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2019 | OriginalPaper | Chapter

2. Methodological Foundations

Authors : Joachim Weimann, Jeannette Brosig-Koch

Published in: Methods in Experimental Economics

Publisher: Springer International Publishing

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Abstract

Now that we have prepared the stage for experimental economics in the first chapter, the second chapter deals with the methodological foundations. The times are long gone when economists “just did an experiment” to see what happens when you let subjects play games. In the meantime, methodological standards and procedures have evolved. Following these procedures is an important prerequisite for obtaining experimental results that can claim to meet the scientific standards of the economics profession. We have put the most important methodological fundamentals into groups, each of which is based on one component of an experiment.

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previous chapter The Study of Behavior

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The exceptions are Volk et al. (2012), Carlsson et al. (2014), Sass and Weimann (2015), Brosig-Koch et al. (2017), and Sass et al. (2018).

For a survey see Feltovich (2011).

However, there is also evidence that monetary incentives can destroy intrinsic motivation (see, for example, Frey and Oberholzer-Gee 1997, Gneezy and Rustichini 2000, Mellström and Johannesson 2008, Fryer 2013).

Cox et al. (1992), Friedman (1992), Harrison (1992), Kagel and Roth (1992) and Merlo and Schotter (1992).

This experience was gained by talking to an experienced experimenter who had often conducted such experiments.

The statistical analysis of panel data differs from that of a time series, where the individual observations are independent. We will discuss this point briefly in 7 Chap. 4.

This means that neither the subjects among themselves nor the experimenter can observe what a subject is doing. How such designs can be achieved and what effects they have will be explained in more detail later in 7 Sect. 2.5.2.

See Ortmann and Hertwig (2002) for a survey.

In fact, this is exactly what they do (cf. Andreoni 1988).

One example is Harrison and List (2004).

We will come back to this point in 7 Sect. 2.5.1.

There is now a large body of literature on the selection biases that can be associated with student subjects. For example, Harrison et al. (2009), Feltovich (2011), Anderson et al. (2013), Cleave et al. (2013), Exadaktylos et al. (2013), Falk et al. (2013), Abeler and Nosenzo (2015), Belot et al. (2015) as well as Cappelen et al. (2015).

This will be explained in more detail in the next Section.

Strictly speaking, the second derivative of the utility function is decisive for the distinction between risk neutrality (second derivative equals zero), risk aversion (second derivative is negative) and risk seeking (second derivative is positive). There are also characterizations of risk preferences that are based on higher derivatives of the utility function, such as prudence (positive third derivative of the utility function, see Kimball 1990) and temperance (negative fourth derivative of the utility function, see Kimball 1992).

For example, the contribution of Harrison and Rutström (2008) in volume 12 of “Research in Experimental Economics” contains about 150 pages on this topic alone.

The numbers and the. Table 2.3 are taken from Harrison and Rutström (2008).

In Hey and Orme, this is 0, 10, 20 and 30 pounds sterling with 100 decisions having to be made.

Indeed, such proposals are almost always accepted. See e.g. Güth and Kocher (2014).

Schotter and Trevino (2014), p. 107, also see Holt and Smith (2009) and Karni (2009).

Nyarko and Schotter (2002), Costa-Gomes and Weizäcker (2008), Ivanov (2011) and Schotter and Trevino (2014).

The full strategy method will be discussed in 7 Sect. 2.7.1. In this method, subjects specify complete strategies instead of reacting to a specific move made by the other subject. In the ultimatum game, for example, responders must specify as of which proposal of the proposer they are willing to accept the proposal.

See Zizzo (2010), p. 83, footnote 11.

In Brosig et al. (2004), this aspect of the strategy method is used, among other things, to explain the differences between “hot” (without strategy method) and “cold” (with strategy method) experiments. See 7 Sect. 2.7.1.

See, for example, the work of Krupka and Weber (2013), which shows that allocations in the dictator game can be interpreted as the price to pay for being able to be in accordance with a social norm.

This is also pointed out by Zizzo (2010).

See also Abbink and Hennig-Schmidt (2006).

The experiment was actually also presented as a climate negotiation, i.e. the subjects were asked to imagine representing their country at an international climate negotiation. For the effect of such frames, see 7 Sect. 2.5.3.

In contrast, the proportion of eastern German subjects at the western German university was well below 2%.

This is not exactly a trivial problem, because a receipt from the subject is usually required for the settlement of the money from the experiment.

It should be noted that the term double blind used here is not identical to that used in medicine, for example. In drug studies, this means that neither the physician administering the drug nor the patient participating in the study knows whether the drug to be tested or a placebo is being administered.

The game can be presented either in the usual normal form or in the “decomposed game” version, in each case indicating how the choice of one’s own strategy affects one’s own payoff and the payoff of the other player.

An exception, which has already been mentioned, is Zizzo (2010).

They refer, for example, to Irlenbusch and Sutter (2006), who use an abstract experiment to describe the behavior of EU states, or to Erhard and Keser (1999), who in the same way attempt to model joining a trade union.

Literally translated: Remember that he is in your hands. What is meant here is the receiver of the dictator’s transfer.

We suspect that the authors use the name “German tipping game” because tips in Germany are smaller on average (because waiters are better paid) than in the US.

Of course, the values can also be drawn at random for each subject. In order to control for these heterogeneous previous experiences, however, a correspondingly large sample is required (see chapter four).

For a detailed discussion of the behavioral effects of cheap talk predicted by game theory, see Crawford (1998).

This was done with the help of bipolar scales that questioned the following pairs of terms: “active – passive”, “lively – dull”, “attractive – unattractive”, “pleasant – unpleasant”, “strong – weak”, “influential – not influential”.

A whole series of studies provide different findings, i.e. the strategy method has an effect in some of the designs, but not in others. See Brandts and Charness (2011).

The intrinsic value of the work has, of course, contributed to this, but the effort involved in the “chosen efforts” is surprisingly low at 23%, which results in costs of 1.3 monetary units (0.13 euros). Measured in the payoff space, this is close to the equilibrium.

To provide an idea of the subjects’ work performance, in the second experiment (Fochmann and Weimann 2013) 43,300 letters were folded and placed in envelopes. On average, the subjects spent 72 minutes in the laboratory, with the duration of their stay being of their choice.

Cooper et al. (1996) experimentally show that the difference between repeated one-shot games and a repeated game can be substantial.

Merritt et al. (2010) provide a survey of the literature on “moral licensing”. More recent experimental studies relating to this effect have been conducted by Brañas-Garza et al. (2013), Ploner and Regner (2013), Clot et al. (2014), Cojoc and Stoian (2014) and Brosig-Koch et al. (2017), for example.

See, for example, the discussion initiated mainly by Levitt and List (2007).

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Title: Methodological Foundations
Authors: Joachim Weimann
Jeannette Brosig-Koch
Publisher: Springer International Publishing
Book: Methods in Experimental Economics
Print ISBN: 978-3-319-93362-7

Electronic ISBN: 978-3-319-93363-4

Copyright Year: 2019
DOI: https://doi.org/10.1007/978-3-319-93363-4_2