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Through an experiment, this study investigates the effects that verification has on honest traders. This paper demonstrates that by reducing the scope for trust verification can have a negative effect on the behaviour of honest individuals. Specifically, the analysis shows that trustworthy agents are willing to punish or seek compensation from those that deprive them of trust opportunities through the use of verification. Regulatory implications are discussed. JEL

We elicit the willingness to sell personal data (contact information, Facebook details, preferences) in laboratory experiments, using a BDM and take-it-or-leave-it offers. Our experiments are novel in that (i) the experiments are incentivized, (ii) the focus on privacy issues is salient, and (iii) the use of the data - marketing purposes - is transparent and unambiguous. We find that only a minority of about 10% to 20% of the participants are unwilling to sell personal data, a share which is roughly constant across both the type of personal data and elicitation method. Subjects willing to sell request about € 15 for their contact details and € 19 for Facebook details.

International audience; To what extent is the observed mispricing in experimental asset markets caused by strategic uncertainty and by confusion? We address this question by comparing subjects' initial price forecasts in two market environments: one with six human traders, and the other with one human and five computer traders. We find that both strategic uncertainty and confusion contribute equally to the median initial forecast deviation from the fundamental value. The effect of strategic uncertainty is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

We demonstrate that widely used measures of antigay sentiment and the size of the lesbian, gay, bisexual, and transgender (LGBT) population are misestimated, likely substantially. In a series of online experiments using a large and diverse but nonrepresentative sample, we compare estimates from the standard methodology of asking sensitive questions to measures from a “veiled” methodology that precludes inference about an individual but provides population estimates. The veiled method increased self-reports of antigay sentiment, particularly in the workplace: respondents were 67% more likely to disapprove of an openly gay manager when asked with a veil, and 71% more likely to say it should be legal to discriminate in hiring on the basis of sexual orientation. The veiled methodology also produces larger estimates of the fraction of the population that identifies as LGBT or has had a sexual experience with a member of the same sex. Self-reports of nonheterosexual identity rose by 65%, and same-sex sexual experiences by 59%. We conduct a “placebo test” and show that for nonsensitive placebo items, the veiled methodology produces effects that are small in magnitude and not significantly different from zero in seven out of eight items. Taken together, the results suggest antigay discrimination might be a more significant issue than formerly considered, as the nonheterosexual population and antigay workplace-related sentiment are both larger than previously measured. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2016.2503 . This paper was accepted by Uri Gneezy, behavioral economics.

We analyze the effects of different resale mechanisms on bidders’ strategies in multi-object uniform-price auctions with asymmetric bidders. Our experimental design consists of four treatments: one without resale and three resale treatments that vary the information available and the bargaining mechanism in the resale market. The presence of a resale market induces demand reduction by high-value bidders and speculation by low-value bidders, thus affecting the allocation of the objects on sale. The magnitude of these effects, however, depends on the form of the resale market. Features of the resale market that tend to increase its efficiency result in lower auction efficiency and seller’s revenue. We also show that, without resale, asymmetry among bidders reduces demand reduction.

In order to acquire insight into consumer preferences for products and services that are described by certain attributes, choice experiments are employed. For e_ciency, this should be done by means of an optimal experimental design, which gives the most precise estimates for the parameters in the corresponding statistical model. Sometimes attributes of products and services can be mixtures of ingredients. Although mixture models are commonly used in industrial experiments, they have never been introduced in choice modeling. This master thesis aims at introducing mixtures in the choice context, since often consumer products and services can be described as mixtures of ingredients. An algorithm to construct semi-Bayesian D-optimal experimental designs is presented for the multinomial logit model when choices are based on a mixture of ingredients. The resulting designs are D-optimal and based on a mix- ture coordinate-exchange algorithm. Further, some features of them are discussed. It is shown that designs, when prior parameter values required for choice models are not assumed to be zero, di_er from the utility neutral designs, where such an assumption is made. We also show that semi-Bayesian designs di_er from and perform better than locally optimal ones (and the utility neutral designs) for most of the time. As often it is di_cult to obtain accurate prior parameter values, parameter misspeci_cation is also investigated. It is demonstrated that monotonous misspeci_cations in true parameters do not distort the outcome, and might help to design more robust designs.

In an experimental setting in which investors can entrust their money to traders, we investigate how compensation schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At the benefit of a potentially higher return, they can entrust their money to a trader. However this investment is risky, as the trader might not be trustworthy. Alternatively, they can opt for a safe but low return. We study how subjects solve this trade-off when traders are either liable for losses or not, and when their bonuses are either capped or not. Limited liability introduces a conflict of interest because it makes traders value the asset more than investors. To limit losses, investors should thus restrict liquidity provision to force traders to trade at a lower price. By contrast, bonus caps make traders value the asset less than investors. This should encourage liquidity provision and decrease prices. In contrast to these predictions, we find that under limited liability investors contribute to asset price bubbles by increasing liquidity provision and that caps fail to tame bubbles. Overall, giving investors skin in the game fosters financial stability.

