with a relatively low probability. In
contrast, pure top-down auditing may prove ineffective, especially in weak
institutional environments.
Keyword: bribery,
monitoring, bottom-up, experiment
Abstract: We study the impact of manipulated
information on agent’s motivation under imperfect information about ability. In
this context of asymetric information at the principal’s advantage, we test
experimentally a model in which the principal can bias strategically the
information he gives to his agent in order to motivate the agent to exert
higher effort. The experimental design is based on the comparison between a
benchmark treatment in which the feedback is trustful and a Bias Treatment in
which the principal can manipulate information. We find that principals express
no lie aversion, agents trust the messages they receive and increase their
effort accordingly. Thus, biased feedback is efficiency-improving.
Keyword: feedback, bias, motivation, experiment
Co-author(s):
PEETERS, Ronald and WALZL, Markus (
Abstract: We
conducted a laboratory experiment to investigate the impact of institutions and
institutional choice on truth-telling and trust in sender-receiver games. We
find that in an institution with sanctioning opportunities, receivers sanction
predominantly after having trusted lies. Individuals who sanction are
responsible for truth-telling beyond standard equilibrium predictions (in the
presence and absence of sanctioning opportunities) and are more likely to
choose the sanctioning institution than other individuals. Sanctioning and
non-sanctioning institutions coexist if their choice is endogenous. Thereby the
former shows a higher level of truth-telling but lower material payoffs than
the latter. We show that models of social preferences fail to explain observed
behavior and demonstrate the descriptive power of explicit preferences for
truth-telling.
Keyword: Experiment;
Sender-receiver games; Strategic information transmission; Institutional
selection; Dynamic psychological games; Social norms.
SESSION F3 DECISION MAKING AND INFORMATION RELEVANCE
Chair: Jean-Louis RULLIERE
Co-author(s):
KOCHER, Martin (CREED,
Abstract: We
examine the development of risk and ambiguity attitude in children and
adolescents by running experiments with more than 800 subjects aged 8 to 17
years. In this age period adolescents face an increasing number of decisions
with uncertain consequences and with often severe long term effects. Examples
include decisions about whether to start smoking, use other drugs or practice
safe sex. Our study uses an elicitation task for risk and ambiguity attitude
that is identical for all participants. All participants make decisions with
real financial incentives. Consistent with research from psychology we find
that young children are risk seeking and that participants become more risk
averse with age. We observe, however, that in our experiments this effect is
caused by selection effects and by extreme choices of participants in the
younger cohorts that seem unrelated to probabilistic reasoning. Controlling for
selection and extreme behavior, we find no age effect on risk attitude.
Furthermore our female participants behave more risk averse than their male
counterparts. Ambiguity aversion is strong in all age groups and it increases
slightly with age. Gender does not affect ambiguity attitude in our sample.
Ambiguity aversion is elicited through an Ellsberg two color choice task, and
we control for individual risk attitudes using the alpha-maxmin framework
(Ghirardato et al. 2004).
Keyword: decision
under uncertainty, experiments with children
Co-author(s): VOGT, Bodo
(Otto-von-Guericke-Universität
Abstract: This study discovers a new violation
of Expected Utility Theory in risky choices that cannot be explained by
theories like Prospect Theory, Disappointment or Regret Theory. In a lottery
choice experiment the influence of a dominated alternative on certainty
equivalents is shown. One group of subjects was offered a series of choices
between a lottery ticket with a 50-50 chance of winning and a sure payoff. A
second group was offered the same choice plus a dominated lottery that as it
turned out was not chosen by any participant. As a result, the average chosen
sure payoff in the second group was higher than in the first group. That means,
by adding a dominated alternative to a choice set, the certainty equivalent of
a lottery increases on average.
Keyword: risky choices, irrelevant
alternatives, violations of expected utility theory
Co-author(s):
JACQUEMET, Nicolas (CES,
Abstract: If
a Roulette Wheel and a One Armed Bandit are driven by the same distribution of
probability, why certain persons think that they will be more fortunate by
playing with a Roulette Wheel rather with a One Armed Bandit, whereas the
others think of the opposite? Do we observe more women or men between these
casino games? The main difference between these two games is due to the impact
of potential comparisons among players about the risk assessment. Whereas a One
Armed Bandit is an individual game, gamblers around a Roulette Wheel table can
compare their chances to win with those the others. This assessment takes into
account the risk aversion, but not only. An optimist gambler discerns him as
luckier than others around the table. According to the theory, there is not
therefore any reason to think that an optimist agent is an agent that has a
taste for the risk, or that a pessimist agent is an agent who is risk averse.
We propose a test based on experimental protocol and data, which distinguish
risk aversion and optimism / pessimism bias. Hoelzl and Rustichini (2005) offer
a test but it gives an assessment of over (or under) confidence about a
relative performance. In this paper we propose the same kind of test but on
risk and probability. We ran an experiment with three treatments for each
session of 15 participants. The first treatment uses an index to evaluate the
risk aversion of each participant. This index is based on the protocol of Holt
and Laury (2002 - 2005).This part of the experiment is necessary in order to
control risk aversion at the individual level and then to distinguish risk
aversion from optimism. The two following treatments ”Individualistic Lottery”
and “Holistic Lottery” can reveal a bias of optimism / pessimism according to
different perceptions of the same risk on probability or frequency. We control
a possible treatment effect (half of the sessions with “Individualistic
Lottery” as the first treatment and “Holistic Lottery” as the second treatment
the second half with the reversed order). The structure of the two treatments
is identical: for each period, a participant has an initial endowment of 20
tokens and he must decide to share this endowment between two activities: A and
B. The outcome of A is known and certain whereas B is more (good news) or less
profitable than A (bad news). The design differs however between the two
treatments: .
• In the
treatment “Individualistic Lottery” before the allocating decision (between
activities A and B) the participant learns first for each period the number p
of black balls for the (the bad news) and the number of 15-p of white balls for
the (the good news). Each participant plays with his real bingo cage (but the
result is known only at the end of session). .
