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Money And The Scale Of Cooperation, Maria Bigoni, Gabriele Camera, Marco Casari
Money And The Scale Of Cooperation, Maria Bigoni, Gabriele Camera, Marco Casari
ESI Working Papers
This study reveals the existence of a causal link between the availability of money and an expanded scale of interaction. We constructed an experiment where participants chose the group size, either a low-value partnership or a high-value group of strangers, and then faced an intertemporal cooperative task. Theoretically, a monetary system was inessential to achieve cooperation. Empirically, without a working monetary system, participants were reluctant to expand the scale of interaction; and when they did, they ended up destroying surplus compared to partnerships, because cooperation collapsed in large groups. This economic failure was reversed only when participants managed to concurrently …
Tug-Of-War In The Laboratory, Cary Deck, Roman M. Sheremeta
Tug-Of-War In The Laboratory, Cary Deck, Roman M. Sheremeta
ESI Working Papers
Tug-of-war is a multi-battle contest often used to describe extended interactions in economics, management, political science, and other disciplines. While there has been some theoretical work, there is scant empirical evidence regarding behavior in a tug-of-war game. To the best of our knowledge, this paper provides the first experimental study of the tug-of-war. The results show notable deviations of behavior from theory. In the first battle of the tug-of-war, subjects exert fewer resources, while in the follow-up battles, they exert more resources than predicted. Also, contrary to the theoretical prediction, resource expenditures tend to increase in the duration of the …
Public Goods With Punishment & Payment For Relative Rank, Terence C. Burnham
Public Goods With Punishment & Payment For Relative Rank, Terence C. Burnham
ESI Working Papers
A laboratory experiment designed to investigate the role of relative performance-based payoffs on cooperation in the context of punishment. Subjects play a repeated public goods game with high-powered punishment (50:1) and additional payoffs based on relative performance. Contributions to the public good are nearly maximal. Punishment levels are substantial, higher than the same game without relative rank payoffs, and sufficiently high that total payoffs are negative. The group would make much more money in the same setting without punishment. This study contributes to investigation of the role of altruism in human cooperation.
The Impact Of Social Information On The Voluntary Provision Of Public Goods: A Replication Study, James J. Murphy, Nomin Batmunkh, Ben Nilson, Samantha Ray
The Impact Of Social Information On The Voluntary Provision Of Public Goods: A Replication Study, James J. Murphy, Nomin Batmunkh, Ben Nilson, Samantha Ray
ESI Working Papers
Shang and Croson (2009) found that providing information about the donation decisions of others can have a positive impact on individual donations to public radio. In this study, we attempted to replicate their results, however, we found no evidence of that social comparisons affected donation decisions. Most of our donors were renewing members, a group which Shang and Croson also found were not influenced by social information.
Error And Generalization In Discrete Choice Under Risk, Nathaniel T. Wilcox
Error And Generalization In Discrete Choice Under Risk, Nathaniel T. Wilcox
ESI Working Papers
I compare the generalization ability, or out-of-sample predictive success, of four probabilistic models of binary discrete choice under risk. One model is the conventional homoscedastic latent index model—the simple logit—that is common in applied econometrics: This model is “context-free” in the sense that its error part is homoscedastic with respect to decision sets. The other three models are also latent index models but their error part is heteroscedastic with respect to decision sets: In that sense they are “context-dependent” models. Context-dependent models of choice under risk arise from several different theoretical perspectives. Here I consider my own “contextual utility” model …
Competition Between And Within Universities: Theoretical And Experimental Investigation Of Group Identity And The Desire To Win, Zhuoqiong Charlie Chen, David Ong, Roman M. Sheremeta
Competition Between And Within Universities: Theoretical And Experimental Investigation Of Group Identity And The Desire To Win, Zhuoqiong Charlie Chen, David Ong, Roman M. Sheremeta
ESI Working Papers