In this paper we measure the effect of the inflation tax on economic activity and welfare within a controlled setting. To do so, we develop a model of price posting and monetary exchange with inflation and finite populations. The model, which provides a game–theoretic foundation to Rocheteau and Wright (2005)׳s competitive search monetary equilibrium, is used to derive theoretical propositions regarding the effects of inflation in this environment, which we test with a laboratory experiment that closely implements the theoretical framework. We find that the inflation tax is harmful – with cash holdings, production and welfare all falling as inflation rises – and that its effect is relatively larger at low inflation rates than at higher rates. For instance, for inflation rates between 0% and 5%, welfare in the two markets we consider (2[seller]×2[buyer] and 3×2) falls by roughly 1 percent for each percentage–point rise in inflation, compared with 0.4 percent over the range from 5% to 30%. Our findings lead us to conclude that the impact of the inflation tax should not be underestimated, even under low inflation.

In this paper, we compare participants in an artefactual field experiment in urban China with the survey population of migrants from which they were recruited. The experimental participants were more educated, more likely to lend money to friends, and worked fewer hours than the general population. They differ significantly from non-participants in terms of regression coefficients, such as the effects of wealth and marital status on the probability of being self-employed and distance migrated. We thus find that there was selection into our experiments on the basis of both observable characteristics and on unobserved differences in behavioral relations.

Suppose a policymaker is interested in the impact of an existing social program. Impact estimates using observational data suffer potential bias, while unbiased experimental estimates are often limited to other contexts. This creates a practical trade-off between internal and external validity for evidence-based policymaking. We explore this trade-off empirically for several common policies analyzed in development economics, including microcredit, migration, and education interventions. Based on mean-squared error, non-experimental evidence within context outperforms experimental evidence from another context. This advantage declines, but may not reverse, with experimental replication. We offer four reasons these findings are of general relevance to policy evaluation.

This article briefly summarizes and judges recent experimental developments exploring the predictions of dynamically inconsistent models. An opinion is provided as to how the literature may evolve given these recent advances.

This paper proposes a methodology to implement probabilistic belief elicitation in continuous-choice games. Representing subjective probabilistic beliefs about a continuous variable as a continuous subjective probability distribution, the methodology involves eliciting partial information about the subjective distribution and fitting a parametric distribution on the elicited data. As an illustration, the methodology is applied to a double auction experiment, where traders' beliefs about the bidding choices of other market participants are elicited. Elicited subjective beliefs are found to differ from proxies such as Bayesian Nash Equilibrium (BNE) beliefs and empirical beliefs, both in terms of the forecasts of other traders' bidding choices and in terms of the best-response bidding choices prescribed by beliefs. Elicited subjective beliefs help explain observed bidding choices better than BNE beliefs and empirical beliefs. By extending probabilistic belief elicitation beyond discrete-choice games to continuous-choice games, the proposed methodology enables to investigate the role of beliefs in a wider range of applications.

We propose a new abstract definition of equilibrium in the spirit of competitive equilibrium: a profile of alternatives and a public ordering (expressing prestige, price, or a social norm) such that each agent prefers his assigned alternative to all lower-ranked ones. The equilibrium operates in an abstract setting built upon a concept of convexity borrowed from convex geometry. We apply the concept to a variety of convex economies and relate it to Pareto optimality. The “magic” of linear equilibrium prices is put into perspective by establishing an analogy between linear functions in the standard convexity and “primitive orderings” in the abstract convexity. (JEL C90, D11) In this paper, we return to the fundamental concept of competitive equilibrium and extend the notion to a more abstract setting. The extension is based on the idea that competitive equilibrium is a method of creating harmony in an interactive situation with a feasibility restriction and self-interested agents. It is built around a public ordering of the alternatives which either limits the choices available to the agents or systematically influences their preferences. In the standard economic setting, this ordering is given by prices that apply equally to all agents. These prices determine consumers’ choice sets and producers’ preferences. We propose an analogous solution concept adjusted to fit more abstract situations in which valuation using prices is replaced by valuation according to a public ordering. The road to the construction of the equilibrium concept starts with a discussion of the notion of convexity. In the Euclidean setting, the algebraic notion of convexity is central to the standard analysis of competitive equilibrium. Since we primarily consider settings that lack an algebraic structure, we employ a more abstract form of convexity. Definitions of convexity involve the primitive phrase “ b is between the elements a 1 , … , a L . ” In an Euclidean space, this means that b is an algebraic con vex combination of a 1 , … , a L . However, the phrase also has a common use in daily conversation. For example, one can say that game theory is between mathematics and economics and that Canada is culturally between the United States, the United Kingdom, and France. To accommodate this, the first step will be to borrow a formal

Previous research studies suggest a lower degree of positional concerns among people from poor countries. Yet the evidence is limited and most often builds on the assumption that people's reference groups are the same across all individuals. We conduct a survey experiment in urban Ethiopia that is modified to include multiplicity of reference groups. We estimate positional concerns considering various reference groups to test whether the low positional concerns found in the literature are due to misspecification of the reference groups. The results show a low degree of positional concern, which is highly stable across different reference groups.