• In the
treatment “Holistic Lottery”, before the allocating decision (between
activities A and B) the participant learns first for each period the number n
of participants who will receive certainly the bad news among the 15
participants of the session. This rule is common knowledge because the n
participants among the 15 are selected by only one bingo cage (but the result
is known only at the end of session). After these treatments, we submit to the
participants a post-experimental questionnaire which assesses the participant’s
optimism in a more general context. The Life Orientation Test Revised (LOT-R
developed by Scheier, Carver and Bridges [1994]). Only at the end of
experimental session, each participant discovers her profile of the 44
outcomes; in fact there is no learning effect during the experiment, like a one
shot game. We compare at the individual level the allocating decision of the 20
tokens between the two activities A and B. There is a decrease of the number of
tokens affected for the risky activity B according to a growth of the
probability p in the treatment “Individualistic Lottery” or the number n in the
treatment “Holistic Lottery”. So it shows that the participants understood the
situation described by the protocol well. On average, the investments in the
risky option B during the “Holistic Lottery” treatment are higher by 1,39 than
those in the “Individualistic Lottery” treatment (significant to 1%). Moreover,
one could prove that the difference between the two treatments is meaningful
and as a consequence, there is a optimism bias. These results are confirmed by
econometrical estimations. Other econometrical results put in evidence the
relation between risk aversion and optimism; also the determinants of the bias
of optimism as the gender. As a conclusion in terms of the behavioral
economics, we confirm that the shape and of uncertainty sources conditions the
perception of uncertainty and finally ground some bias as the optimism. "
SESSION F4 INVESTMENT
Chair: Frans VAN WINDEN
Co-author(s):
Abstract: This laboratory experiment aims to clarify to what extent and
in which direction investors react to new information on the ethical standards
of firms. The extensive literature on this issue is divided. The demand of a
share is considered as uncorrelated, positively correlated, or negatively
correlated with information on ethical excellence according to the theory
embraced and/or the evidence examined. The ambiguity of results obtained so far
depends in part on the complex motivations underlying financial decisions that
cannot be easily disentangled. In this paper we resort to a laboratory
experiment in order to isolate the effects of information on the ethical
standards of a firm from other factors, different from expected financial
returns, which in principle may affect the demand of its share. The
decision-makers in the laboratory receive a financial endowment and are invited
to invest it in a portfolio of financial assets chosen from a limited list of
shares of the same industrial sector. We provide information on the expected
returns of each of them based on their past performance. The only additional
information about each share is about their inclusion in an ethical index, or
exclusion from it. We can thus verify whether the investors react to
information about the ethical standards of firms as assessed by the managers of
the ethical fund. Our findings show that experimental subjects do not limit
themselves to maximize the expected returns as many of them are characterized
by ethical preferences. Their behaviour is a function not only of their
individual pay-offs but also of the information available to them on the
ethical standards of the firms. Between the two arguments of the utility
function we found a fairly well-defined trade-off. This behaviour is definitely
inconsistent with traditional Homo-economicus rationality. We ascertained,
however, that the behaviour of student is not sheerly irrational but is
consistent with identifiable rules of behavioural rationality.
Keyword: Investors, Ethical stock indexes, SRI (Socially Responsible
Investing) funds, experiment
Co-author(s):
WOLFF, Irenaeus (
Abstract: Governments
worldwide provide subsidies and funding of risky entrepreneurial projects.
Funding takes various forms such as lump-sum subsidies, debt or equity. In this
paper we investigate the allocative efficiency of funding structures. We
introduce and experimentally explore a model of entrepreneurial external
finance with limited liability and moral hazard. We find that, in line with our
theoretical predictions, the standard debt contract and outside equity are dominated
by nonmonotonic repayment contracts and lump-sum subsidies in the laboratory.
Further, we experimentally investigate if non-monotonic repayment contracts
endogenously emerge in a investor-entrepreneur relation and observe their
incentive effects. Our theoretical and experimental results are suggestive for
a government funding policy demanding smaller repayments if entrepreneurial
projects turn out to be very successful and larger repayments otherwise.
Keyword: entrepreneurs,
moral hazard, public funding, external finance
Co-author(s):
KRAWCZYK, Michal (CREED -
Abstract: This
experimental study is concerned with the impact of the timing of the resolution
of risk on people’s willingness to take risks, with a special focus on the role
of affect. While the importance of anticipatory emotions has so far been only
inferred from decisions regarding hypothetical choice problems, we had
participants put their own money at risk in a real investment task. Moreover,
emotions were explicitly measured, including anticipatory emotions experienced
during the waiting period under delayed resolution (which involved two days).
Affective traits and risk attitudes were measured through a web-based
questionnaire before the experiment and participants’ preferences for
resolution timing, risk, and time were incentive compatibly measured during the
experiment. Main findings are that delayed resolution can affect investment,
that the effect depends on the risk involved, and that (among all the measures
considered) only emotions can explain our results, albeit in ways that are not
captured by existing models.
Keyword: Investment
decision, delayed resolution of risk, emotions, experiment
SESSION F5 BELIEFS
Chair: Dietmar FEHR
Co-author(s): PFAJFAR, Damjan (
Abstract: Using laboratory experiments we
establish a number of stylized facts about the process of inflation expectation
formation. Within a New Keynesian sticky price framework, we ask subjects to
provide forecasts of inflation and their corresponding confidence bounds. We
study individual responses and properties of the aggregate empirical
distribution. Many subjects do not rely on a single model of expectation
formation, but are rather switching between different models. About 40 percent
of the subjects predominately use a rational rule when forecasting inflation,
and about 35 percent of agents simply extrapolate trend. Around 5 percent of
subjects behave in an adaptive manner, while the remaining 20 percent behaves
in accordance to adaptive learning and sticky information models. Furthermore,
we find that only 60 percent of subjects correctly estimate the underlying
uncertainty in the economy when reporting confidence intervals. However,
empirical analysis do not support a significant countercyclical behavior of
individuals' confidence intervals.
