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This paper uses laboratory experiments to directly test a central prediction of disclosure theory: that market forces can lead businesses to voluntarily provide information about the quality of their products. This theoretical prediction is based on unraveling arguments, which require that consumers hold correct beliefs about non-disclosed information. Instead, we find that receivers are insufficiently skeptical about non-disclosed information, and as a consequence, senders do not always disclose their private information. However, when subjects are informed about non-disclosed information after each round, behavior slowly converges to full unraveling. This convergence appears to be driven by an asymmetric response in receiver actions after learning that they were profitably deceived. Despite the change in receiver behavior, stated beliefs about sender strategies remain insufficiently skeptical, which suggests that while direct and immediate feedback induces equilibrium behavior, it does not reduce strategic naïveté.

For most classes of chains, it is known if these contain locks, but especially for fixed-angle equilateral equiangular obtuse open polygonal chains in 3D, which can be used to model protein backbones, this is unknown. Fixed-angle equilateral equiangular obtuse closed and open polygonal chains can be used to model polymers. For these, it is clear, that locks based on knots exist, but not which chains are generally locked. We therefore examine both open and closed fixed-angle equilateral equiangular obtuse chains. For this purpose, those chains are divided into various subgroups and, depending on the subgroup, other aspects are investigated to show locks. Techniques from knot theory, graph theory, and specifically robot arm reachability and motion planning are combined. Algorithms are developed to create chains in desired configurations and to study them. It is shown why all fixed-angle equilateral equiangular obtuse closed chains are expected to be locked or in rare cases rigid and non-locked, but never non-locked and non-rigid. For fixed-angle equilateral equiangular obtuse open chains it is shown why it is expected that there are open chains that are locked and that the smallest locked open chain has 𝑛=7.

Measurement error is ubiquitous in experimental work. It leads to imperfect statistical controls, attenuated estimated effects of elicited behaviors, and biased correlations between characteristics. We develop simple statistical techniques for dealing with experimental measurement error. These techniques are applied to data from the Caltech Cohort Study, which conducts repeated incentivized surveys of the Caltech student body. We illustrate the impact of measurement error by replicating three classic experiments, and showing that results change substantially when measurement error is taken into account. Collectively, these results show that failing to properly account for measurement error may cause a field-wide bias: it may lead scholars to identify "new" effects and phenomena that are actually similar to those previously documented.

This survey compiles ideas and recommendations from more than a dozen researchers with different backgrounds and from different institutes around the world. Promoting best practice in benchmarking is its main goal. The article discusses eight essential topics in benchmarking: clearly stated goals, well- specified problems, suitable algorithms, adequate performance measures, thoughtful analysis, effective and efficient designs, comprehensible presentations, and guaranteed reproducibility. The final goal is to provide well-accepted guidelines (rules) that might be useful for authors and reviewers. As benchmarking in optimization is an active and evolving field of research this manuscript is meant to co-evolve over time by means of periodic updates.

Researchers and policy makers are often interested in estimating how treatments or policy interventions affect the outcomes of those most in need of help. This concern has motivated the increasingly common practice of disaggregating experimental data by groups constructed on the basis of an index of baseline characteristics that predicts the values that individual outcomes would take on in the absence of the treatment. This article shows that substantial biases may arise in practice if the index is estimated, as is often the case, by regressing the outcome variable on baseline characteristics for the full sample of experimental controls. We analyze the behavior of leave-one-out and repeated split sample estimators and show they behave well in realistic scenarios, correcting the large bias problem of the full sample estimator. We use data from the National JTPA Study and the Tennessee STAR experiment to demonstrate the performance of alternative estimators and the magnitude of their biases.

Microfinance groups often engage in a variety of collective activities not directly related to credit. We design a three-stage repayment game to examine how the existence of these ancillary activities affect repayment behavior and group attrition. In the first stage, the group borrows under joint liability, each member undertakes a risky project and decides whether or not to contribute to loan repayment. In the second stage, contributing members can vote to expel others from the group. Those remaining engage in a public goods game in the last stage. The public good game represents the non-credit collective activity that members can be involved in. We identify repayment equilibria with and without exclusion and show that exclusionary equilibria are most likely when loans are large and there is significant within-group heterogeneity in the gains from the public good. Results from a laboratory experiment that embodies the main features of the repayment game are consistent with the theoretical predictions. Individual decisions to contribute to loan repayment depend on gains from the public good and groups with the largest debt burdens have the highest rates of default and attrition.