A new behavioral foundation is uncovered for why money promotes impersonal exchange. In an experiment, subjects could cooperate by intertemporally exchanging goods with anonymous opponents met at random. Indefinite repetition supported multiple equilibria, from full defection to the efficient outcome. Introducing the possibility to hold and exchange intrinsically worthless tickets affected outcomes and cooperation patterns. Tickets resembled fiat money, which emerged as a tool for equilibrium selection in the economy. Monetary exchange facilitated coordination on cooperation and redistributed surplus from defectors to cooperators. Treatments where subjects could develop a reputation revealed a limited record-keeping role for monetary exchange.

El estudio se centró en determinar la prevalencia de Diabetes Mellitus en mayores de 20 años en el área urbana de Nicaragua. Se seleccionó la población mayor de 20 años, utilizando la proyección del censo de 2010 en las cabeceras del norte, centro y pacífico de Nicaragua. La Costa Caribe fue excluida por problemas de factibilidad. Las cabeceras seleccionadas fueron escogidas al azar, estratificando los sectores de cada cabecera para la selección de la población, la que una vez definido los lugares los participantes fueron seleccionados al azar usando el método de lotería. El cálculo del tamaño de la muestra fue hecho usando el Programa Epidemiológico EPIINFO versión 6.04, usando una frecuencia de 0.5, un máximo error permisible de 3% y un intervalo de confianza del 95%, siendo multiplicado el total muestreado por dos para evitar el error por el efecto de diseño. Al final se entrevistaron un total de 3150 encuestas a los que se les preguntó por datos generales, datos sobre factores de riesgo de Diabetes Mellitus y una medición de variables biológicos (Presión arterial, frecuencia cardiaca, pulso, peso, talla, cintura, cadera y la medición de la glicemia ya fuese en ayunas o glicemia casual) Los resultados evidencian la prevalencia fue de 9.5%; 6.1% resultaron ser prediabéticos y 84.4% al momento de hacer la encuesta no padecían de la enfermedad. Hubo un predominio de Diabetes en el sexo masculino con 12.9% y en el sexo femenino se encontró una prevalencia de 7.4%. Por grupos etáreos predominó en la mayoría de 40 años. De los 300 diabéticos encontrados en el estudio, 171 (57%) sabían que eran diabéticos y 129 (43%) desconocían que padecían de la enfermedad. Los principales factores de riesgo encontrados fueron: la edad mayor de 45 años (OR:5.5; IC95%: 4.2-7.2), para las mujeres la 95% historia de Diabetes gestacional (OR:4.5; IC95%: 1.7-11.7), hipertensión arterial (OR:4.0; IC95%: 3.1-5.1), sedentarismo (OR:3.1; IC95%: 2.4-4.1), obesidad (OR:2.7; IC95%: 2.0-3.7), e historia familiar de Diabetes (OR:2.0; IC95%: 1.6-2.6). En conclusión, la Diabetes Mellitus constituye un problema importante para la salud pública para la población nicaragüense y que en países con pocos recursos la prevención debe ir orientada a cambiar factores de riesgo modificables como sedentarismo y obesidad en la población y la promoción de estilos de vida saludables. DOI: http://dx.doi.org/10.5377/universitas.v5i1.1476 UNIVERSITAS (León): Revista Científica de la UNAN León Vol.5(1) 2014, pp 1-10