Keyword: Inflation Expectations, Experiments,
New Keynesian Model, Adaptive Learning
Co-author(s): SUTTER, Matthias (
Abstract: We study in an experiment the
cognition and strategic behavior of individuals and teams in 18 normal-form
games that were first used by Costa-Gomes et al. (2001 Econometrica). The 18
games have various patterns of iterated dominance and unique pure-strategy
equilibria. Decision makers have to indicate for each single game their own
strategy choice, their first-order beliefs about their opponent’s choice, and
their second-order beliefs about the opponent’s first order belief. Analyzing
the strategy choices of decision makers we find that (i) teams play more
frequently the equilibrium strategy than individuals, whereas individuals aim
more often at an outcome that Pareto-dominates the Nash-equilibrium, (ii) the
frequency of equilibrium choices is, in general, inversely related to the
complexity of a game, i.e. to the number of steps of iterated elimination of
(weakly) dominated strategies. We show in a maximum likelihood error-rate
analysis of subjects’ decisions that teams make significantly more often
strategic decisions. The reverse side of this statement is that individuals are
much more likely to ignore the other player’s strategic moves when making own
decisions. Teams can be classified most likely as sophisticated decision
makers, meaning that they play best response to the (actual) probability
distribution of its partner’s decision. Individuals are most likely classified
as naïve types who play best response to beliefs that assign equal
probabilities to its partner’s decision. When we analyse the combination of
strategy choices and first-order beliefs, respectively of first-order and
second-order beliefs, we find in particular that (iii) teams are significantly
more often consistent in their decisions, meaning that they play best response
to their own first-order beliefs about their partner’s choice. The analysis of
first- and second-order beliefs and the error-rate analysis of decision-making
types distinguish this paper from previous studies on the differences between
individual and team decision-making. Yet, our analysis confirms clear and
substantial behavioral differences between individuals and teams. Teams are
much more strategic decision-makers.
Keyword: Strategic thinking, experiment, team
decision making, individual decision making
Co-author(s):
VOGT, Bodo (Otto-von-Guericke-Universität
Abstract: This
study focuses on the question whether risk aversion or beliefs of players
explain the strategic choices in 2x2 coordination games. In a laboratory
experiment we elicit the risk attitude by using lottery choices. Furthermore,
using a quadratic scoring rule, subjects’ beliefs about the choice of the
opponent are elicited directly. Our data show that participants’ behavior is
not explained by risk attitude, but rather is it best response to their stated
first order beliefs. Higher order beliefs follow different patterns which are
in most cases in contrast to Bayesian updating.
Keyword: coordination
games, equilibrium selection, beliefs
Co-author(s):
KUEBLER, Dorothea (TU Berlin and IZA); DANZ, David (TU Berlin)
Abstract: We
study beliefs and choices in a repeated normal-form game. In addition to a
baseline treatment with common knowledge of the game structure and feedback
about choices in the previous period, we run treatments (i) without feedback
about previous play, (ii) with no information about the opponent.s payoffs and
(iii) with random matching. Using Stahl and Wilson.s (1995) model of limited
strategic reasoning, we classify behavior with regard to its strategic
sophistication and consider its development over time. We use belief statements
to track the consistency of subjects.actions and beliefs as well as the
accuracy of their beliefs (relative to the opponent.s true choice) over time.
In the baseline treatment we observe more sophisticated play as well as more
consistent and more accurate beliefs over time. We isolate feedback as the main
driving force of such learning. In contrast, information about the opponent.s
payoffs has almost no e¤ect on the learning path. While it has an impact on the
average choice and belief structure aggregated over all periods, it does not
alter the choices and the belief accuracy in their development over time.
Keyword: experiments,
beliefs, strategic uncertainty, learning
SESSION F6 RATIONALITY
Chair: David DICKINSON
Co-author(s): HAMMOND, Peter (
Abstract: We use a revealed preference
framework to explore the link between individual choice behavior under
uncertainty and the allocation of attention. Subjects were presented a series
of portfolio choice problems, with a basic experimental design like that of
Choi, Fisman, Gale, and Kariv (2007). Instead of directly testing whether
subjects' choices are consistent with utility maximization in the sense of
Afriat's (1967) generalized axiom of revealed preferences (GARP), we employed
Varian's (1982) notion of the supporting set of commodity bundles consistent
with GARP as a test device. As in Gabaix, Laibson, Moloche, and Weinberg
(2003), we presumed that subjects' mental processing speed is limited, leaving
them unable to analyze the entire set of feasible consequences in such a
complex decision task. We constrained the time that was available for each
decision problem and tracked not only subjects' final choices but also the
process of information collection. Preliminary data analysis shows that, as in
a number of previous studies, the majority of decisions was consistent with
GARP. Subjects who made consistent choices needed less thinking time and
allocated their attention almost entirely to the choices which would be
consistent with GARP. On the other hand, subjects whose choices violated GARP
focussed their main attention on inconsistent consequences.
Keyword: Rationality, Uncertainty, Decision
Making, Consequentialism
Co-author(s):
TYRAN, Jean-Robert (
Abstract: We
run a large-scale two-period guessing game over the internet and match
participants’ choices to their socio-economic background information from
registry data. The first period is a standard guessing game. In the second
period, participants are randomly allocated to treatments. Some participants
simply repeat the game. Others play a version in which the game is transformed
into an individual optimization task in which it is dominant to choose 0. We show
that “the educated”, i.e. people with high school education, better grades in
high school and those majoring in scientific-mathematical disciplines, make
choices closer to the target number in the first round and are better in
adjusting their guesses in period two of the strategic game. We find that about
10 percent of the participants are sophisticated players who are able to solve
the individual optimization task, and that “the educated” are more likely to be
sophisticated. Thus, “the educated” are not only better at solving the
individual optimization task but are also better at guessing others’ behavior
in the strategic game.
Keyword: bounded
rationality, strategic uncertainty, disequilibrium, guessing game, beauty
contest, newspaper experiment, internet experiment, step-level reasoning
Co-author(s):
FATAS, Enrique (LINEEX,
Abstract: Rubinstein
(2007) analyzes decisions by lecture audiences and students in simple virtual
game situations. On the basis of several thousand observations, Rubinstein
concludes that his methodology “is a cheap and incisive tool for understanding
the process of reasoning involved in classical economic decision problems.