We study how salient group identity, created through competition between students from different universities, as well as differences in the value of winning impact competitive behavior. Our experiment employs a simple all-pay auction within and between two university subject pools. We find that when competing against their peers, students within the lower tier university bid more aggressively than students within the top-tier university. Also, students from the lower tier university, in particular women, bid more aggressively when competing against students from the top-tier university. These findings, interpreted through a theoretical model incorporating both group identity and differential value of winning, …
Behavior In Group Contests: A Review Of Experimental Research, Roman Sheremeta
Behavior In Group Contests: A Review Of Experimental Research, Roman Sheremeta
ESI Working Papers
Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team-incentives within firms, group sports, and rent-seeking. In order to succeed, members of the same group have incentives to cooperate with each other by expending individual efforts. However, since effort is costly, each member also has an incentive to abstain from expending any effort and instead free-ride on the efforts of other members. Contest theory shows that the intensity of competition between groups and the amount of free-riding within groups depend on the group size, sharing rule, group impact function, contest success function, and heterogeneity of …
Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang
Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang
ESI Working Papers
Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (i) asymmetric communication and (ii) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote …
The Optimal Defense Of Network Connectivity, Dan Kovenock, Brian Roberson
The Optimal Defense Of Network Connectivity, Dan Kovenock, Brian Roberson
ESI Working Papers
Maintaining the security of critical infrastructure networks is vital for a modern economy. This paper examines a game-theoretic model of attack and defense of a network in which the defender's objective is to maintain network connectivity and the attacker's objective is to destroy a set of nodes that disconnects the network. The conflict at each node is modeled as a contest in which the player that allocates the higher level of force wins the node. Although there are multiple mixed-strategy equilibria, we characterize correlation structures in the players' multivariate joint distributions of force across nodes that arise in all equilibria. …
Asymmetric And Endogenous Communication In Competition Between Groups, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang
Asymmetric And Endogenous Communication In Competition Between Groups, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang
ESI Working Papers
Costless pre-play communication has been shown to effectively facilitate within-group coordination. However, in competitive coordination games, such as rent-seeking contests, better within-group coordination leads to more aggressive competition and lower efficiency. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. We find that allowing within-group communication makes groups compete more aggressively. When only one group can communicate, the communicating group coordinates better and expends higher efforts than the non-communicating group. However, the communicating group earns payoffs that are not different from the baseline contest without any communication, while the non-communicating group earns …
Dynamic Behavior And Player Types In Majoritarian Multi-Battle Contests, Alan Gelder, Dan Kovenock
Dynamic Behavior And Player Types In Majoritarian Multi-Battle Contests, Alan Gelder, Dan Kovenock
ESI Working Papers
In a dynamic contest where it is costly to compete, a player who is behind must decide whether to surrender or to keep fighting in the face of bleak odds. We experimentally examine the game theoretic prediction of last stand behavior in a multi-battle contest with a winning prize and losing penalty, as well as the contrasting prediction of surrendering in the corresponding contest with no penalty. We find varied evidence in support of these hypotheses in the aggregated data, but more conclusive evidence when scrutinizing individual player behavior. Players’ realized strategies tend to conform to one of several “types”. …
Dynamic Directed Search, Gabriele Camera, Jaehong Kim
Dynamic Directed Search, Gabriele Camera, Jaehong Kim
ESI Working Papers
The directed search model (Peters, 1984) is static; its dynamic extensions typically restrict strategies, often assuming price or match commitments. We lift such restrictions to study equilibrium when search can be directed over time, without constraints and at no cost. In equilibrium trade frictions arise endogenously, and price commitments, if they do exist, are self-enforcing. In contrast to the typical model, there exists a continuum of equilibria that exhibit trade frictions. These equilibria support any price above the static price, including monopoly pricing in arbitrarily large markets. Dispersion in posted prices can naturally arise as temporary or permanent phenomenon despite …