Research on behavioral economics has established the importance of factors such as reference dependent preferences, hyperbolic discounting, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find substantial incentive effects from both financial and non-financial incentives on test scores. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were less effective with older students. Third, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to underinvestment. Fourth, in stark contrast to previous laboratory experiments, we do not see an increased response of effort when rewards are framed as losses. Our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps.

Evolutionary theory reveals that punishment is effective in promoting cooperation and maintaining social norms. Although it is accepted that emotions are connected to punishment decisions, there remains substantial debate over why humans use costly punishment. Here we show experimentally that constraints on emotion expression can increase the use of costly punishment. We report data from ultimatum games, where a proposer offers a division of a sum of money and a responder decides whether to accept the split, or reject and leave both players with nothing. Compared with the treatment in which expressing emotions directly to proposers is prohibited, rejection of unfair offers is significantly less frequent when responders can convey their feelings to the proposer concurrently with their decisions. These data support the view that costly punishment might itself be used to express negative emotions and suggest that future studies will benefit by recognizing that human demand for emotion expression can have significant behavioral consequences in social environments, including families, courts, companies, and markets.

We study the role of information transparency on fairness, welfare and efficiency in long-term employment relationships. When information on the firms’ productivity and surplus is revealed, wage offers represent larger shares of potential gains for workers who, in return, respond with higher performance. Workers respond not only to wages, but also to firms’ intentions concerning fairness. We find that, in long-term relationships, transparency is a strong mechanism to promote performance and welfare. It naturally improves relationships between firms and workers, increases workers’ welfare, profits from low productivity jobs and boosts the labor market efficiency.

This paper considers the design of a stated choice experiment intended to measure the marginal rate of substitution (MRS) between cost and an attribute such as time using a conventional logit model. Focusing the experimental design on some target MRS will bias estimates towards that value. The paper shows why this happens. The resulting estimated MRS can then be manipulated by adapting the target MRS in the experimental design. (C) 2015 Elsevier Ltd. All rights reserved.

We run an experiment with users of internet message boards. We find that forum users cooperate more with partners of their own forum than with partners from a different forum but they are equally altruistic when they made a gift to a partner of their forum or from another one. We also find that individuals are more active in the forums, the more altruistic they are; however, we find no relation between activity in the forum and cooperation. These results suggest that the public good provided in internet forums is mainly provided by a group of unconditional altruistic group of users, and that the feeling of community supports the cooperation in that provision.

We introduce the notion of strategic awareness in experimental games which captures the idea that subjects realize they are playing a game and thus have to form beliefs about others' actions. The concept differs from both, rule understanding and rationality. We then turn to experimental evidence from a beauty contest game where we elicit measures of cognitive ability and beliefs about others' cognitive ability. We show that the effect of cognitive ability is highly non-linear. Subjects' behavior below a certain threshold choose numbers in the whole interval and does not correlate with beliefs about others ability. In contrast, choices of subjects who exceed the threshold avoid choices above 50 and react very sensitively to beliefs about others' cognitive ability.

This paper tests how migrants' willingness to remit changes when given the ability to direct remittances to educational purposes using different forms of commitment. Variants of a dictator game in a lab-in-the-field experiment with Filipino migrants in Rome are used to examine remitting behavior under varying degrees of commitment. These range from the soft commitment of simply labeling remittances as being for education, to the hard commitment of having funds directly paid to a school and the student's educational performance monitored. The analysis finds that the introduction of simple labeling for education raises remittances by more than 15 percent. Adding the ability to directly send this funding to the school adds only a further 2.2 percent. The information asymmetry between migrants and their most closely connected household is randomly varied, but no significant change is found in the remittance response to these forms of commitment as information varies. Behavior in these games is shown to be predictive of take-up of a new financial product called EduPay, designed to allow migrants to pay remittances directly to schools in the Philippines. This take-up seems largely driven by a response to the ability to label remittances for education, rather than to the hard commitment feature of directly paying schools.