Furthermore, the results appear to be more clear-cut and less speculative than
those obtained recently by fMRI studies”. In this paper we present a systematic
study of time response across 8 different games. All subjects are monetarily
rewarded on the basis of their responses. All subjects went trough the same
sequence of games, and a set of three alternative risk aversion and non verbal
intelligence tests. This sophisticated experimental design allows for a within
subject analysis. In addition, all subjects answered a deep socio economic
questionnaire. Our results suggest that Rubinstein is right when claiming that
time responses is a cheap and incisive method to understand reasoning process
in assorted games. However, the standard experimental methodology used in our
paper yields some contradictions with his intuitive results. Our results
suggest that time response in repeated interactions is better understood with
the help of simple measures of IQ and social preferences.
Co-author(s):
ANDERSON, Clare (
Abstract: The
effects of total sleep deprivation (SD) on higher level decision-making are
only recently becoming more rigorously examined. In such cases, the focus has
been on various components of individual decision-making. There is a complete
absence of research on the effects of SD on decision-making in interactive
environment or social exchange. Given that sleep loss is becoming more and more
pervasive in modern society, this is an important gap in the literature. We
examine behavior of 16 subjects who underwent 36 hours of total sleep deprivation
under laboratory conditions. Subjects engaged in simple (anonymous) ultimatum
and dictator bargaining and trust experiments both well-rested and following 36
hours TSD. Our results show that while SD did not significantly affect
ultimatum or dictator offers, it does significantly increase one’s minimum
acceptable offer in simple bargaining. Also, though marginally insignificant,
first-movers in the trust experiment appear to pass (i.e., trust) less
following TSD than when well-rested. (additional subjects will be run to
increase our power to detect this second result). Results thus far are
consistent with a hypothesis that SD increases aggression in bargaining and
social exchange environments.
SESSION F7 SOCIAL PREFERENCES AND NORMS
Chair: Marco FAILLO
Co-author(s): POTTERS, Jan (
Abstract: We track subjects’ eye-movements
while they make choices in simple three-person distribution experiments as in
Engelmann and Strobel (2004). We examine whether eyemovements are
systematically related to the choices subjects make. In particular, we
characterize individual subjects in terms of three different choice rules:
maximizing efficiency, maximizing the minimum payoff, and minimizing envy. We
find a systematic and significant relationship between the choice data and the
classification based on the eye-movements data.
Co-author(s): KRAWCZYK, Michal (CREED,
Abstract: This paper reports the results of a
'probabilistic dictator game' experiment in which subjects had to allocate chances
to win a prize between themselves and a dummy player. Using a within-subject
design we manipulated two aspects of the decision: the relative values of the
prizes--being equal for both players, higher for the dictator or higher for the
dummy--and the nature of the lottery determining the earnings-independent draws
for the two players (`noncompetitive' condition) vs. a single draw
('competitive' condition). We also asked for decisions in a standard,
nonprobabilistic, setting. The main results can be summarized as follows:
first, a substantial fraction of subjects do share chances to win, also in the
competitive treatments, thus showing concern for the other player that cannot
be explained by outcome-based inequality aversion or quasi-maximin models. Second,
this concern hardly ever leads to equalizing expected payoffs. Third, subjects
share less in the probabilistic treatments than in the deterministic control
treatment, possibly because in the former even a generous choice cannot remove
outcome inequalities. Fourth, subjects appear to be somewhat
efficiency-oriented, as they share more when partner's prize is relatively
high.
Keyword: social preference, other-regarding
utility, risk attitude, inequality aversion, social concern, social preference
under risk
Co-author(s):
FEHR, Dietmar (Berlin Institute of Technology)
Abstract: We
conduct an artefactual field experiment in one of
Co-author(s):
OTTONE, Stefania (EconomEtica and
Abstract: The
main contribution of this paper is twofold. First of all, it focuses on the
decisional process that leads to the creation of a social norm. Secondly, it
analyses the mechanisms through which subjects conform their behaviour to the
norm. In particular, our aim is to study the role and the nature of Normative
and Empirical Expectations and their influence on people’s decisions. The tool
is the Exclusion Game, a sort of ‘triple mini-dictator game’. It represents a
situation where 3 subjects – players A - have to decide how to allocate a sum S
among themselves and a fourth subject - player B - who has no decisional power.
The experiment consists of three treatments. In the Baseline Treatment
participants are randomly distributed in groups of four players and play the
Exclusion Game. In the Agreement Treatment in each group participants are
invited to vote for a specific non-binding allocation rule before playing the
Exclusion Game. In the Outsider Treatment, after the voting procedure and
before playing the Exclusion Game, a player A for each group (the outsider) is
reassigned to a different group and instructed about the rule chosen by the new
group. In all the treatments, at the end of the game and before players are
informed about the decisions taken during the Exclusion Game by the other
coplayers, first order and second order expectations (both normative and
empirical) are elicited through a brief questionnaire. The first result we
obtained is that subjects’ choices are in line with their empirical (not
normative) expectations. The second result is that even a non-binding agreement
induces convergence of empirical expectations – and, consequently, of choices.
The third results is that expectation of conformity is higher in the partner
protocol. This implies that a single outsider breaks the ‘trust and
cooperation’ equilibrium.
Keyword: Agreement
Norm compliance Beliefs
Saturday, September
13th, 7:30pm CONFERENCE DINNER AT
THE
1, place de la
Comédie 69001
SESSION G1 CHARITABLE GIVING II
Chair: Luca CORAZZINI
Abstract: This
paper attempts to provide a clearer picture of the incentives behind people’s
donation decisions, particularly of the roles of non-monetary components of the
utility function – warm-glow and prestige. Theoretically, we refer to the work
of Harbaugh (1998a), which models a taste for prestige on the behavior of donors
and charities in combination with the effect of warm glow (Andreoni 1990). We
adopted an extended Stone-Geary utility function to simulate the donor’s
utility, prestige, and optimal donations given different reporting plans
commonly used by charities, which are known as “No Reporting Plan (NR)”, “Exact
Reporting Plan (ER)”, “Category Reporting Plan (CR)” and “Category without
Reporting Plan (CNR)”. Lab experiments are designed to test the theoretical
predictions on the effects of those reporting plans, and to estimate the
importance of the tastes for prestige and for warm glow as motivations for
giving. The data from 150 participants shows that NR has the same effect of ER
and both of them are superior to the CR and CNR. Although CR does not help to
yield higher donations, it changes people’s behavior by eliminating some focal
points demonstrated in NR. A comparison between NR and CNR provides weak
support for the effect of prestige. Warm glow proves to be the major driving
force of people’s donation decisions.
