Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

Experimental Economics 2021-22

December Final Exam

Section A (25%)

Discuss ONE of the following topics in experimental economics

and include relevant experimental results where possible:

A1. Social (or Other-regarding) Preferences

A2. Centralised and Decentralised Institutions to sustain Cooperation

 

Section B (25%)

Answer ONE of the following questions

and when relevant, refer to the appropriate literature:

B1. Discuss the experimental evidence on the concept of rationality in the context of Beauty Contest’ games. What do the findings suggest regarding the assumption of common knowledge of rationality?

B2. Discuss the experimental evidence on the concept of selfishness in the context ofultimatum game, dictator game, public goοd game and trust game experiments. What are the main findings in these four experimental games?

 

Section C (25%)

Describe and critically assess the objectives, design

and findings of ONE of the following papers:

 

C1. Huck, S., Normann, H.-T., Oechssler, J. (2004). Two are few and four are many: number effects in experimental oligopolies.” Journal of Economic Behavior & Organization

53: 435-446.

C2. Houser, D.,  Schunk, D., & Winter, J. (2010). Distinguishing trust from risk: An anatomy of the investment game.” Journal of Economic Behavior & Organization, 74(1– 2),

72–81.

 

Section D (25%)

Answer ALL PARTS of the following question:

D1. Consider the following experiment, conducted in an experimental lab.

We implement two conditions: a treatment (Treatment 1) in which the rewards in the real   effort task are decided by a tournament within pairs of subjects, and a treatment (Treatment 2) in which comparable payoffs are instead exogenously assigned.

The real effort task that subjects perform is the Coin Task. The Coin Task consists of             recognizing the value and the country of Euro coins. The task of the subjects is to identify the value and the country of the selected coin. Participants have 5 minutes to recognize as many  coins as possible.

 

Figure 1: The Coin Task

The score is the number of coins successfully recognized, with no penalty for wrong answers. Players are randomly paired to do the Coin Task and the payment to each player and their      opponent is determined by the treatment condition.

Participants in Treatment 1 are in competition with their randomly determined opponent: the subject reaching the higher score gets €8 while the other one gets €2. Participants in              Treatment 2 receive the same monetary payoffs (one player €8, the other €2), which are        however predetermined, so that there is no competition. Subjects are told that they are

randomly matched in pairs, and before playing the Coin Task they are also told whether their randomly determined reward is €2 or €8.

Monetary rewards in both treatments are conditional upon identifying at least 5 coins,             otherwise the payoff is zero. Possible ties are broken first looking at the total number of         attempts, i.e. also including wrong answers in the score, and in case of a further tie at the time taken to identify the coins correctly. The chosen threshold is low in order to avoid losing        observations because subjects do not earn a positive amount.

After the completion of the Coin Task, we elicit subjects’ risk preferences by using the BRET. The BRET is a simple risk elicitation method in which participants see on their computer screen a field containing of 100 boxes, as shown in Figure 2.

 

Figure 2: The Bomb Risk Elicitation Task

A subject has to choose how many boxes to collect knowing that 99 boxes contain €0.10        while one contains a bomb that, if collected, destroys the earnings. Boxes are collected in       numerical order starting from the top-left corner and ending at the box corresponding to         participant’s chosen number. The bomb can be in any box with the same probability and its   position is randomly determined at the end of the experiment, i.e., after the choice is made, in order to avoid truncation of the data.

After selecting a number of boxes, subjects are informed about the lottery they are going to  play. The chosen number of boxes is shown in light grey and the potential earnings and their corresponding probabilities are explicitly described. Participants may change their choice as many times as they like before confirming it. We elicit risk attitudes only once, after the       effort task.


Experimental Procedures

The experiment will take place at the University of Athens. It will be programmed using z- Tree (Fischbacher, 2007). Subjects will be recruited using the ORSEE software (Greiner,   2015) ensuring a balanced representation by gender.

Upon their arrival subjects enter the laboratory and are randomly assigned to computer          terminals, separated by partitions. After reading aloud the instructions illustrating the Coin    Task, participants are solicited to raise questions. Once all doubts have been privately            dispelled, the first stage of the experiment begins. Participants are randomly matched in pairs and are given the chance to practice for one minute in order to familiarize themselves with    the Coin Task. Coins identified during this minute do not add to the final score. They then     have five minutes to perform the Coin Task.

Before starting, subjects are asked to guess the number of coins they are going to correctly identify and whether this number is higher, equal to, or lower than the average of the other participants.

We ask these questions in order to elicit subjects’ expectations and be able to build a proxy   for overconfidence. At the end of the real effort task, subjects are told their own score and in Treatment 1 also the outcome of the tournament. Subjects are not told their peer’s score. The experimenter then reads aloud the instructions of the BRET and participants are given again the opportunity to clear up any doubts individually. Subjects play the BRET and, after          submitting their choice, complete a short questionnaire. The position of the bomb is then      randomly determined at the individual level. Subjects are notified about their final earnings  (€2.5 of show-up fee, plus their earnings in both the Coin Task and the BRET), receive their payment in a sealed envelope and leave the laboratory.

(a) Which research questions could be addressed by this experimental design? If possible, refer to experimental work studied in the course. [35 marks]

(b) Provide an example of a hypothesis that can be tested with the data from this experiment using the Mann-Whitney U test. Explain how this test works based on your example.  [25 marks]

(c) Discuss what you would need to consider in order to determine the sample size for this experiment. [15 marks]

(d) Can you identify any potential flaws in the above experimental design? Do you have any suggestions for further improvement? [25 marks]