A gondolat, amely szerint a vállalatok közötti verseny és együttműködés egyszerre van jelen az üzleti gyakorlatban, kiemelt figyelemet kap az üzleti tudományok területén, ugyanakkor meglehetősen kevés elméleti modell született a probléma megjelenítésére. A tanulmányban egy olyan modellkeret megalkotására teszünk kísérletet, amelyben az első időszakban a vállalatok arról döntenek, hogy mekkora összeggel járuljanak hozzá egy olyan közös alaphoz, amely révén vélhetően a piac bővül, így ez a szakasz egy folytonos közjószágjátékhoz hasonló helyzetet hoz létre. Ezt követően, a második időszakban a vállalatok Cournot-versenyt folytatnak. Ebben a kétlépcsős szekvenciális játékként értelmezhető keretben megvizsgáljuk az egyensúly tulajdonságait különböző feltételek mellett. Látható lesz, hogy az egyensúlyi hozzájárulási szintek általában pozitívak, sőt többnyire megegyeznek a maximális lehetséges összeggel. Megvizsgáljuk azt is, hogy az optimális hozzájárulási szintek hogyan viszonyulnak a vállalatok összprofitját, illetve a társadalmi jólétet maximalizáló hozzájárulási szintekhez. A modellünk egy speciális esetében feltesszük, hogy a közös alaphoz való hozzájárulás csökkenti a technológiai fejlesztések által termelési költségek csökkentésére fordítható forrásokat, felerősítve ezáltal a verseny és együttműködés között feszülő ellentéteket. E modellt egy laboratóriumi kísérlet során teszteljük. A kapott eredmények alátámasztják a modell hozzájárulással kapcsolatos predikcióit. Journal of Economic Literature (JEL) kód: C70, C90, D21, D22, L20., The idea of parallel competition and cooperation among firms has attracted remarkable recent interest in management. Yet there are very few theoretical models for studying it. The paper proposes a framework in which in stage 1, firms decide how much to contribute to a common fund intended to enlarge the market, so that the situation resembles a continuous public-good game. In stage 2 firms compete in Cournot fashion. The authors investigate in this sequential two-stage game the properties of the equilibrium under various conditions. It is found that equilibrium contribution levels are generally positive, sometimes even maximal. Also studied is how optimal contribution levels relate to the contribution levels that maximize the total profit of firms and social welfare. In a special case it is assumed that contributions to the common fund reduce the funds available to decrease production costs, enhancing still further the tension between cooperation and competition. The findings in this case are tested in a laboratory experiment. The predictions about the contribution level are supported by the data.

We study both theoretically and experimentally the set of Nash equilibria of a classical one-dimensional election game with two candidates. These candidates are interested in power and ideology, but their weights on these two motives are not necessarily identical. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called ‘one-sided’ and ‘probabilistic’ policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about votersʼ preferences. The theoretical predictions are supported by the data collected from a laboratory experiment, as we observe convergence to the Nash equilibrium values at the aggregate as well as at the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory.

Les effets d’âge relatif (relative age effects, rae) font reference a l’avantage qu’ont les individus nes plus tot au sein d’une cohorte. En economie de l’education, le rae montre que les enfants nes tot dans l’annee obtiennent de meilleurs resultats scolaires que les autres. C’est egalement vrai dans le cas du sport dans le cadre duquel les enfants sont regroupes par classe d’âge lors de leur formation. Parce que la date delimitant les categories ne change jamais au niveau scolaire (l’annee civile), il est difficile d’identifier parfaitement l’effet causal. Nous pouvons identifier cet effet car la Federation francaise de football a change la date limite des categories de jeunes pendant la saison 1995-1996. Ainsi cette experience naturelle montre que : (1) la date-limite des categories cree le rae ; (2) les effets continuent d’exister pour les footballeurs les plus âges ; (3) il existe des differences de developpement physique entre les joueurs nes juste avant et juste apres la date limite.

In comparison to traditional laboratory experiments, internet-based experiments reduce the experimental subject’s opportunity costs. Consequently, the samples of these two experiments will likely be different in spite of size and composition. This finding is important to consider when interpreting economic experiments because self-selection may bias the external validity of experiments.

In an experiment with professionals from the financial services sector, we investigate the impact of a team incentive scheme on the recommendation quality of investment products when advisors benefit from advising lower quality products. Experimental results reveal that, when group affiliation is strong, inferior products are recommended significantly more often under team incentives than under individual incentives.

This paper examines the effect of religion on positional concerns using survey experiments. We focus on two of the dimensions of religion – degree of religiosity and religious festivals. By conducting the experiments during both the most important day of Ramadan (the Night of Power) and a day outside Ramadan, we find that Ramadan overall has a small and negative impact on positional concerns. Detailed analyses based on the sorting of individuals' degree of religiosity reveal that the decrease in the degree of positional concerns during Ramadan is mainly explained by a decrease in positionality among individuals with a low degree of religiosity. We also discuss the broader welfare implications of our findings.

Neuroeconomics shares the main goals of microeconomics: to understand what causes choices, and the welfare properties of choice. The novel goal is linking mathematical constructs and observable behavior to mechanistic details of neural circuitry. Several complementary methods are used. An initial insight from neuroscience is that distinct systems guide choice: Pavlovian and instrumental conditioning (learning) of state-value and response-value associations, overlearned habits, and model- (or goal-) directed value that requires deliberation. These systems can differ economically from rational choice—for example, habitual choices have low utility and price elasticities, whereas model-directed values are often constructed preferences. Neuroeconomics also provides evidence of situations in which utility maximization either works well (in simple binary choice) or benefits from the introduction of behavioral constructs. Neuroeconomics is well equipped to guide the theory of how choices depend on mental states, such as fear or cognitive load. Examples include extensive studies of risk and time preference, finance, and neural decoding of private information.