Keyword: Charitable
giving, prestige, warm glow, Category Reporting, experiments
Abstract: When
making a decision on donations, people are often not guided solely by altruism.
Alternative motives, such as social approval, prestige, desire for a “warm
glow”, positive self-image, avoidance of scorn and other social and
psychological objectives come into play. This paper aspires to discriminate the
means of social influence and to forecast how alterations in the economic and
social environment shape altruistic behaviour in experimental settings. More
specifically, by including the factor of social comparisons we explore its
influence on the donation behaviour of participants. They earn their payoffs
either by engaging in a difficult or an easy task. After receiving their
experimental payoff, participants are offered to voluntarily give part as a
donation to a specified charity organisation (UNICEF). The treatments vary the
given payoff information by comprising of (i) only the amount earned, (ii) the
amount earned and their payoff rank in the treatment group or (iii) the amount
earned, their payoff rank in the treatment group and the full payoff
distribution of participants in the treatment group. Altruistic behaviour
differs significantly conditional on the alterations in the economic and social
environment. Donations of participants vary with the task type, their group
ranking, payoff expectations and the social value orientation profile.
Purposely acquiring a better understanding of the motivations for prosocial
behaviour endows us with an enhanced insight into the nature of human altruism
as well as the knowledge of institutional design and the optimal behaviour of
charities that could foster donations of time and money to public goods.
Co-author(s):
BERNASCONI, Michele (
Abstract: Public
goods are of paramount importance to economic and societal life, but their
provision through private contributions constitutes a major (incentive)
problem. The present paper experimentally demonstrates how "unpacking"
provides a possible approach to mitigate this dilemma. Subjects' total
contributions increase when a single public good is split into two identical
public goods, although marginal per capita returns of contributions are
constant across treatments. This finding not only informs NGOs about possible
new ways to increase charitable donations in general, the unpacking effect
presented here might potentially be of importance for a broad range of
mechanisms involving individually subdividable decisions.
Keyword: public
goods, voluntary contributions, unpacking effect, laboratory experiment,
charitable donation.
SESSION G2
AUCTION II
Chair: Stéphane ROBIN
Co-author(s):
BATTIGALLI, Pierpaolo (
Abstract: The
paper focuses on First-Price Auctions (FPA henceforth) with private valuations
and independent signals. Our goal is to design experiments to test the assumption
that bidders' .conjectures are strategically sophisticated (hence consistent
with a careful introspective analysis of the game), although not necessarily
correct. The analysis of simultaneous bidding games typically builds upon the
notion of (Bayesian) Risk-Neutral Nash Equilibrium (RNNE henceforth), in which
are implicit the assumptions that players are rational and hold correct
conjectures about the bidding behavior of their opponents. However, in the
theoretical analysis of standard auctions, there are no compelling reasons to
assume that each player holds correct conjectures on the behavior of (each of)
his opponent(s). Battigalli and Siniscalchi (2003, BS henceforth) make a first
step to address this problem: they do not assume equilibrium behavior in
first-price sealed-bid auctions and show theoretically that although strategic
sophistication of bidders. conjectures has nontrivial implications for bidding
behavior, it is consistent with a wide range of non-equilibrium beliefs. In
particular, strategic sophistication seems consistent with some of the
significant and persistent deviations (overbidding, decreasing proportional
deviations, heterogeneity) from the RNNE highlighted by the experimental
evidence on FPA with independent private values. BS theoretical findings
suggest that most of the observed deviations from RNNE may be due to players
holding incorrect conjectures even though they are able to think strategically
about the auction game. In this paper, we follow their intuition of adopting the
notion of (interim) rationalizability to capture strategic sophistication and
we regard nonequilibrium (but strategically sophisticated) bidding as a
potential explanation of experimental findings. First of all, we use data on
(standard) first-price auctions produced in previous experimental works to
check whether BS theoretical analysis is qualitatively consistent with the
existing experimental findings, according to Selten and Krischker'.s (1983)
measure of predictive success for area theories. Then [and this is the main
technical contribution of the paper] we design an experimental setting able to
minimize the impact of bounded rationality in FPA with private and independent
valuations, in order to see how much of the deviations from the RNNE can be explained
by the heterogeneity of beliefs allowed by strategic sophistication. Since such
deviations may be due to bidders' .inability to compute a best response (a
complex problem), we produce in the laboratory a .Decision Support System .(DSS
henceforth) that allows bidders to focus on guessing the behavior of their
competitors (as a function of their valuations) without having to worry about
the problem of computing the optimal response to their conjecture. The DSS
works in the following way: before bidding, each participant provides as inputs
his valuation and his conjecture (e.g. in the form of a graph of the
competitors. bidding function) and the system gives him back as output the
corresponding (risk-neutral) best reply. Hence, the DSS does not suggest to a
player how to think about her competitors' .behavior, it only suggests the
optimizing bid given her valuation and conjecture. With the introduction of the
DSS, bidders could be helped to make two or three steps of the iterative
deletion procedure: this involves the iterative deletion, for each possible
type, of bids that cannot be justified by beliefs consistent with progressively
higher degrees of strategic sophistication. Even though we identify and isolate
the impact of bounded rationality on players. best reply calculation, we
observe that players.' bidding behavior does not respect the RNNE prediction,
but almost all their actual bids fall inside the set of rationalizable bids, as
predicted by BS. We are also able to account for players' .risk aversion in
bidding. Before letting them play the FPA, we elicit the risk aversion of the
participants to our experimental sessions and we transmit it to the DSS. Having
internalized the specific coefficient of risk aversion of a player, the DSS is
able to provide him the best reply according to his risk attitude. Also in that
case, almost all players.' actual bids fall inside the set of BS.'s
rationalizable bids.
Keyword: auctions;
interim rationalizability; experiments; decision support system.
