1,720,989 research outputs found
Preferences of neutral third-parties in three-player ultimatum games
Full text linkWe present a three-player game in which a proposer makes a suggestion on how to split 0. Our results show a decision-maker whose main concern is to reduce the inequality between proposer and responder and who, in order to do so, is willing to reject both selfish and generous offers.This pattern of rejections is robust through a series of treatments which include changing the "flat-fee" payoff of the decision-maker, introducing a monetary cost for the decision-maker in case the offer ends up in a rejection, or letting a computer replace the proposer to randomly make the splitting suggestion between proposer and responder. Further, through these different treatments we are able to show that decision- makers ignore the intentions behind the proposers suggestions, as well as ignoring their own relative payoffs, two surprising results given the existing literature
A tale of two tails: Preferences of neutral third-parties in three-player ultimatum games
Full text linkWe present a three-player game in which a proposer makes a suggestion on how to split 0. Our results show a decision-maker whose main concern is to reduce the inequality between proposer and responder and who, in order to do so, is willing to reject both selfish and generous offers. This pattern of rejections is robust through a series of treatments which include changing the "flat-fee" payoff of the decision-maker, introducing a monetary cost for the decision-maker in case the offer ends up in a rejection, or letting a computer replace the proposer to randomly make the splitting suggestion between proposer and responder. Further, through these different treatments we are able to show that decision-makers ignore the intentions behind the proposers suggestions, as well as ignoring their own relative payoffs, two surprising results given the existing literature
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3 experiments in 3 completely different things
Full text linkAbstract 1: We present a three-player game in which a decision-maker, in the role of referee, accepts or rejects the offer made by a proposer to a passive receiver. If the offer is accepted, the split takes place as suggested, if rejected both proposer and passive receiver get $0. The payoff of the decision-maker, on the other hand, will be the treatment variable. Our results show a decision-maker that ignores his payoffs, but that is so concerned about equality among other players rejecting both selfish and generous offers. When we introduce a cost to rejecting proposals, we are able to show that inequality aversion is the only reason behind rejections.Abstract 2: When should a necessary inconvenience be introduced gradually, and when should it be imposed all at once? The question is crucial to web content providers. In a setting where people eventually fully adapt to changes, the answer depends on the shape of the "survivor curve" S(x), which represents the fraction of a user population willing to tolerate inconveniences of size x.We report a laboratory experiment that estimates the shape of survivor curves in several different settings. Our key finding is that web content providers will generally find it profitable to introduce inconveniences gradually over time.Abstract 3: There is consensus that the recent financial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the effects that contract length has on the market-wide supply of short-term credit. Our main result is that, while credit markets with shorter maturities are less prone to freezes, the optimal policy should be state-dependent, favoring long contracts when the economy is in good shape, and allowing for short-term contracts when the economy is in a recession. We also report runs on firms with strong fundamentals, and rich learning dynamics, with a text-book bubble and crash pattern in the short-term credit market
anexperiment on rollover risk
Full text linkThere is consensus that the recent financial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the effects that contract length (i.e. maturity mismatch) has on the market-wide supply of short-term credit. Our main result is that, while credit markets with shorter maturities are less prone to freezes, the optimal policy should be state-dependent, favoring long contracts and lower maturity mismatch when the economy is in good shape, and allowing for short-term contracts when the economy is in a recession. We also report the possibility of credit runs on rms with strong fundamentals, something that cannot be observed in the canonical static models of financial panics. Finally, we show that our experimental design produces rich learning dynamics, with a text-book bubble and crash pattern in the market for short-term credit
That's how we roll: An experiment on rollover risk
Full text linkThere is consensus that the recent financial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the effects that contract length (i.e. maturity mismatch) has on the market-wide supply of short-term credit. Our main result is that, while credit markets with shorter maturities are less prone to freezes, the optimal policy should be state-dependent, favoring long contracts and lower maturity mismatch when the economy is in good shape, and allowing for short-term contracts when the economy is in a recession. We also report the possibility of credit runs on firms with strong fundamentals, something that cannot be observed in the canonical static models of financial panics. Finally, we show that our experimental design produces rich learning dynamics, with a text-book bubble and crash pattern in the market for short-term credit
Non-Standard Errors
Full text linkIn statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants
Heads We Both Win, Tails Only You Lose: the Effect of Limited Liability On Risk-Taking in Financial Decision Making
Full text linkOne of the reasons for the recent crisis is that financial institutions took "too much risk" (Brunnermeier, 2009; Taylor et al., 2010). Why were these institutions taking so much risk is an open question. A recent strand in the literature points towards the "cognitive dissonance" of investors who, because of the limited liability of their investments, had a distorted view of riskiness (e.g., Barberis (2013); Benabou (2015)). In a series of laboratory experiments we show how limited liability does not affect the beliefs of investors, but does increase their willing exposure to risk. This results points to a simple explanation for the over-investment of banks and hedge-funds: When incentives are not aligned, investors take advantage of the moral hazard opportunities
The one player guessing game: a diagnosis on the relationship between equilibrium play, beliefs, and best responses
Full text linkExperiments involving games have two dimensions of difficulty for subjects in the laboratory. One is understanding the rules and structure of the game and the other is forming beliefs about the behavior of other players. Typically, these two dimensions cannot be disentangled as belief formation crucially depends on the understanding of the game. We present the one-player guessing game, a variation of the two-player guessing game (Grosskopf and Nagel 2008), which turns an otherwise strategic game into an individual decision-making task. The results show that a majority of subjects fail to understand the structure of the game. Moreover, subjects with a better understanding of the structure of the game form more accurate beliefs of other player's choices, and also better-respond to these beliefs.</p
Motivated Beliefs, Social Preferences, and Limited Liability in Financial Decision-Making
Full text linkUsing a new experimental design, we compare how subjects form beliefs in an investorclient
setup under varying degrees of liability. Our results re
ect the importance of social
preferences when making investment decisions for others. We show that when investors
have no liability, those with stronger social preferences are more optimistic about the
probability that their investment results in a gain. In other words, we nd that social
preferences appear to be correlated with motivated beliefs. This nding suggests the
existence of cognitive biases in nancial decision-making and supports the recent literature
on the formation of motivated beliefs under limited liability (Barberis, 2015; B enabou and
Tirole, 2016)
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