A szerző a 2008-ban kezdődött gazdasági világválság hatását vizsgálja az egy részvényre jutó nyereség előrejelzésének hibájára. Számos publikáció bizonyította, hogy az elemzők a tényértékeknél szisztematikusan kedvezőbb tervértéket adnak meg az egy részvényre jutó előrejelzéseikben. Más vizsgálatok azt igazolták, hogy az egy részvényre jutó előrejelzési hiba bizonytalan környezetben növekszik, míg arra is számos bizonyítékot lehet találni, hogy a negatív hírek hatását az elemzők alulsúlyozzák. A gazdasági világválság miatt az elemzőknek számtalan negatív hírt kellett figyelembe venniük az előrejelzések készítésekor, továbbá a válság az egész gazdaságban jelentősen növelte a bizonytalanságot. A szerző azt vizsgálja, hogy miként hatott a gazdasági világválság az egy részvényre jutó nyereség- előrejelzés hibájára, megkülönböztetve azt az időszakot, amíg a válság negatív hír volt, attól, amikor már hatásaként jelentősen megnőtt a bizonytalanság. Journal of Economic Literature (JEL) kód: C12, C90, D03, D53, D83, G02, G17, P11., The author investigated the impact of the financial crisis that started in 2008 on the forecasting error for earnings per share. There is plentiful evidence from the 1980s that analysts give systematically more favourable values in their earnings per share (EPS) forecasts than reality, i.e. they are generally optimistic. Other investigations have supported the idea that the EPS forecasting error is greater under uncertain environmental circumstances, while other researchers prove that the analysts under-react to the negative information in their forecasts. The financial crisis brought a myriad of negative information for analysts to consider in such forecasts, while also increasing the level of uncertainty for the entire economy. The article investigates the impact of the financial crisis on the EPS forecasting error, distinguishing the period when the crisis gave merely negative information, from the one when its effect of uncertainty was significantly increased over the entire economy.

This paper puts forward suggestions that could improve the efficiency of field experiments as they are currently carried out in experimental economics. Two recommendations are made: (1) Prior to the actual study, economic field experiments should include sample size calculations that confirm that meaningful effects can be detected. (2) Economic field experiments should take advantage of the power of multi-factor experimental plans.

The hold-up problem is central to the theory of incomplete contracts. It shows how the difficulty to write complete contracts and the resulting need to renegotiate can lead to underinvestment. We describe the design of a simple teaching experiment that illustrates the hold-up problem. The model used is a simple perfect information game. The experiment can hence also be used to illustrate the concept of subgame perfect equilibrium and the problem of making non-binding commitments.

Explicit economic incentives designed to increase contributions to public goods and to promote other pro-social behavior sometimes are counterproductive or less effective than would be predicted among entirely self-interested individuals. This may occur when incentives adversely affect individuals' altruism, ethical norms, intrinsic motives to serve the public, and other social preferences. The opposite also occurs—crowding in —though it appears less commonly. In the fifty experiments that we survey, these effects are common, so that incentives and social preferences may be either substitutes (crowding out) or complements (crowding in). We provide evidence for four mechanisms that may account for these incentive effects on preferences: namely that incentives may (i) provide information about the person who implemented the incentive, (ii) frame the decision situation so as to suggest appropriate behavior, (iii) compromise a control averse individual's sense of autonomy, and (iv) affect the process by which people learn new preferences. An implication is that the evaluation of public policy must be restricted to allocations that are supportable as Nash equilibria when account is taken of these crowding effects. We show that well designed fines, subsidies, and the like minimize crowding out and may even do the opposite, making incentives and social preferences complements rather than substitutes. (JEL D02, D03, D04, D83, E61, H41, Z13)

Although legal sanctions are often nondeterrent, we frequently observe compliance with “mild laws.” A possible explanation is that the incentives to comply are shaped not only by legal, but also by social sanctions. This paper employs a novel experimental approach to study the link between legal and social norm enforcement. We analyze whether the two institutions are complements or substitutes. Our results show that legal sanctions partially crowd out social norm enforcement. Mild laws nevertheless give scope for a potentially large, positive welfare effect, as a higher level of compliance is achieved at lower social enforcement costs.