Co-author(s): GüTH, Werner (Max Planck
Instuitute of Economics,
Abstract: Let's assume a group of individuals
collectively own a unique indivisible commodity, e.g., a piece of art or a
house, which should be allocated to one of them while compensating the others
monetarily. The previous theoretical and experimental analyses are based on
independently and identically distributed private values (Güth,
Ivanova-Strenzel, Königstein and Strobel (1999, 2003)). Here, we complement
these results with an analysis of the common value-case. We study repeated
bidding behavior under 1st- and 2nd-price rule, implementing auctions and fair
division games in the lab. Our main finding is that more cases of overbidding
in the fair division game lead to a larger magnitude of the winner's curse
under both price rules.
Keyword: common value auction , winner's curse,
learning behavior
Co-author(s):
DEQUIEDT, Vianney (INRA GAEL)
Abstract: What
information disclosure policy should be adopted by the seller in a repeated
auction? When identical and common value items are auctioned sequentially,
information about the outcome of the elapsed auctions, like the winner’s bid,
modifies how the bidders value next item and could impact their bidding
strategy. We analyse this issue in a twice repeated common value auction, both
in theory and in the lab. We show that when the winning bid is disclosed at the
end of the first auction, any symmetric equilibrium of the game necessarily
involves some bunching at the top: the strategy profiles in the first auction
are flat for bidders that receive the highest signals about the value of the
object. However, the impact of that information disclosure on the seller’s
profit cannot be assessed analytically. Therefore, we turn to the lab and
perform a “searching for facts” experiment. We observe that the seller’s profit
decreases with disclosure of the winning bid compared to the case where no information
is disclosed at the end of the first auction. The main reason is that bidders
decrease drastically their bids in the first auction when they know that the
winning bid will be revealed: an anticipation effect. Moreover and as predicted
by theory, bunching occurs for high value signals.
Keyword
: First-price auctions, Common value
auction, Information disclosure, Experiment
SESSION G3 CREDIT
MARKET
Chair: Irene COMEIG
Co-author(s): AYADI, Mohamed and MAMOGHLI, Chokri (Institut Supérieur de Gestion De Tunis)
Abstract: Most of the problems with formal
sector credit lending to the poor in developing countries can be traced to the
lack of collateral. One common feature of successful mechanisms is
group-lending, in which members of a borrowing group can monitor each other.
Since group members have more and better information about each other compared
to lender, peer monitoring is relatively inexpensive compared to lender
monitoring. Theoretically this leads to greater monitoring and greater rates of
loan repayments. In this paper we report the results from a laboratory
experiment of group lending in the presence of moral hazard, peer monitoring
and dynamic game. Our results suggest that group-lending mechanism induice
higher peer monitoring and higher repayment especially when there is more
dynamic incentives. Self-selected groups show high but less stable monitoring
and then less rates of loan repayments.
Keyword: JEL Classification: G21, C92, O2.
Keywords: Group Lending, Peer Monitoring, Moral Hazard, Laboratory Experiment.
Co-author(s): MASCLET, David (CREM,
Abstract: This paper reports the results of an
experiment that investigates the effects of reciprocity and reputation on
credit market performance. To do so, we replicate the three treatments carried
out by Fehr and Zehnder (2005) in their experiment and introduce some
alterations. More precisely, in our experiment, participants are matched by
pairs exogenously so that they have the opportunity of reputation building.
Furthermore, our experiment allows us to investigate the effect of information
on reputation building. In the first treatment called partner "no
information" a lender and a borrower are matched for the all duration of
the experiment. The second treatment ("stranger no information") is
identical to the previous one except that it is played under a stranger
matching protocol. The third treatment ("partner information") solely
differs from the first one by the fact that the lenders have access to the
project selected by the borrowers and the project outcome. The last treatment ("third
party no information") allows for the introduction of a third party in
charge of enforcing the contracts whereas in the three conditions
aforementioned the contracts are not enforceable by an exogenous force. Our
results show that an honour-based market – wherein participants cannot build up
long term relationship – is not viable on the long run because borrowers have
no repayment incentives, though a significant fraction of borrowers reciprocate
fair offers. The opportunity to engage bilateral long term relationships
strongly improves the market performance by partially mitigating the repayment
problem and thus enhancing cooperation between borrowers and lenders. The
latter succeed in applying a conditional contract renewal strategy. As a
consequence selfish borrowers have an incentive to behave reciprocally.
Surprisingly, rendering the information symmetric and transparent between the
two parties involved does not improve market performance. This fact seems to
highlight the prominence of reputation as a disciplining devise. The presence
of an exogenous force in charge of enforcing contract undeniably improves the credit
market functioning by solving the repayment problem and thus giving more
confidence to the investors but also exacerbates moral hazard associated with
project selection. Interestingly, the fact that lenders offer fair financing
conditions significantly lowers moral hazard.
Keyword: Credit market, Reputation,
Reciprocity, Relationship Banking
Co-author(s):
COMEIG, Irene (
Abstract: In
credit markets with asymmetric information and limited liability, moral hazard
can emerge when borrowers choose to increase the riskiness of their projects
after receiving a loan (see Stiglitz, 1990). Behaviorally, however, moral
hazard is not uniformly observed across subjects in experimental credit markets
(see Comeig, Capra, and Fernandez, 2007). This heterogeneity of reactions to
limited liability may be due to large differences in risk attitude among
borrowers and/or due to other individual characteristics, such as
conscientiousness and sense of responsibility. In this paper, we investigate
the personality and emotional processes that underlie her tendency to fall into
moral hazardous behavior after receiving a loan. We also investigate how
institutions interact with individual differences to affect behavior in
contractual contexts. More specifically, we study the effect of credit ratings
on an individual’s tendency to fall into moral hazard. On the one hand, credit rating
can reduce the borrower’s tendency to gamble as bad credit increases borrowing
costs; on the other hand, credit rating can increase the tendency to gamble by
undermining the importance of having a sense of responsibility. We design an
experiment with two main treatments. In the first treatment lenders choose a
loan to offer to a borrower from a menu of possible loans. Borrowers are given
a chance to increase the riskiness of their project in an attempt to get a
higher payoff. There are ten rounds and in each round each borrower is matched
with a different lender. In the second treatment, borrowers face the same set
of choices as before, but they also start with a credit score that can go down
if, in any given round, the project for which a loan is given fails.