When individuals trade with strangers, there is a temptation to renege on contracts. In the absence of repeated interaction or exogenous enforcement mechanisms, this problem can impede valuable exchange. Historically, individuals have solved this problem by forming institutions that sustain trade using group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are generally unavailable to isolated individuals: information sharing and in-group punishment. In this paper, we design a laboratory experiment to distinguish the roles of these two mechanisms in sustaining group reputation and increasing gains from trade. We nd that information sharing encourages path dependence via group reputation; good (bad) behavior by individuals results in greater (fewer) gains from exchange for the group in the future. However, the mere threat of in-group punishment is enough to discourage bad behavior, even if punishment is rarely employed. When combined, information sharing and in-group punishment work as complements; the presence of ingroup punishment encourages cooperation early on, and information sharing reinforces this behavior over time.

I. INTRODUCTION Laboratory methods are now widely accepted as a methodological approach in economics and, increasingly, they have been used to examine specific public policy issues. There is much to be gained from careful laboratory experiments. They offer a low cost means of testing (and replicating) policy innovations, and they generate precise data on individual behavior, thereby allowing estimation of behavioral responses. Importantly, they allow many policy innovations to be introduced singly and exogenously in a controlled environment, and as a result, laboratory experiments are typically seen as having a high degree of "internal validity" (Brewer 2000; Campbell and Stanley 1966; Shadish, Cook, and Campbell 2002) because the causal relation between variables can be properly demonstrated. However, as emphasized by Plott (1987), using laboratory experiments can allow more general inferences regarding human behavior only when the setting implemented in the laboratory parallels what is observed in the naturally occurring world. Even beyond this requirement of "parallelism" is the need for generalizing behavioral observations from the laboratory to the field, or "external validity." Internal validity can be demonstrated through the evaluation of the design. However, external validity can only be verified empirically and only with respect to the specific setting being investigated. This paper investigates the external validity of laboratory experiments, and does so in the context of experiments on tax compliance behavior. Tax evasion is central to many important policy questions. Current estimates report the "tax gap" (or difference between taxes owed and taxes paid) in the United States to be $450 billion annually (Internal Revenue Service 2012). Beyond these massive revenue losses, evasion creates major misallocations in resource use when individuals alter their behavior to cheat on their taxes. Its presence requires that government expend resources to detect noncompliance, to measure its magnitude, and to penalize tax evasion. Evasion alters the distribution of income in arbitrary, unpredictable, and unfair ways, and it may contribute to feelings of unjust treatment and disrespect for the law. More broadly, it is not possible to understand the true impact of taxation without recognizing the existence and the effects of tax evasion. Laboratory methods have been used to examine a wide range of policies that may affect the compliance decision, policies that have not always proven amenable to either theoretical analyses or empirical analyses with field data. However, laboratory studies of compliance are sometimes viewed with skepticism. The most common criticism is that the student subjects typically used in experiments may not be representative of taxpayers. Undergraduates may have little experience with filing tax returns, and their economic and demographic backgrounds may differ from those of taxpayers. Another criticism is that the context of laboratory compliance experiments does not closely enough resemble the context in which actual compliance decisions are made. As a result, there is a concern that experimental results on policy innovations that rely upon student subjects in laboratory compliance experiments cannot be generalized to the population. It is this issue that we examine here. Building on previous research, we present several types of evidence on the external validity of experiments on individual compliance decisions. A first question examines whether behavior of laboratory participants is replicated by behavior of individuals making a similar decision in the naturally occurring world; that is, do participants in laboratory experiments exhibit different patterns of behavior than individuals in a similar naturally occurring setting? To answer this question, we utilize a special data set from the U.S. Internal Revenue Service (IRS) assembled as part of its National Research Program (NRP). …

In this study, a handy quick estimate of expected power and cost of micro-scale generation wind turbines is generated for the purpose of simplifying and facilitating the deal of non-specialists with the sophisticated technicalities of micro-scale generation wind turbines technologies and terminologies. Several small-scale wind turbines are examined such as rotor diameter, cut-in velocity and rated power versus the various wind velocities of the intended place of wind turbine installation. The user of this estimate needs to identify only two issues which are the required power in kW to be generated by micro-scale wind turbine and the annual mean wind velocity at expected height of installation of the turbines of the location of energy demand, knowing that Micro-scale wind turbines can be roof mounted and/or tower mounted. The user of this estimate would be able to select easily the wind turbine(s) power capacity, number of wind turbines to fulfil his energy demand, guidance estimate of related costs, associated with that the turbine cutin velocity, rotor diameter which gives an indication of the space would be required for wind turbines would This estimate was based on utilising the Weibull statistical method, which offers three scenarios of power generation. Those scenarios are i) Optimistic, ii) most likely iii) pessimistic. This estimate is considered a friendly guide of micro-scale wind turbines to nonspecialists for residential, educational and small commercial applications.