Revisiting Information Aggregation In Asset Markets: Reflective Learning & Market Efficiency, Brice Corgnet, Mark Desantis, David Porter
Revisiting Information Aggregation In Asset Markets: Reflective Learning & Market Efficiency, Brice Corgnet, Mark Desantis, David Porter
ESI Working Papers
The ability of markets to aggregate disperse information leading to prices that reflect the fundamental value of an asset is key to assessing the often-debated efficiency of markets. We study information aggregation in the experimental environment originally created by Plott and Sunder (1988). Contrary to the current belief, we find that markets do not aggregate information. The model that best describes our data, as well as data on information aggregation subsequent to Plott and Sunder (1988), is prior information (Lintner, 1969). That is, traders use their private information but fail to use market prices to infer other traders’ information. We …
The Cognitive Basis Of Social Behavior: Cognitive Reflection Overrides Antisocial But Not Always Prosocial Motives, Brice Corgnet, Antonio M. Espín, Roberto Hérnan-Gonzalez
The Cognitive Basis Of Social Behavior: Cognitive Reflection Overrides Antisocial But Not Always Prosocial Motives, Brice Corgnet, Antonio M. Espín, Roberto Hérnan-Gonzalez
ESI Working Papers
Even though human social behavior has received considerable scientific attention in the last decades, its cognitive underpinnings are still poorly understood. Applying a dual-process framework to the study of social preferences, we show in two studies that individuals with a more reflective/deliberative cognitive style, as measured by scores on the Cognitive Reflection Test (CRT), are more likely to make choices consistent with “mild” altruism in simple non-strategic decisions. Such choices increase social welfare by increasing the other person’s payoff at very low or no cost for the individual. The choices of less reflective individuals (i.e. those who rely more heavily …
On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan
On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan
ESI Working Papers
Influence costs models predict that organizations should limit managerial discretion to deter organizational members from engaging in wasteful politicking activities. We test this conjecture in a controlled, yet realistic, work environment in which we allow employees to influence managers’ decisions about rewards. We find that influence activities are pervasive and significantly lower organizational performance. Organizational performance suffers because principals offer weaker incentives when influence activities are allowed than when they are not. Importantly, we show that equal pay incentive schemes perform better when influence activities are available than when they are not. Our results thus support the idea that prevalent …
When Income Depends On Performance And Luck: The Effects Of Culture And Information On Giving, Pedro Rey-Biel, Roman M. Sheremeta, Neslihan Uler
When Income Depends On Performance And Luck: The Effects Of Culture And Information On Giving, Pedro Rey-Biel, Roman M. Sheremeta, Neslihan Uler
ESI Working Papers
We study how giving depends on income and luck, and how culture and information about the determinants of others’ income affect this relationship. Our data come from an experiment conducted in two countries, the US and Spain, which have different beliefs about how income inequality arises. We find no cross-cultural differences in giving when individuals are informed about the determinants of income, but when uninformed, Americans give less than Spanish. Culture and information not only affect individual giving, but also the determinants of giving and the beliefs about how income inequality arises. Beliefs partially moderate cross-cultural differences in giving.
The Gender Difference In The Value Of Winning, Zhuoqiong (Charlie) Chen, David Ong, Roman Sheremeta
The Gender Difference In The Value Of Winning, Zhuoqiong (Charlie) Chen, David Ong, Roman Sheremeta
ESI Working Papers
We design an all-pay auction experiment in which we reveal the gender of the opponent. Using this design, we find that women bid higher than men, but only when bidding against other women. These findings, interpreted through a theoretical model incorporating differences in risk attitude and the value of winning, suggest that women have a higher value of winning than men.
