72 research outputs found
Culture, nationality and demographics in ultimatum games
We use experimental data collected in Russia and in the United States using a simple
ultimatum game to evaluate two alternative hypotheses that may account for previously
observed behavior in multinational experiments. One hypothesis postulates that
behavioral differences observed in bargaining experiments arise from country-specific
cultural environments. We submit the alternative hypothesis that different behavior in
such experiments stems from differences in the demographic characteristics of the subject
pools within each country. Because of its simplicity, our experimental design allows us to
discriminate between these two hypotheses. Our findings support the alternative
hypothesis.Fundação para a Ciência e a Tecnologia (FCT
Social norms and social choice
Experiments can provide rich information on behavior conditional on the institutional rules of the game being imposed by the experimenter. We consider what happens when the subjects are allowed to choose the institution through a simple social choice procedure. Our case study is a setting in which sanctions may or may not be allowed to encourage “righteous behavior.” Laboratory experiments show that some subjects in public goods environments employ costly sanctions against other subjects in order to enforce what appears to be a social norm of contribution.
We show that this artificial society is not an attractive place to live, by any of the standard social choice criteria. If it came about because of evolutionary forces, as speculated, then The Blind Watchmaker was having one of his many bad days at the
workbench. In fact, none of our laboratory societies with perfect strangers matching
ever chose to live in such a world. Our findings suggest that the conditions under
which a group or a society would choose a constitution that is based on voluntary costly sanctions are very special.Fundação para a Ciência e a Tecnologia (FCT
Policy making and rent-dissipation: An experimental test.
Abstract We present a transfer-seeking model of political economy that links the theory of Becker (1983) with Tullock-type models of politically contestable rents. In our model the size of the transfer is determined endogenously, and over-dissipation of rents is predicted even under conditions of risk-neutrality and perfect rationality. We implement an empirical test of this model by collecting behavioral data in a laboratory experiment. We confirm the existence of behavior that leads to over-dissipation of rents in games with both symmetric and asymmetric political power. To the extent that the transfer-seeking costs are social costs, our findings imply that the total costs of running government might be greatly underestimated if the value of the rent is used as a proxy for the rent-seeking cost. We also confirm the hypotheses that lowering the political power of one player can lead to smaller rent-seeking expenditures and to larger transfer
Testing static game theory with dynamic experiments : a case study of public goods
Game theory provides predictions of behavior in many one-shot games. On the other hand, most experimenters usually play repeated games with subjects, to provide experience. To avoid subjects rationally employing strategies that are appropriate for the repeated game, experimenters typically employ a “random strangers” design in
which subjects are randomly paired with others in the session. There is some chance
that subjects will meet in multiple rounds, but it is claimed that this chance is so small that subjects will behave as if they are in a one-shot environment. We present evidence from public goods experiments that this claim is not always true.Fundação para a Ciência e a Tecnologia (FCT
Discounting in developing countries : a pilot experiment in Timor-Leste
We conduct laboratory experiments in Timor-Leste designed to test if individual discount rates vary with the time horizon for which the rate is elicited. Our experiments test a design that has been successfully employed in field experiments in developed countries, and that avoids several confounds of previous procedures. We find that there is onsiderable heterogeneity in individual discount rates, and that this heterogeneity is associated with observable demographic characteristics. We also find evidence that is consistent with exponential discounting behavior, although our
sample sizes do not allow us to definitively reject alternative specifications. We discuss modifications of our laboratory experiments that would facilitate field experiments in Timor-Leste.Fundação para a Ciência e a Tecnologia (FCT
Estimating Subjective Probabilities
Subjective probabilities play a role in many economic decisions. There is a large
theoretical literature on the elicitation of subjective probabilities, and an equally large empirical
literature. However, there is a gulf between the two. The theoretical literature proposes a range of
procedures that can be used to recover subjective probabilities, but stresses the need to make strong
auxiliary assumptions or “calibrating adjustments” to elicited reports in order to recover the latent
probability. With some notable exceptions, the empirical literature seems intent on either making
those strong assumptions or ignoring the need for calibration. We illustrate how one can jointly
estimate risk attitudes and subjective probabilities using structural maximum likelihood methods. This
allows the observer to make inferences about the latent subjective probability, calibrating for
virtually any well-specified model of choice under uncertainty. We demonstrate our procedures with
experiments in which we elicit subjective probabilities. We calibrate the estimates of subjective
beliefs assuming that choices are made consistently with expected utility theory or rank-dependent
utility theory. Inferred subjective probabilities are significantly different when calibrated according to
either theory
Theory and Experiments
Subjective beliefs play a role in many economic decisions. There is a large theoretical
literature on the elicitation of beliefs, and an equally large empirical literature. However, there is a
gulf between the two. The theoretical literature proposes a range of procedures that can be used to
recover beliefs, but stresses the need to make strong auxiliary assumptions or “calibrating
adjustments” to elicited reports in order to recover the latent belief. With some notable exceptions,
the empirical literature seems intent on either making those strong assumptions or ignoring the need
for calibration. We make three contributions to bridge this gulf. First, we offer a general theoretical
framework in which the belief elicitation task can be viewed as an exchange of state-dependent
commodities between two traders. Second, we provide a specific elicitation procedure which has clear
counterparts in field betting environments, and that is directly motivated by our theoretical
framework. Finally, we illustrate how one can jointly estimate risk attitudes and subjective beliefs using
structural maximum likelihood methods. This allows the observer to make inferences about the
latent subjective belief, calibrating for virtually any well-specified model of choice under uncertainty.
We demonstrate our procedures with an experiment in which we elicit subjective probabilities over
three future events and one fact
Estimating Aversion to Uncertainty
It is intuitive that decision-makers might have attitudes towards uncertainty just as they
might have attitudes towards risk. However, it is only recently that this intuitive notion has been
formalized and axiomatically characterized. We estimate the extent of uncertainty aversion in a
manner that is parsimonious and consistent with theory. We demonstrate that one can jointly
estimate attitudes towards uncertainty, attitudes towards risk, and subjective probabilities in a
rigorous manner. Our structural econometric model constructively demonstrates the theoretical
claims that it is possible to define uncertainty aversion in an empirically tractable manner. Our
results show that attitudes towards risk and uncertainty can be different, qualitatively and
quantitatively, and that allowing for these differences can have significant effects on inferences about
subjective probabilities
Dual Criteria Decisions
The most popular models of decision making use a single criteria to evaluate
projects or lotteries. However, decision makers may actually consider multiple
criteria when evaluating projects. We consider a dual criteria model from psychology.
This model integrates the familiar tradeoffs between risk and utility that economists
traditionally assume, allowance for rank-dependent decision weights, and
consideration of income thresholds. We examine the issues involved in full
maximum likelihood estimation of the model using observed choice data. We
propose a general method for integrating the multiple criteria, using the logic of
mixture models, which we believe is attractive from a decision-theoretic and
statistical perspective. The model is applied to observed choices from a major natural
experiment involving intrinsically dynamic choices over highly skewed outcomes.
The evidence points to the clear role that income thresholds play in such decision
making, but does not rule out a role for tradeoffs between risk and utility or
probability weighting
Non-Linear Mixed Logit and the Characterization of Individual Heterogeneity
Experimental data exhibit considerable individual heterogeneity. We review
the econometric methods employed to characterize that heterogeneity. We pay
particular attention to the trade-off between collecting and allowing for observable
characteristics, such as the familiar demographics, and the use of statistical methods
to allow for unobserved individual heterogeneity. We demonstrate that these tools
are complementary
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