Weak electoral registration requirements are commonly thought to encourage electoral participation, but may also promote electoral fraud. For one, candidates and their supporters can more easily mobilize voters outside the district to register and vote for the candidates, even though these voters do not reside within the district. We statistically detect this classic type of electoral fraud for the first time, by taking advantage of a natural experimental setting in Japanese municipal elections. We argue that whether or not a municipal election was held in April 2003 can be regarded as an "as-if" randomly assigned treatment. The difference-in-difference analysis of municipality-month panel data shows that an increase in the new population just prior to April 2003 is significantly larger in treatment municipalities (with an election) than in control ones (without an election). The estimated effects are, in some cases, decisive enough to change the electoral results, especially when the election is competitive. We argue that our approach – "election timing as treatment" – can be applied to investigate not only this type of electoral fraud but also other "electoral connection[s]" (Mayhew 1974) in other countries.

In a laboratory experiment, subjects were endowed with money and waiting time. Preferences for waiting time reduction were elicited with salient rewards both as a private good and as a public good. The allocations of the public good that were theoretically predicted by the Nash equilibrium and the Lindahl equilibrium, respectively, were computed from the individual private good valuations and compared with the subjects’ actual contributions. We found a significant positive correlation between private good valuations in terms of willingness-to-pay and public good valuations in terms of voluntary contributions. Group contributions to public waiting time reduction significantly exceeded the non-cooperative prediction and were close to the socially optimal level. However, for a majority of subjects, the Lindahl equilibrium was not able to predict the observed contributions.

Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers' relative effort affects the allocation of production costs, but a random productivity shock ensures that the allocation is not necessarily equitable. In another treatment, sellers' effort increases the buyers' valuation of a good. We find that effort investments have a short-lived impact on trading behavior when sellers' effort benefits buyers, but no effect when effort determines cost allocation. Efficiency rates are high and do not differ across treatments.

Randomized controlled trials are increasingly used to evaluate policies. How can we make these experiments as useful as possible for policy purposes? We argue greater use should be made of experiments that identify the behavioral mechanisms that are central to clearly specified policy questions, what we call “mechanism experiments.” These types of experiments can be of great policy value even if the intervention that is tested (or its setting) does not correspond exactly to any realistic policy option.

The "Hawthorne effect," a concept familiar to all students of social science, has had a profound influence both on the direction and design of research over the past 75 years. The Hawthorne effect is named after a landmark set of studies conducted at the Hawthorne plant in the 1920s. The first and most influential of these studies is known as the "Illumination Experiment." Both academics and popular writers commonly summarize the results as showing that every change in light, even those that made the room dimmer, had the effect of increasing productivity. The data from the illumination experiments, however, were never formally analyzed and were thought to have been destroyed. Our research has uncovered these data. We find that existing descriptions of supposedly remarkable data patterns prove to be entirely fictional. There are, however, hints of more subtle manifestations of a Hawthorne effect in the original data.

Many social experiments are run in multiple waves, or are replications of earlier social experiments. In principle, the sampling design can be modified in later stages or replications to allow for more efficient estimation of causal effects. We consider the design of a two-stage experiment for estimating an average treatment effect, when covariate information is available for experimental subjects. We use data from the first stage to choose a conditional treatment assignment rule for units in the second stage of the experiment. This amounts to choosing the propensity score, the conditional probability of treatment given covariates. We propose to select the propensity score to minimize the asymptotic variance bound for estimating the average treatment effect. Our procedure can be implemented simply using standard statistical software and has attractive large-sample properties.

In this paper we reply to Binmore and Shaked's criticism of the Fehr–Schmidt model of inequity aversion. We put the theory and their arguments into perspective and show that their criticism is not substantiated. Finally, we briefly comment on the main challenges for future research on social preferences.

This paper presents a rare study on ethnic identity and perception of psychological differences among different ethnic groups in China. The objective is to offer an empirical test on the long standing stereotypes of cultural differences between Han Chinese, the majority ethnic group in China, and Uyghur Chinese, the Muslim minority in Xinjiang region of China. A total of 1600 students from four Chinese universities have been selected and examined in aspects ranging from self-esteems to desires for cross-cultural communication, and the result shows that the psychological differences between Han Chinese and Uyghur Chinese are considered by the majority of the students from these two groups to be great, which, however, are actually even smaller than the differences among different Han Chinese majority groups. What¡¯s more, contrary to the popular belief that economic discrepancy between Han and Uyghur Chinese is the main cause of ethnic misconceptions, our study demonstrates that self-perception of economic status has no effect on psychological measurements over this subject. Finally, a question can be raised whether assumptions about cultural differences are still in line with the constant social economic changes in China, and implications for improving ethnical relations in China have also been provided.

This paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts. We use the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000) where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent. When discrimination is impossible, the game resembles a stag-hunt (coordination) game in which the buyers' payoffs are endogenously chosen by the incumbent seller. Exclusion occurs when the buyers fail to coordinate on their preferred equilibrium. Two-way non-binding pre-play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller. When discrimination and communication are possible, the exclusion rate rises. Divide-and-conquer strategies are observed more frequently when buyers can communicate with each other. Exclusion rates are significantly higher when the buyers' payoffs are endogenously chosen rather than exogenously given. Finally, secret offers are shown to decrease the incumbent's power to profitably exclude.

