Procurement and Information Feedback

A government that regularly procures the services of construction companies wants to minimize its costs. The instrument it can use is the level of information feedback given to the firms in the market. Theoretically, the competition between firms is supposed to drive prices to the lowest possibility, independently of the information feedback. We design an experiment in which firms participate in a first price sealed-bid auction. Interaction takes place in 10 periods according to a random matching mechanism, and we control for the level of information feedback firms receive after each period. It turns out that when firms are informed about the losing bids in previous periods, prices are higher than the theoretical prediction. However, when firms do not receive this information prices converge towards the theoretical prediction. We suggest that aphenomenon of price signaling may be important for explaining these results.Procurement auction; experiment; information feedback; price signaling

Price Competition and Market Concentration: An Experimental Study

The classical price competition model (named after Bertrand), prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the "Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature. In this paper we experimentally investigate a model which is immune to the theoretical critique of the original model. We find, nevertheless, that the outcome does depend on the number of competitors: the Bertrand solution does not predict well when the number of competitors is two, but after some opportunities for learning are provided it tends to predict well when the number of competitors is three or four. A bounded rationality explanation of this is suggested.Price competition; Bertrand model; market concentration; experiment; learning

Cognitive Forward Induction and Coordination without Common Knowledge: An Experimental Study

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Gender and competition at a young age

Gender gaps may be observed in a variety of economic and social environments. One of the possible determining factors is that men are more competitive than women and so, when the competitiveness of the environment increases, the performance of men increases relative to that of women. We test this hypothesis in a field study conducted with 9-year old children, running on a track. They first run alone and then in pairs over a short distance with different gender composition of the pairs. The results support the hypothesis that performance in competition varies according to gender. When children ran alone, there was no difference in performance. In competition boys, but not girls, improved their performance. This finding relates to the discussion regarding single sex schools: the outcomes of examinations in a mixed sex school can show a gender gap in favor of boys, even when this gap does not reflect actual abilities. Girls who are as talented as boys will end up performing worse just because they are not as competitive, and will not achieve as high scores in examinations as boys.Gender, Competition, Affirmative action, Single-sex schools

A Field Study of Social Learning

We present a field study of social learning. The setting is a pair of adjacent fast food restaurants serving very similar cuisine whose main clientele are the students at a nearby major university. We observed whether an uninformed customer's choice of restaurant depends on the relative queue lengths at the two restaurants. Observations were made at two separate observation periods, the start of the academic year, when a significant proportion of customers had little or no experience with either restaurant, and the middle of the year, when most customers already had previous experience with the restaurants. It is found, consistent with the social learning hypothesis, that relative queue length has a significant effect at the first period but not at the second.

An Experimental Investigation of Optimal Learning in Coordination Games

This paper presents an experimental investigation of optimal learning in repeated coordination games. We find evidence for such learning when we limit both the cognitive demands on players and the information available to them. We also find that uniqueness of the optimal strategy is no guarantee for it to be used. Optimal learning can be impeded by both irrelevant information and the complexity of the coordination task. ZUSAMMENFASSUNG - (Eine experimentelle Untersuchung des optimalen Lernens in Koordinationsspielen) In diesem Beitrag wird eine experimentelle Untersuchung des optimalen Lernens in wiederholten Koordinationsspielen vorgestellt. Derartiges Lernen wird beobachtet, wenn kognitive Anforderungen an die Spieler und die ihnen zur Verfügung stehende Information begrenzt sind. Es zeigt sich aber auch, daß die Einzigartigkeit der optimalen Strategie keine Garantie dafür ist, daß sie angewendet wird. Optimales Lernen kann sowohl durch irrelevante Informationen als auch durch die Komplexität der Koordinationsaufgabe behindert werden.

Price Competition and Market Concentration: An experimental Study

The classical price competition model (named after Bertrand), prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature. In this paper we experimentally investigate a model which is immune to the theoretical critique of the original model. We find, nevertheless, that the outcome does depend on the number of competitors: the Bertrand solution does not predict well when the number of competitors is two, but after some opportunities for learning are provided it tends to predict well when the number of competitors is three or four. A bounded rationality explanation of this is suggested.Bertrand Model; Price Competition; Boundered Rationality; noise-bidding

Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments

Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research -- gift exchange -- in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the "gift" treatment than in the "non-gift treatment." After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages.

The effect of intergroup competition on group coordination: An experimental study

We report an experiment on the effect of intergroup competition on group coordination in the minimal-effort game (Van Huyck et al., 1990). The competition was between two 7-person groups. Each player in each group independently chose an integer from 1 to 7. The group with the higher minimum won the competition and each of its members was paid according to the game’s original payoff matrix. Members of the losing group were paid nothing. In case of a tie, each player was paid half the payoff in the original matrix. This treatment was contrasted with two control treatments where each of the two groups played an independent coordination game, either with or without information about the minimum chosen by the outgroup. Although the intergroup competition does not change the set of strict equilibria, we found that it improved collective rationality by moving group members in the direction of higher-payoff equilibria. Merely providing group members with information about the minimal-effort level in the other group was not sufficient to generate this effect.Non cooperative games, coordination, minimum effort game, intergroup competition, Leex