I estimate a simultaneous equations model of contributions and beliefs in a repeated public good game, providing causal estimates of the effect of beliefs on contributions and the effect of contributions on beliefs, also known as the “projection bias.â€

Individual risk preferences can serve as an effective control variable in order to describe human decisions and behavior. Due to limited participants' attention and time, using standard procedures may be difficult. This paper hence proposes a risk preference elicitation task, aiming to assess individual risk preferences in experiments conducted outside the lab. The test is evaluated against a well-established task by means of two online experiments comprising a total of 490 participants.

Contains fulltext : 141058.pdf (Publisher’s version ) (Open Access) This paper identifies gender beliefs in a public goods game and studies their impact on cooperation. On average, the beliefs of men, but not those of women, depend significantly on the group gender composition, with men expecting groups to be more cooperative when more females are present in the group. Gender beliefs of women are not absent, however, but show more variance than those of men. The contributions to the public good are driven by gender beliefs, and after controlling for them, contributions do not depend on the gender group composition directly. 7 p.

Complexity aversion describes the preference of decision makers for less complex options that cannot be explained by expected utility theory. While a number of research articles investigate the effects of complexity on choices, up to this point there exist only theoretical approaches aiming to explain the reasons behind complexity aversion. This paper presents two experimental studies that aim to fill this gap. The first study considers subjects' cognitive abilities as a potential driver of complexity aversion. Cognitive skills are measured in a cognitive reflection test and, in addition, are approximated by subjects' consistency of choices. In opposition to our hypothesis, subjects with higher cognitive skills display stronger complexity aversion compared to their peers. The second study deals with cultural background. The experiment was therefore conducted in Germany and in Japan. German subjects prefer less complex lotteries while Japanese are indifferent regarding choice complexity.

Policy makers and the healthcare industry have proposed changes to physician payment structures as a way to improve the quality of health care and reduce costs. Several of these proposals require healthcare providers to employ a value-based purchasing program (also known as pay-for-performance [P4P]). However, the way in which existing payment structures impact physician behavior is unclear and therefore, predicting how well P4P will perform is difficult. To understand the impact physician payment structures have on physician behavior, I approximate the physician–patient relationship in a real-effort laboratory experiment. I study several prominent physician payment structures including fee-for-service, capitation, salary, and P4P. I find that physicians are intrinsically motivated to provide high quality care and relying exclusively on extrinsic incentives to motivate physicians is detrimental to the quality of care and costly for the healthcare industry.

The use of moral appeals to affect the behavior of others is pervasive (from the pulpit to ethics classes) but little is known about the effects of moral suasion on behavior. In a series of experiments we study whether moral suasion affects behavior in voluntary contribution games and mechanisms by which behavior is altered. We find that observing a message with a moral standard according to the golden rule or, alternatively, utilitarian philosophy, results in a significant but transitory increase in contributions above the levels observed for subjects that did not receive a message or received a message that advised them to contribute without a moral rationale. When players have the option of punishing each other after the contribution stage the effect of the moral messages on contributions becomes persistent: punishments and moral messages interact to sustain cooperation. We investigate the mechanism through which moral suasion operates and find it to involve both expectation- and preference-shifting effects. These results suggest that the use of moral appeals can be an effective way of promoting cooperation.

Behavioral research has revealed how normal human cognitive processes can tend to lead us astray. But do these affect economic researchers, ourselves? This article explores the consequences of stereotyping and confirmation bias using a sample of published articles from the economics literature on gender and risk aversion. The results demonstrate that the supposedly “robust†claim that “women are more risk averse than men†is far less empirically supported than has been claimed. The questions of how these cognitive biases arise and why they have such power are discussed, and methodological practices that may help to attenuate these biases are outlined.