Many of the main scientific challenges in the fields of development, environment, and resource economics have a microeconomic foundation wherein behavioral elements play a significant role. Preferences with respect to risk, time, societal others, and the environment shape the decision-making processes of individuals. Economic experiments have been extensively carried out in the lab and in the field to test the predictions of behavioral theories; some have had a particular focus on development and environmental issues. Random interventions have also proven to be an important source of information with respect to experimentation in development and policy design. This article identifies the contributions of experiments and random interventions and reflects on the value of having a productive dialogue—in connection with said experiments—with the main stakeholders regarding the problems being studied.

Arguments about the appropriate discount rate often start by assuming a Utilitarian social welfare function with isoelastic utility, in which the consumption discount rate is a function of the (constant) elasticity of marginal utility along with the (much discussed) utility discount rate. In this model, the elasticity of marginal utility simultaneously reflects preferences for intertemporal substitution, aversion to risk, and aversion to (spatial) inequality. While these three concepts are necessarily identical in the standard model, this need not be so: well-known models already enable risk to be separated from intertemporal substitution. Separating the three concepts might have important implications for the appropriate discount rate, and hence also for long-term policy. This paper investigates these issues in the context of climate-change economics, by surveying the attitudes of over 3000 people to risk, income inequality over space and income inequality over time. The results suggest that individuals do not see the three concepts as identical, and indeed that preferences over risk, inequality and time are only weakly correlated. As such, relying on empirical evidence of risk or inequality preferences may not necessarily be an appropriate guide to specifying the elasticity of intertemporal substitution.

Researchers who have examined markets populated by “robot traders” have claimed that the high level of allocative efficiency observed in experimental markets is driven largely by the “intelligence” implicit in the rules of the market. Furthermore, they view the ability of agents (artificial or human) to process information and make rational decisions as unnecessary for the efficient operation of markets. This paper presents a new series of market experiments that show that markets populated with standard robot traders are no longer efficient if time is a meaningful element, as it is in all asset markets. While simple two-season markets with human subjects reliably converge to an efficient equilibrium, markets with minimally intelligent robot traders fail to attain this equilibrium. Instead, these markets overshoot the equilibrium and then crash below it. In addition to firmly establishing the role of trader intelligence in asset-market equilibrium, these experiments also provide insights into why bubbles and crashes are consistently observed in many asset-market laboratory experiments using human subjects.

When building a Kriging model, the general intuition is that using more data will always result in a better model. However, we show that when we have a large non-uniform dataset, using a uniform subset can have several advantages. Reducing the time necessary to fit the model, avoiding numerical inaccuracies and improving the robustness with respect to errors in the output data are some aspects which can be improved by using a uniform subset. We furthermore describe several new and current methods for selecting a uniform subset. These methods are tested and compared on several artificial datasets and one real life dataset. The comparison shows how the selected subsets affect different aspects of the resulting Kriging model. As none of the subset selection methods performs best on all criteria, the best method to choose depends on how the different aspects are valued. The comparison made in this paper can be used to facilitate the user in making a good choice.

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that the subjects achieve the most efficient ownership allocation starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.

The 2007 Nobel Prize in Economics has been awarded to Leonid Hurwicz, Eric Maskin, and Roger Myerson, for their contributions to mechanism design theory. The article discusses the importance of mechanism design theory for modern economics, focusing on some of its implications for economic policy making.

Empirical research documents that temporary trends in stock price movements exist. Moreover, riding a trend can be a profitable investment strategy. Thus, the ability to recognize trends in stock markets influences the quality of investment decisions. In this Paper, we provide a thorough test of the trend recognition and forecasting ability of financial professionals who work in the trading room of a large bank and novices (MBA students). In an experimental study, we analyse two ways of trend prediction: probability estimates and confidence intervals. Subjects observe stock price charts, which are artificially generated by either a process with positive or negative trend and are asked to provide subjective probability estimates for the trend. In addition, the subjects were asked to state confidence intervals for the development of the chart in the future. We find that depending on the type of task either underconfidence (in probability estimates) or overconfidence (in confidence intervals) can be observed in the same trend prediction setting based on the same information. Underconfidence in probability estimates is more pronounced the longer the price history observed by subjects and the higher the discriminability of the price path generating processes. Furthermore, we find that the degree of overconfidence in both tasks is significantly positively correlated for all experimental subjects whereas performance measures are not. Our study has important implications for financial modelling. We argue that the question which psychological bias should be incorporated into a model does not depend on a specific informational setting but solely on the specific task considered. This Paper demonstrates that a theorist has to be careful when deriving assumptions about the behaviour of agents in financial markets from psychological findings.

