Auction Format and Auction Sequence in Multi-Item Multi-Unit Auctions – An experimental study

Date: 2014-06
By: Regina Betz (Australian School of Business, the University of New South Wales)
Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales)
Sascha Schweitzer (University of Bayreuth)
Stefan Seifert (University of Bayreuth)
We experimentally study the effect of auction format (sealed-bid vs. closed clock vs. open clock) and auction sequence (simultaneous vs. sequential) on bidding behaviour and auction outcomes in auctions of multiple related multi-unit items. Prominent field applications are the sale of emission permits, fishing rights, and electricity. We find that, when auctioning simultaneously, clock auctions outperform sealed-bid auctions in terms of efficiency and revenues. This advantage disappears when the items are auctioned sequentially. In addition, auctioning sequentially has positive effects on total revenues across all auction formats, resulting from fiercer competition on the item auctioned first.
Keywords: emission permits, auction design, laboratory experiment
JEL: C90 D44 Q53

How Individual Preferences are Aggregated in Groups: An Experimental Study

Date: 2014-06
By: Attila Ambrus (Department of Economics, Duke University)
Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales)
Parag A. Pathak (Department of Economics, MIT)
This paper experimentally investigates how individual preferences, through unrestricted deliberation, are aggregated into a group decision in two contexts: reciprocating gifts and choosing between lotteries. In both contexts, we find that median group members have a significant impact on the group decision, but the median is not the only influential group member. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual’s influence in different groups, we find evidence for relative position in the group having a direct effect on influence. These results are consistent with predictions from a spatial model of dynamic bargaining determining group choices. We also find that group deliberation involves bargaining and compromise as well as persuasion: preferences tend to shift towards the choice of the individual’s previous group, especially for those with extreme individual preferences.
Keywords: group decision-making, role of deliberation, social influence
JEL: C72 C92 H41

When Ignorance is Bliss* : Information Asymmetries Enhance Prosocial Behavior in Dicator Games

Date: 2014
By: Winschel, Evguenia
Zahn, Philipp
In most laboratory experiments concerning prosocial behavior subjects are fully informed how their decision influences the payoff of other players. Outside the laboratory, however, individuals typically have to decide without such detailed knowledge. To asses the effect of information asymmetries on prosocial behavior, we conduct a laboratory experiment with a simple non-strategic interaction. A dictator has only limited knowledge about the benefits his prosocial action generates for a recipient. We observe subjects with heterogenous social preferences. While under symmetric information only individuals with the same type of preferences transfer, under asymmetric information different types transfer at the same time. As a consequence and the main finding of our experiment, uninformed dictators behave more prosocially than informed dictators.
Keywords: Asymmetric Information , Prosocial Behavior , Efficiency Concern , Inequality Aversion , Dictator Game
JEL: D82 C91

Promoting Competition or Helping Less-Endowed? An Experiment on Collective Institutional Choices under Intra-Group Inequality

Date: 2014-06-20
By: Kamei, Kenju
Unequally-distributed resources, whether people’s income or competence, are ubiquitous in our real world. Whether to promote competition or to lead to a more equal environment is often in question in societies or organizations. With heterogeneous endowments, we let subjects collectively choose whether to have a competitive lottery contest – where only one individual in a group wins and receives an award, generating a greater income inequality – or to have a public good that benefits the less-endowed to a greater degree. Our data indicates that highly-endowed individuals contribute little when the public good is selected. The majority of subjects, however, vote in favor of having a public good, contrary to the standard theory predictions. In addition, a belief elicitation task shows that they expect payoffs to be more equally distributed under the public good regime than under the contest regime. Moreover, the subjects’ preferences between the two regimes are little affected by their risk attitudes or the size of awards in competition. These suggest that people’s institutional choices are driven more by their income inequality-averse preferences.
Keywords: heterogeneity, experiment, cooperation, competition, public goods, inequality
JEL: C92 D63 D70 D72 H4

Commons as a risk-management tool: theoretical predictions and an experimental test

Date: 2014-04
By: Marielle Brunette (Laboratoire d’Economie Forestière, INRA – AgroParisTech)
Philippe Delacote (Laboratoire d’Economie Forestière, INRA – AgroParisTech)
Serge Garcia (Laboratoire d’Economie Forestière, INRA – AgroParisTech)
Jean-Marc Rousselle (INRA, UMR 1135 LAMETA)
The impact of the safety-net use of Common-pool resources (CPR) on the individual investment into and extraction from the commons is analyzed in this paper. Agents of the community first choose to invest in their private project and in the CPR; second, they choose how much to extract from their private project and the commons. The model compares two types of risk management tool: CPR as risk-coping and risk-diversification mechanisms. It also compares two types of risk: risk on a private project and risk on CPR investment by other community members. The theoretical predictions are empirically tested with experimental economics. In this view, we propose an original CPR game composed of two periods, an investment one and an extraction one. Our result clearly shows that risk reduction in the private project unambiguously decreases investment in the CPR, while it does not impact CPR extraction. We also show that a risk-coping strategy is well understood as more flexible and influenced by the outcome in terms of private project yield.
Keywords: Common-pool resource, Common-pool resource game, deforestation, experimental economics.
JEL: Q15 Q23 D71 D81

Ignorance and bias in collective decision:Theory and experiments

Ignorance and bias in collective decision:Theory and experiments
Date: 2014
By: Alexander Elvitar (Centro de Investigación y Docencia Económicas, (CIDE))
Andrei Gomberg (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
César Martinelli (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
Thomas R. Palfrey (California Institute of Technology)
We consider a committee with common interests. Committee members do not know which of two alternatives is the best, but each member may acquire privately a costly signal before casting a vote under either majority or unanimity rule. In the lab, as predicted by Bayesian equilibrium, voters are more likely to acquire information under majority rule, and attempt to counter the bias built in favor of one alternative under unanimity rule. As opposed to Bayesian equilibrium predictions, however, some committee members vote for either alternative when uninformed. Moreover, uninformed voting is correlated with a lower disposition to acquire information. We show that an equilibrium model of subjective prior beliefs may account for this correlation, and provides a good fit for the observed patterns of behavior both in terms of rational ignorance and biases.
Keywords: Condorcet jury theorem, rational ignorance, homemade priors
JEL: D72 D83

An Experimental Study on the Effect of Ambiguity in a Coordination Game

An Experimental Study on the Effect of Ambiguity in a Coordination Game
Date: 2014
By: David Kelsey (Department of Economics, University of Exeter)
Sara le Roux (Department of Economics, Oxford Brookes University)
We report an experimental test of the influence of ambiguity on behaviour in a coordination game. We study the behaviour of subjects in the presence of ambiguity and attempt to determine whether they prefer to choose an ambiguity safe option. We fi?nd that this strategy, which is not played in either Nash equilibrium or iterated dominance equilibrium, is indeed chosen quite frequently. This provides evidence that ambiguity aversion infl?uences behaviour in games. While the behaviour of the Row Player is consistent with randomising between her strategies, the Column Player shows a marked preference for avoiding ambiguity and choosing his ambiguity-safe strategy.
Keywords: Ambiguity; Choquet expected utility; coordination game; Ellsberg urn, experimental economics.
JEL: C72 C91 D03 D81