Language And Cooperation In Hominin Scavenging, Bart J. Wilson, Samuel R. Harris
Language And Cooperation In Hominin Scavenging, Bart J. Wilson, Samuel R. Harris
ESI Working Papers
Bickerton (2009, 2014) hypothesizes that language emerged as the solution to a scavenging problem faced by proto‐humans. We design a virtual world to explore how people use words to persuade others to work together for a common end. By gradually reducing the vocabularies that the participants can use, we trace the process of solving the hominin scavenging problem. Our experiment changes the way we think about social dilemmas. Instead of asking how does a group overcome the selfinterest of its constituents, the question becomes, how do constituents persuade one another to work together for a common end that yields a …
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
ESI Working Papers
Despite its central role in the theory of incentives, empirical evidence of a tradeoff between risk and incentives remains scarce. We reexamine this empirical puzzle in a controlled laboratory environment so as to isolate possible confounding factors encountered in the field. In line with the principal-agent model, we find that principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier. Unexpectedly, agents produce substantially more in the noisy environment than in the baseline despite lesser pay for performance. We show that this result can be accounted for by introducing agents’ loss aversion in …
Sharing As Risk Pooling In A Social Dilemma Experiment, Todd L. Cherry, E. Lance Howe, James J. Murphy
Sharing As Risk Pooling In A Social Dilemma Experiment, Todd L. Cherry, E. Lance Howe, James J. Murphy
ESI Working Papers
In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefiting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk …
Generalizations Of The General Lotto And Colonel Blotto Games, Dan Kovenock, Brian Roberson
Generalizations Of The General Lotto And Colonel Blotto Games, Dan Kovenock, Brian Roberson
ESI Working Papers
In this paper, we generalize the General Lotto game (budget constraints satisfied in expectation) and the Colonel Blotto game (budget constraints hold with probability one) to allow for battlefield valuations that are heterogeneous across battlefields and asymmetric across players, and for the players to have asymmetric resource constraints. We completely characterize Nash equilibrium in the generalized version of the General Lotto game and then show how this characterization can be applied to identify equilibria in the Colonel Blotto version of the game. In both games, we find that there exist sets of non-pathological parameter configurations of positive Lebesgue measure with …
Unusual Estimates Of Probability Weighting Functions, Nathaniel T. Wilcox
Unusual Estimates Of Probability Weighting Functions, Nathaniel T. Wilcox
ESI Working Papers
I present new estimates of the probability weighting functions found in rankdependent theories of choice under risk. These estimates are unusual in two senses. First, they are free of functional form assumptions about both utility and weighting functions, and they are entirely based on binary discrete choices and not on matching or valuation tasks, though they depend on assumptions concerning the nature of probabilistic choice under risk. Second, estimated weighting functions contradict widely held priors of an inverse-s shape: Instead I usually find populations dominated by “optimists” who uniformly overweight best outcomes in risky options. A salience-based theory of choice …
An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti
An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti
ESI Working Papers
We develop a novel theoretical and experimental framework to study adoption and use of cash versus electronic payments in retail transactions. The design allows us to assess the behavioral impact of sellers’ service fees and buyers’ rewards from using electronic payments. In the experiment, buyers and sellers faced a coordination problem, independently choosing a payment method before trading. Sellers readily adopted electronic payments but buyers did not. Eliminating service fees or introducing rewards significantly increased adoption and use of electronic payments. Buyers’ economic incentives played a pivotal role in the diffusion of electronic payments but cannot fully explain their adoption …
What Makes A Good Trader? On The Role Of Quant Skills, Behavioral Biases And Intuition On Trader Performance, Brice Corgnet, Mark Desantis, David Porter
What Makes A Good Trader? On The Role Of Quant Skills, Behavioral Biases And Intuition On Trader Performance, Brice Corgnet, Mark Desantis, David Porter
ESI Working Papers
We study the determinants of individual trader performance by conducting a comprehensive analysis of a broad range of variables that have been studied separately in different strands of the literature (financial literacy, cognitive skills, behavioral biases and the theory of mind). We utilize an experimental trading environment that allows us to control information flows into the market and measure a large set of individual characteristics. We show that behavioral biases (such as overconfidence and the failure to understand random sampling) significantly explain trader performance whereas standard cognitive and theory of mind skills only have a marginal effect. These results support …
The Effects Of Make And Take Fees In Experimental Markets, Vince Bourke, David Porter
The Effects Of Make And Take Fees In Experimental Markets, Vince Bourke, David Porter
ESI Working Papers
We conduct a series of experiments to examine the effects of the make and take fee structure currently used by equity exchanges in the U.S. We examine the effects of these fees on measures of market quality (allocative efficiency, trading volume, book depth, and the bid-ask spread). With the exception of increased book depth, we document no significant effects of make and take fees relative to a baseline case in which trading fees are assessed on both sides of a transaction.