This paper explores, theoretically and experimentally, a fixed-price mechanism bywhich, if aggregate demand exceeds supply, bidders are proportionally rationed. Ifdemand is uncertain, equilibrium consists in overstating true demand to alleviate theeffects of being rationed. Overstating is more intense the lower the price, with bidsreaching their upper limit for sufficiently low prices. In the experiment, despite of asignificant proportion of equilibrium play, subjects tend to (under)overbid the equilibriumstrategy when rationing is (high) low, with only this latter effect being persistentover time. We explain the experimental evidence by a simple model in which theprobability of a deviation is decreasing in the expected loss associated with it.

A közgazdaságtani modellek túlnyomó részében az embereket kizárólag az önérdekkövetés jellemzi: nincsenek tekintettel mások jólétére. A valóságban azonban ez a viselkedés igencsak ritka. Az önzés feltevésén alapuló modellek sikerének oka, hogy a valóságos gazdasági helyzetekben az emberek valóban önérdekkövető módon viselkednek. Más szituációkban azonban ennek éppen az ellenkezője igaz. A kísérleti eredmények alátámasztják a különböző társadalmi normákat és egyéb motiváló tényezőket figyelembe vevő elméletek létjogosultságát. Az elmúlt évtizedekben olyan hasznosságmodellek is születtek, amelyek a méltányosságot is magukban foglalják. Tanulmányunk a szóban forgó modellek közül a leglényegesebbeket mutatja be, azokat, amelyek az egyenlőségre törekvést veszik figyelembe a méltányosság szemléltetése során. Journal of Economic Literature (JEL) kód: C70, C79, C90., Most economic models describe people only in terms of self-interest, without concern for the wellbeing of others. But such behaviour is very rare in reality. Models based on an assumption of self-interest succeed because people really behave in a self-interested way in real economic situations. But in other situations the opposite applies. Experimental findings justify the existence of theories that consider social norms and other motivating factors. Recent decades have also seen the arrival of utility models that include the concept of equity. The study presents the most cogent of these, in which the consideration of quity incorporates consideration of efforts towards equality.

We provide new evidence on the impact of peer effects on the schooling decisions of teenagers. In November 1980 a major earthquake hit Southern Italy. In the aftermath, young men from certain towns were exempted from compulsory military service. We show that the exemption raised high school graduation rates of boys by more than 2 percentage points by comparing high school graduation rates of young exempt men and older not exempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake. Similar comparisons show that graduation rates of young women in the affected areas rose by about 2 percentage points. Since in Italy women are not subject to drafting, we interpret these findings as evidence of social effects of the decision of teenage boys of staying longer in school on that of teenage girls. Our estimates suggest that an increase of 1 percentage point of male graduation rates raises female probability of completing high school by about 0.7-0.8 percentage points. A series of robustness checks, including comparisons across different age groups and with different definitions of the comparison areas, suggest that the rise was due to the earthquake-related exemption, rather than other factors.

We are interested in statistical tests that are able to uncover that one method is better than another one. The Wilcoxon-Mann-Whitney rank-sum and the Wilcoxon sign-rank test are the most popular tests for showing that two methods are different. Yet all of the 32 papers in Economics we surveyed misused them to claim evidence that one method is better, without making any additional assumptions. We present eight nonparametric tests that can correctly identify which method is better in terms of a stochastic inequality, median difference and difference in medians or means, without adding any assumptions. We show that they perform very well in the data sets from the surveyed papers. The two tests for comparing medians are novel, constructed in the spirit of Mood's test.

How does known diversity in cognitive ability among market participants influence market outcomes? We investigated this question by first measuring subjects' cognitive ability and categorizing them as `H' type for those above median ability and `L' type for those below median ability. We then constructed three kinds of markets with six traders each: 6H, 6L, and 3H3L. Subjects were informed of their own cognitive type and that of the others in their market. We found heterogeneous markets (3H3L) generated significantly larger mispricing than homogeneous markets (6H or 6L). Thus, known diversity in cognitive ability among market participants impacts mispricing.

We study issues related to external validity for treatment effects using over 100 replications of the Angrist and Evans (1998) natural experiment on the effects of sibling sex composition on fertility and labor supply. The replications are based on census data from around the world going back to 1960. We decompose sources of error in predicting treatment effects in external contexts in terms of macro and micro sources of variation. In our empirical setting, we find that macro covariates dominate over micro covariates for reducing errors in predicting treatments, an issue that past studies of external validity have been unable to evaluate. We develop methods for two applications to evidence-based decision-making, including determining where to locate an experiment and whether policy-makers should commission new experiments or rely on an existing evidence base for making a policy decision., Comment: forthcoming at Journal of Business and Economic Statistics