Keyword: Credit
contracts, Moral hazard, Credit rating, Personality, Emotions
SESSION G4 INFORMATION AND COMMUNICATION
Chair:
Marco CASARI
Abstract: GAECHTER,
Simon and SEFTON, Martin (
Abstract: Theoretical
considerations (e.g. Akerlof and Yellen, 1988; 1990) and anecdotal evidence
(e.g. Bewley, 1999) point to the importance of pay comparisons in the
workplace: employees compare their pay with those of their peers' to judge the
fairness of the pay structure in their firm. Perception of unfairness may
negatively affect employees' effort and performance. However, empirical support
for the notion that pay comparisons trigger behavioural reactions remains at
best weak, both in the field and in the lab. In this contribution we explore
the importance of effort transparency (i.e. the possibility to access
information about co-workers' performance) in mediating the extent by which pay
comparisons activate employees' behavioural reactions. We argue that
behavioural reactions are less prominent in environments where the co-worker's
effort is scarcely transparent both because individuals may find it more
difficult to form clear notions of pay fairness and because they may find it
convenient to substitute behavioural reactions with cognitive strategies of
inequity reduction (i.e. strategies that allow to cognitively distort the
reality of the comparison situation to one’s advantage). To test the validity
of our conjectures we design a three-person gift-exchange game where the two
employees move sequentially: thus, while they both have full and identical
information about relative wages, they face environments characterised by opposite
degrees of transparency in the co-worker's effort. Results from our laboratory
experiment confirm our conjectures: employees who are informed about the
coworkers’ wage and effort significantly react to pay comparisons, while we
cannot observe systematic behavioural reactions from employees who only learn
the coworkers’ wage.
Keyword: laboratory
experiment; gift exchange; multiple agents; pay comparisons; pay inequities;
Abstract: Previous
experimental literature has deeply analyzed the role of communication and
information in certain games, where the payoff’s structure is given and known
by subjects in advance. This paper presents an experimental investigation on
the impact of information and communication among subjects in ambiguous games
where payoffs depend on the realization of a probabilistic event. In all our
experimental conditions, subjects first repeatedly interact in a game with
uncertain payoffs (our Baseline treatment). Depending on the outcome of a
probabilistic event, the game becomes a Prisoner’s Dilemma or a Stag-Hunt game.
In one treatment (Info), subjects play a repeated game in a second stage in which
they get some information about the maximum (or minimum) value of the
probability associated with plying one of the games. In the other treatment
(Info-Com), “cheap talk” with limited messages is additionally allowed. Our
results show that pre—play communication and information about the censored
probabilities of playing each game does not increase the frequency of choosing
the efficient action. The Baseline treatment outperforms both Info and Info-Com
results. An analysis of the behavioral determinants of these results suggests
that risk averse subjects overreact to information and overweight informative
signals associated with small failure probabilities. Some policy considerations
about R institutions come straightforward from these results
Co-author(s):
JACKSON, Christine and ZHANG, Jingjing (
Abstract: In
an experiment we study how small groups tackle a company takeover game, where
the winner's curse has been shown to be frequent. We find that groups of three
members, who can exchange opinions and chat, place better bids than
individuals. We examine what decisional processes drive the improvement in
group performance. We find that the "truth wins" norm does not
explain the bulk of the data. When there is disagreement, what prevails is
usually not the best but the median opinion. Interestingly, when the minority
is able to change the group decision, the direction of the change is almost always
an improvement. As a consequence, performance by groups improves over time much
faster than by individuals. Risk attitude does not explain this change. Groups
are less risk-averse than individuals, which would have resulted in more
overbidding in the company takeover game. Thus the superiority of group
decisions over individual decisions shall be attributed to the better strategic
ability groups have in solving the intellective task.
Keyword: winner's
curse, company takeover game, risk attitude, group decision making, learning
SESSION G5 NETWORKS
Chair: Martin STROBEL
Co-author(s): COBO-REYES, Ramón (
Abstract: This paper studies the effect of
social relations on convergence to the efficient equilibrium in 2x2
coordination games from an experimental perspective. We employ a 2x2 factorial
design in which we explore two different games with asymmetric payoffs and two
matching protocols: "friends" versus "strangers". In the
first game, payoffs by the worse-off player are the same in the two equilibria,
whereas in the second game, this player must sacrifice her own payoff to
achieve the efficient equilibrium. Surprisingly, the results show that "strangers"
coordinate more frequently in the efficient equilibrium than "friends"
in both games. Network measures such as degree in, degree out and betweenness
are all positively correlated with the strategy which leads to the efficient
outcome with the exception of clustering. In addition, envy is a salient factor
in explaining no convergence to the efficient outcome.
Keyword: Coordination, efficiency, envy,
experiments, friendship, social networks.
Co-author(s):
DI CAGNO, Daniela Teresa (LUISS Guido Carli); SCIUBBA, Emanuela (
Abstract: We
run a computerised experiment of network formation, where all connections are
beneficial and only direct links are costly. Players simultaneously submit link
proposals; a connection is made only when both players involved agree. We use
both simulated and experimentally generated data to test the underlying model of
network formation both at the micro and the macro level. At the level of the
individual, we estimate the individual demand for links. In contrast to the
existing literature, we take into account the correlation among the
observations belonging to a single individual and we control for such
correlation deriving a new estimator mainly inspired by the heterogeneous panel
theory. At the macro level, we provide an econometric analysis of network
convergence, through a system of time equations. In contrast to the existing
literature our method allows us to identify conditions under which convergence
to a stable network architecture obtains.
Keyword: social
network, convergence, best response, expectations, neighborhood effects
Abstract: The
minimum effort game (also called weakest link game) is a multi-equilibria
coordination game where the ranking of equilibria according to payoff dominance
(Pareto ranking) is contrary to the ranking yielded by risk dominance. A very
stable experimental result is that larger groups are not able to coordinate on
the payoff-dominant equilibria and move towards the least risky equilibrium in
repeated games. Various setups have been tried to trigger coordination on
high-payoff equilibria. Examples are pre-play communication and growth of group
size. We conduct an experiment where the minimum effort game is embedded in a
game on network formation. We show that the possible exclusion of others from
the own neighborhood provides a powerful mean to achieve maximum effort in the
minimum effort game. The results remain stable even in very large groups (of
24subjects).