Gender differences in competitiveness have been hypothesized as a potential explanation for gender differences in education and labor market outcomes. We examine the predictive power of a standard laboratory experimental measure of competitiveness for the later important choice of academic track of secondary school students in the Netherlands. Although boys and girls display similar levels of academic ability, boys choose substantially more prestigious academic tracks, where more prestigious tracks are more math- and science-intensive. Our experimental measure shows that boys are also substantially more competitive than girls. We find that competitiveness is strongly positively correlated with choosing more prestigious academic tracks even conditional on academic ability. Most important, we find that the gender difference in competitiveness accounts for a substantial portion (about 20%) of the gender difference in track choice.

In this study, a general overview of energy and renewable energy sources available in Australia was introduced, household’s electricity situation in Australia was presented, and focus wind energy was conducted. A theoretical methodology for quantification and costing of selected micro wind turbines was introduced. This methodology was applied to Armidale city, New South Wales (NSW), Australia as a case study. The methodology involved utilisation of spread sheet application and HOMER software. Such methodology dealt with hourly household electric load in Armidale and hourly wind speed in Armidale as inputs and provided hourly power outputs from selected micro wind turbine as an output. As well, a sample of payback period calculations for the said selected wind turbines is calculated versus various wind speeds. This methodology can be applied to any other cities or towns. Undoubtedly, the ability of quantifying micro electricity generation resultant from micro wind turbines for a specific city or town and evaluating the share of households’ electric consumption at that city or town associated with the relevant payback periods opens the gate for further studies of feasibility and visibility of micro wind turbines.

“Aggressive tax planning” (ATP) is typically characterized as a tax scheme that reduces the effective tax rate of a particular type of income to a level below the one sought by fiscal policy for this income. One motivation often suggested for its use is the uncertainty in tax liabilities introduced by a complicated and ever changing tax system. In this paper, I examine the impact of an uncertainty on the use of such tax schemes; by implication, I also examine how a simpler and more stable tax system that reduced this uncertainty might affect ATP. In this analysis, I draw upon some of my own work on tax avoidance and tax evasion, and then I extend this work to the related but separate area of ATP. Importantly, I introduce and model both individual and group motivations, incorporating insights from behavioral economics in these new analyses. Taxpayers are clearly motivated in part by narrowly defined financial considerations as shaped by the tax, audit, and penalty rates that they face, all of which I classify as individual motivations . However, individuals are also often influenced by many other factors that go beyond self-interest and that have as their main foundation some aspects of social norms, morality, altruism, fairness, or the like. In their entirety, I lump these factors together as group motivations , and I argue that they are shaped by the dynamic social context in which, and the process by which, decisions emerge. My main conclusion is that there is much in theory to suggest that uncertainty leads to more use of ATP, especially when both individual and group motivations are considered.

Intermittency is an apparent characteristic of some renewable energy sources and this specifically applies to solar, wind and tidal renewable sources. Thus, battery storage is a real important element of any photo voltaic (PV) energy generation systems. As well, sizing of battery storage plays a vital role in achieving an optimal operation of such a system. Emphasis is greatly required to proper sizing of battery storage. In this context, daily global solar radiation data, for (14) years during the period 1997–2010 were meteorologically measured and recorded at Armidale, NSW, Australia. Those data have been analysed to investigate the optimal size of battery storage capacity for stand-alone PV energy systems. Several sizing configurations have been simulated. The monthly average daily values of solar global radiation on horizontal ranges from4.75 to7.20kWh/m2. Four case studies of Armidale’s houses/units with occupancy of (1, 2, 4 and 6) persons are considered to fulfil fifty percent of the average daily electrical load demand of each occupancy category using PV energy system equipped with battery storage. Calculations showed various combinations of capacities of PV energy system and its related battery storage. Optimal size of PV energy system and relevant battery storage for each occupancy category are conducted based on techno-commercial view.

Using an intergenerational trilateral laboratory gift-exchange game, we investigate how employers' own performance in a real effort task impacts on the wage setting behavior of younger and older employers. We find that the employers' own past performance strongly affects wage setting behavior, though we do not find significant differences concerning the employers' or employees' age.

Alternative dispute resolution procedures such as arbitration and mediation are the most common methods for resolving wage, contract, and grievance disputes, but they lead to varying levels of success and acceptability of the outcome depending on their design. Some innovative procedures, not yet implemented in the real world, are predicted to improve on existing procedures in some ways. But controlled tests of several procedures show that the simple addition of a nonbinding stage prior to binding dispute resolution can produce the best results in terms of cost (monetary and "uncertainty" costs) and acceptability.