Indirect Reciprocity, Resource Sharing, And Environmental Risk: Evidence From Field Experiments In Siberia, E. Lance Howe, James J. Murphy, Drew Gerkey, Colin Thor West
Indirect Reciprocity, Resource Sharing, And Environmental Risk: Evidence From Field Experiments In Siberia, E. Lance Howe, James J. Murphy, Drew Gerkey, Colin Thor West
ESI Working Papers
Integrating information from existing research, qualitative ethnographic interviews, and participant observation, we designed a field experiment that introduces idiosyncratic environmental risk and a voluntary sharing decision into a standard public goods game. Conducted with subsistence resource users in rural villages in remote Kamchatka Russia, we find evidence consistent with a model of indirect reciprocity and local social norms of helping the needy. When experiments allow participants to develop reputations, as is the case in most small‐scale societies, we find that sharing is increasingly directed toward individuals experiencing hardship, good reputations increase aid, and risk‐pooling becomes more effective. Our results highlight …
Behavior In All-Pay Auctions With Ties, Alan Gelder, Dan Kovenock, Roman Sheremeta
Behavior In All-Pay Auctions With Ties, Alan Gelder, Dan Kovenock, Roman Sheremeta
ESI Working Papers
Despite the wide occurrence of ties in a variety of contest settings, the strategic interaction that arises when ties are treated as viable outcomes has received little attention. Building on recent theoretical work, we experimentally examine an extension of the canonical two-player all-pay auction in which a tie occurs unless one player’s bid exceeds the other’s by some critical threshold. In the event of a tie, each player receives an identical fraction of the prize. For the case where players receive one-half of the prize when they tie, we find that players’ expenditures are non-monotonic in the threshold required for …
Cognitive Reflection Test: Whom, How, When, Pablo Brañas-Garza, Praveen Kujal, Balint Lenkei
Cognitive Reflection Test: Whom, How, When, Pablo Brañas-Garza, Praveen Kujal, Balint Lenkei
ESI Working Papers
We report the results of a meta-study of 118 Cognitive Reflection Test studies comprising of 44,558 participants across 21 countries. There is a negative correlation between being female and the overall, and individual, correct answers to CRT questions. Taking the test at the end of an experiment negatively impacts performance. Monetary incentives do not impact performance. Overall students perform better compared to non-student samples. Exposure to CRT over the years may impact outcomes, however, the effect is driven by online studies. We obtain mixed evidence on whether the sequence of questions matters. Finally, we find that computerized tests marginally improve …
Selective Recognition: How To Recognize Donors To Increase Charitable Giving, Anya Samek, Roman Sheremeta
Selective Recognition: How To Recognize Donors To Increase Charitable Giving, Anya Samek, Roman Sheremeta
ESI Working Papers
Recognizing donors by revealing their identities is important for increasing charitable giving. We conducted a field experiment to examine how different recognition methods impact giving, and found that all forms of recognition that we examined had a positive impact on increasing donations, whereby recognizing only highest donors (positive recognition) and recognizing only lowest donors (negative recognition) had the most pronounced effect. We argue that selective recognition (both positive and negative) creates tournament-like incentives. Recognizing the highest donors activates the desire to seek a positive prize of prestige, thus increasing the proportion of donors who contribute large amounts. Recognizing the lowest …
Status And The Demand For Visible Goods: Experimental Evidence On Conspicuous Consumption, David Clingingsmith, Roman M. Sheremeta
Status And The Demand For Visible Goods: Experimental Evidence On Conspicuous Consumption, David Clingingsmith, Roman M. Sheremeta
ESI Working Papers
Some economists argue that consumption of publicly visible goods is driven by social status. Making a causal inference about this claim is difficult with observational data. We conduct an experiment in which we vary both whether a purchase of a physical product is publicly visible or kept private and whether the income used for purchase is linked to social status or randomly assigned. Making consumption choices visible leads to a large increase in demand when income is linked to status, but not otherwise. We investigate the characteristics that mediate this effect and estimate its impact on welfare.