Keyword: Minimum
Effort Game, Weakest Link Game, Networks, Network Formation, Experiment
SESSION G6
TRUST
Chair: Niall O'HIGGINS
Co-author(s):
MITTONE, Luigi (
Abstract: We
experimentally investigate social effects in a principal-agent setting with
incomplete contracts. The strategic interaction scheme is based on the
Investment Game \citep{BDM:95}. In our setting four trustees and one trustor
are interacting and the access to choices of peers in the group of trustees is
experimentally manipulated. We find that when the trustworthiness of some
participants is made available to peers, the high levels of trustworthiness
displayed by those being observed tend to negatively impact on the
trustworthiness of those observing them.
Co-author(s): PRESTON, Anne (
Abstract: Recent research has found that
people’s social preferences are heterogeneous and that some groups share types
of preferences (e.g. women tend to be inequity averters and men social surplus
maximizers). This heterogeneity suggests that people will behave differently in
economic situations in ways that are predictable given the type of social
preference they hold. This study examines economic decision-making by different
social preference categories with respect to fairness, trust, and reciprocity.
We conduct a set of experiments with two parts. In one part, we ask the
participants to make ten decisions about how to allocate sums of money among
themselves and two other participants. The set of answers to these allocation
exercises allows us to classify the participants as self-interested, inequity
averters, or social surplus maximizers. In the other part of the experiment,
the participants play two games with anonymous partners, an ultimatum game and
a trust game. We use game theory to predict offers and responses of the
different social preference types in the ultimatum and trust games given own
preference type and expectations about the opponent’s preferences. We also
incorporate risk and reciprocity in the expected behaviors for each social
preference type. The data set includes actual monetary decisions made by the
players in both games and the subjects’ answers to strategy-type questions on
how they would respond to alternative offers as well as how they expect the
other person would respond to different offers. The results from the ultimatum
and trust games reveal that heterogeneous social preferences help explain the
diversity of behavior in these games.
Keyword: Social Preferences, Fairness, Trust,
Reciprocity, Ultimatum game, Trust game
Co-author(s):
FARINA, Francesco (
Abstract: The
seminal paper of Glaeser et al. (2000) raised the issue of the relation between
attitudes to trust and trustworthiness and actual behaviour observed in
laboratory experiments. This has given rise to a number of papers which analyse
this relation. Glaeser et al. (2000) were the first to compare attitudinal and
behavioural evidence stemming from experiments, reporting that attitudinal
survey questions do not predict trusting behaviour in the laboratory. Lazzarini
et al. (2005) present similar experimental evidence. Glaeser et al. (2000) and
Sapienza et al. (2007) find a correlation between attitudinal trust and
behavioural evidence of expected trustworthiness, which does not show up in the
results put forward by Fehr et al. (2003). By pointing to heterogeneity across
the German households participating in the Fehr et al.’s experiment, Sapienza
et al. (2007) argue that the deviation of their experimental evidence from the
WVS’s attitudinal measures stems from the trustor’s impediment to identify himself
with the trustee. Since there is ample experimental evidence suggesting that a
considerable proportion of play in two-person trust games deviates from that
predicted by standard noncooperative game theory, the role of intentions in
orienting the trustor’s and the trustee’s moves has been emphasized by many
authors (McCabe and Smith, 2000; Dufwenberg and Kirchsteiger, 1998, Falk and
Fischbacher, 1998). Indeed, the literature on the Trust Game experiments
inspired by the Investment Game of Berg et al. (1995) suggests that choices
made by individuals depend in part on the each player’s capacity to perceive
the intentions of the other player. To elicit the players’ intentions, Fehr et
al. (2003) and Speranza et al (2007) ask senders to report about their expectation
on the Respondents' behaviour. Their aim is to interpret the reason for the
amount sent by means of the senders' beliefs. Yet, we think that beliefs do not
form in the void, so that the objective of eliciting intentions from the
players’ beliefs can more sensibly be obtained by previously endowing them with
a substantial piece of information. In this paper, we ask to what extent the
information at disposal of the trustor about the trustee’s behaviour is an
important factor in determining senders’ behaviour and thus in interpreting the
overall outcome of the Trust Game. The hypothesis was that the senders’
behaviour is determined by the beliefs that the senders form out of two types
of information on the respondent. We then conducted experimental sessions in
which almost 300 students of the Universities of Siena and
In line with
a previous paper (Farina et al., 2008), on the basis of the attitudinal
questions, we classify players as trusting or prudent and trustworthy or
untrustworthy and use these distinctions to analyse the differential
conditional behaviour across different groups. Specifically, we used ordered
probit models to analyse: 1) the differential reaction of trusting/prudent and
trustworthy/untrustworthy senders to the type and content of the information
provided; and, 2) the differential reaction of recipients to amounts sent
across the full range of possible amounts sent by individual (trusting/prudent
and trustworthy/untrustworthy) type.
We find: a)
there is clear behavioural distinction to be made between those defined as
trusting and those who are defined as trustworthy on the basis of the
questionnaire responses – indeed there is almost no correlation between
trusting and trustworthy individual types; b) There are significant differences
in the reaction of senders to information on recipients according to whether
they are trusting or prudent OR trustworthy or untrustworthy; and, c)
Recipients of differing types (trusting/prudent, trustworthy/untrustworthy)
differ in their reaction to the amounts send specifically in regard to the
extent that they show both positive reciprocity – rewarding generous senders
with a relatively high return – and negative reciprocity - punishing mean
senders.
The results
allow us to go someway towards reconciling the conflicting previous evidence by
digging a little deeper into the motivations of individuals and specifically by
identifying the differential reactions of different types of person.
Keyword: Experimental
economics; Surveys; Trust; Reciprocity
Break 10:30-11:00am –
Atrium
Plenary Session
Charles
NOUSSAIR: "Pricing Asymmetries in Experimental Asset Markets"
Location:
Lunch 12:00pm – Atrium