Aluminum and aluminum alloy usage has a great economic and social importance. Therefore, so customary in our lives, aluminum and its alloys have a great spread in various fields. Our paper presents possibilities for optimization of aluminum (Al) alloys elaboration and casting processes by specific mathematical modeling. Some of these developments might include: developing new furnace types that will replace the largely exposed melt surface with a reduced surface area, thus improving energy consumption, environmental performance and overall efficiency through reduced metal loss; the development of in–line metal treatment units through high speed degassing. Direct and reliable detection and measurement techniques of non-metallic measurements will be developed; continuous production processes will replace sequential operations used to produce tin foil, extruded products and remelted alloyed ingots. We also present the main modeling principle and we describe the algorithm of modeling. Recycling provides a viable solution to existing shortages of raw materials. The use of products made with secondary aluminum provides high energy savings compared to the same products that use primary aluminum. Recycling aluminum products has a positive impact on the environment, its recyclability being preferred over other materials. An important principle of mathematical modeling is the principle of analogy. This principle consists in observing and analyzing competently the modeled reality, using both analogy with other fields of research and logical homology.

Monty Hall is a difficult task which triggers multiple biases. With sophisticated subjects and treatments that reverse and eliminate these triggers, non-rational choice is greatly reduced. Among task-familiar subjects, non-rational choice can can fall to background-error levels. But as our data also show, task-form recognition is necessary but not sufficient for rational choice when the task calls for conditional probability reasoning rather than simple rule-based behavior, as in e.g. 'Switch in Monty Hall.' Task-form understanding, a more stringent requirement, proves to be necessary and sufficient for rational choice in generalized Monty Hall conditional probability reasoning tasks.

This paper discusses and determines the optimization process of sizing a hybrid renewable energy system designed for urban residential buildings in Armidale NSW, Australia. The considered renewable energy system comprises of solar photovoltaic (PV) system and wind turbines as small scale or microscale, thus it is a green sustainable system compared with already existing in use conventional traditional electricity generation based on fossil fuel, mainly coal burning which is definitely neither green nor sustainable. This proposed alternative renewable energy systems includes battery racks as storage device. Software called HOMER software developed by the National Renewable Energy USA utilized for the simulation and evaluation purposes. The optimisation process depends on a very common economic analysis which is the net present cost (NPC) analysis, meaning that the system of the highest energy production, the most optimum efficiency and the least NPC through the energy. Conclusions and recommendations are provided considering the residential buildings occupants’ number and relevant electrical consumption with proposed renewable energy wind and solar PV combinations.

This paper investigates the processing of repeated complex information. The focus of this study is whether additional information and the introduction of performance-based payoffs have an influence on judgment. Therefore, an experiment is designed to investigate the degree of precision and of quality in interval estimates. The data shows that providing additional information decreases the precision of stated estimates, while it improves its quality. The same result is obtained when performance-based payoffs are introduced to an otherwise hypothetical decision environment. This means that, while the variation in the treatment variables increases the quality of the estimate, the precision as a reflection of the decision maker's confidence is reduced.

This article describes experimental economics, in general, and new developments in experimental macroeconomics, in particular. The approach has a clear niche in providing evidence on economic phenomena that cannot be observed directly or that are difficult to measure. Experimental work conducted by Bank of Canada economists has shed light on a number of issues important to monetary policy, such as the relative efficacy between price-level and inflation targeting, and the nature of inflation expectations formation.

To study switching behavior, an experiment mimicking the state of a driver on the road was conducted. In each trial participants were given a chance to switch lanes. Despite the fact that lane switching had no sound rational basis, participants often switched lanes when the speed of driving in their lane on the previous trial was relatively slow. That tendency was discerned even when switching behavior had been sparsely reinforced, and was especially marked in almost a third of the participants, who manifested it consistently. The findings illustrate a type of behavior occurring in various contexts (e.g., stocks held in a portfolio, conduct pertinent for residual life expectancy, supermarket queues). We argue that this behavior may be due to a fallacy reminiscent of that arising in the well-known “envelopes problem”, in which each of two players holds a sum of money of which she knows nothing about except that it is either half or twice the amount held by the other player. Players may be paradoxically tempted to exchange assets, since an exchange fallaciously appears to always yield an expected value greater than whatever is regarded as the player's present assets. We argue that the fallacy is due to egocentrically framing the problem as if the “amount I have” is definite, albeit unspecified, and shows that framing the paradox acentrically instead eliminates the incentive to exchange assets. A possible psychological source for the human disposition to frame problems in a way that inflates expected gain is discussed. Finally, a heuristic meant to avert the source of the fallacy is proposed.

In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that the four-firm industries form cartels more often than the duopolies because they gain less from a hysteresis effect after cartel disruption.

The Minneapolis Domestic Violence Experiment (MDVE) is a randomized social experiment with imperfect compliance that has been extremely influential in how police officers respond to misdemeanor domestic violence. This article reexamines data from the MDVE, using recent literature on partial identification to find recidivism associated with a policy that arrests misdemeanor domestic violence suspects rather than not arresting them. Using partially identified bounds on the average treatment effect, I find that arresting rather than not arresting suspects can potentially reduce recidivism by more than two-and-a-half times the corresponding intent-to-treat estimate and more than two times the corresponding local average treatment effect, even when making minimal assumptions on counterfactuals.

The history of the world is strewn with the remains of societies whose institutions failed to adapt to ecological change, but the determinants of institutional fragility are difficult to identify in the historical record. We report a laboratory experiment exploring the impact of an exogenous ecological shock on the informal rules of property and exchange. We find that geographically-induced tribal sentiments, which are unobservable in the historical record, impede adaptation post shock and that inequality declines as wealth and sociableness increase. Quantitative measures of individual and group sociality account for some of the differences in successful or failed adaptation.

We create an experimental asset market in which we conduct share repurchases and share issues. Although the intrinsic value of the shares is independent of the quantity outstanding, the interventions result in changes in asset price. Specifically, we find the following. (1) A repurchase of shares increases the price of the asset, and a share issue decreases the price of the asset, compared to a benchmark of no intervention. These effects are consistent with downward-sloping demand for the asset. (2) The empirical patterns observed are consistent with a model based on that proposed by DeLong et al. (1990), which posits three trader types-- fundamental, speculator, and momentum-interacting in the market. (3) The downward pressure on prices resulting from share issues drives prices down toward, but not beyond, fundamental values. This downward resistance at the fundamental value is predicted by the model, in which it arises from the impact of an intervention on the proportion of the total stock of units and cash held by each trader type.

This experiment finds that the Becker-DeGroot-Marschak (BDM) (1964) valuation mechanism under-predicts the proportion of subjects choosing cash over an item. The extent of the divergence is increasing in risk aversion, which is consistent with reference dependent preferences. This suggests a reframing of the BDM to improve its performance. The modified BDM mechanism is found to better match choices at a single offer price (SOP).

Previous studies on technical analysis mostly report the profitability of specific trading rules for a given set of historical data. In this paper, we use the human trader experiment approach to compare the performance of experienced and novice traders. It is found that traders who are more knowledgeable on technical analysis significantly outperform those who are less knowledgeable.

Kriging (Gaussian process, spatial correlation) metamodels approximate the Input/Output (I/O) functions implied by the underlying simulation models; such metamodels serve sensitivity analysis and optimization, especially for computationally expensive simulations. In practice, simulation analysts often know that the I/O function is monotonic. To obtain a Kriging metamodel that preserves this known shape, this article uses bootstrapping (or resampling). Parametric bootstrapping assuming normality may be used in deterministic simulation, but this article focuses on stochastic simulation (including discrete-event simulation) using distribution-free bootstrapping. In stochastic simulation, the analysts should simulate each input combination several times to obtain a more reliable average output per input combination. Nevertheless, this average still shows sampling variation, so the Kriging metamodel does not need to interpolate the average outputs. Bootstrapping provides a simple method for computing a noninterpolating Kriging model. This method may use standard Kriging software, such as the free Matlab toolbox called DACE. The method is illustrated through the M/M/1 simulation model with as outputs either the estimated mean or the estimated 90% quantile; both outputs are monotonic functions of the traffic rate, and have nonnormal distributions. The empirical results demonstrate that monotonicity-preserving bootstrapped Kriging may give higher probability of covering the true simulation output, without lengthening the confidence interval.

Laibson (1997) suggests the present bias problem as one of the driving forces of excessive borrowing. Shefrin and Thaler (1988) suggest that self-control underlies national borrowing/savings rate. We conduct a survey with 65 people between the ages of 21 and 56 to check for present bias as well as self-control problems among individuals in Turkey using a quasi-hyperbolic discounting model. Our findings show that different income groups have similar discount factors, i.e., impatience levels, but very different degrees of dynamic inconsistencies, i.e. present bias levels. In particular, 32.2% of low-income individuals exhibit present bias whereas this is down to 5.9% for high-income individuals. This result does not depend on a particular assumption of a utility function. Using the parameters we elicit through the surveys, policymakers can design appropriate commitment devices for time-inconsistent individuals to ensure a sustainable level of aggregate saving and financial investment.

Reciprocity in feedback giving distorts the production and content of reputation information in a market, hampering trust and trade efficiency. Guided by feedback patterns observed on eBay and other platforms, we run laboratory experiments to investigate how reciprocity can be managed by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust, and more efficient trade. We discuss the implications for theory building and for managing the redesign of market trust systems. This paper was accepted by Teck Ho, decision analysis.

We experimentally explore how common knowledge provided by accounting systems affects investors’ decision and shapes the formation of security prices over time. We design alternative accounting structures and run experiments in artificial security markets framed by these structures. In sessions where investors receive exogenous accounting information about ultimate earnings, prices converge to the fundamental levels derived from those earnings through backward induction. Accounting plays a role for the market. In sessions where investors receive endogenous accounting information about earnings that are linked to the ongoing clearing price of the security, market price levels and paths become indeterminate and lose earnings anchor; investors tend to form their expectations of future prices by forward, not backward, induction. Accounting plays its role from the market, and loses its relevance in financial decision-making. These laboratory results suggest that accounting information and its overarching structure are important to prevent market exuberance, excess volatility and the formation of financial bubbles. They further have relevant effects on market allocative efficiency, and revenue and wealth distribution among investors.

Summary How to deal with the risks associated with nuclear energy is a major policy issue. This paper investigates the effect of an individual’s distance from nuclear power plants on willingness to pay for increased insurance coverage against nuclear accidents (MWP C ) as well as on willingness to pay for solving the nuclear waste disposal problem (MWP W ). Using data from a discrete choice experiment conducted in Switzerland, we find evidence that MWP C values decrease with distance from plant once attitudes influencing choice of residential location are controlled for. However, distance from plant has no effect on MWP W values.

We design an artefactual field experiment to study the relationship between joint-liability lending and adverse selection, moral hazard and risk preferences. While theories concerning joint-liability lending have highlighted its ability to mitigate adverse selection in credit transactions, our experimental results indicate that joint-liability lending may actually induce problems of adverse selection. The results of our experiment, carried on in partnership with a Bolivian microlender, show that borrowers exogenously endowed with a risky project are disproportionately likely to choose jointly-liability contracts over individually-liable contracts. This behavior does not appear to be motivated by risk-diversification, but rather by free-riding, as these subjects disproportionally switch from safe to risky projects when exogenously given a joint-liability contract instead of an individual contract. Thus the results of our experiment offer a possible explanation why joint liability loans have diminished in popularity in recent years among both borrowers and microfinance lenders.

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.

This study aims to provide empirical evidence of the economic and social impacts of access to microloans disbursed thorough self-help group (SHG) programs. For this purpose, primary data were collected from households in Kerala, South India, and combined with detailed financial transactions of SHG members and information collected through laboratory experiments. The estimation results show that wealthier group members are significantly more likely to reap economic benefits, probably from productive investments. For poor members, asset accumulation and consumption smoothing are the two main pathways out of poverty through SHG-modeled microfinance initiatives. Finally, we find that reciprocal cooperation and trust among group members are developed by repeated social interactions, which are facilitated by weekly meetings of SHGs.

Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company's sales to movie box office receipts. Recent research suggests prediction markets are robust to manipulation attacks and resulting market outcomes improve forecast accuracy. However, we present evidence from the lab indicating that single-minded, well-funded manipulators can in fact destroy a prediction market's ability to aggregate informative prices and mislead those who are making forecasts based upon market predictions. However, we find that manipulators primarily influence market trades meaning outstanding bids and asks remain informative.