Browsing by Subject "experimental economics"

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  • Lönnqvist, Jan-Erik; Walkowitz, Gari (2019)
    In a monetarily incentivized Dictator Game, we expected Dictators' empathy toward the Recipients to cause more pro-social allocations. Empathy was experimentally induced via a commonly used perspective taking task. Dictators (N = 474) were instructed to split an endowment of 10(sic) between themselves and an unknown Recipient. They could split the money 8/2 (8(sic) for Dictator, 2(sic) for Recipient) or 5/5 (5(sic) each). Although the empathy manipulation successfully increased Dictators' feelings of empathy toward the Recipients, Dictators' decisions on how to split the money were not affected. We had ample statistical power (above 0.99) to detect a typical social psychology effect (corresponding to r around 0.20). Other possible determinants of generosity in the Dictator Game should be investigated.
  • Favereau, Judith; Nagatsu, Michiru (2020)
    In this paper, we critically and constructively examine the methodology of evidence-based development economics, which deploys randomized field experiments (RFEs) as its main tool. We describe the context in which this movement started, and illustrate in detail how RFEs are designed and implemented in practice, drawing on a series of experiments by Pascaline Dupas and her colleagues on the use of bednets, saving and governance in Kenya. We show that this line of experiments have evolved to address the limitation of obtaining policy-relevant insights from RFEs alone, characterized as their lack of external validity in the literature. After examining the two prominent responses by leading figures of evidence-based development economics, namely machine learning and structured speculation, we propose an alternative methodological strategy that incorporates two sub-fields, namely experimental economics and behavioral economics, to complement RFEs in investigating the data-generating process underlying the treatment effects of RFEs. This strategy highlights promising methodological developments in RFEs neither captured by the two proposals nor recognized by methodologists, and also guides how to combine different sub-fields of economics.
  • Sääksvuori, Lauri (2007)
    Markets are the necessary prerequisite for human development. The freehold of a property and the freedom of exchange are the bedrocks of individual and societal well-being. However, economic research has proved that the markets do not efficiently allocate goods under asymmetric information. The affluence through free markets is dependent on others whose behavior we do not know or even fully understand. Conventionally, attempts to solve the problems of imperfect information have relied on jurisdiction and establishment of hierarchical organizations. The rise of the Internet has lately revolutionized the customs of social and economic exchange. Electronic marketplaces span the boundaries of cultural and juristically inconsistent territories, as a result, the prevailing contract monitoring turns out to be inadequate. Should the virtual exchange obey existing laws, the transaction costs may top the benefits of trade, and thus prevent otherwise mutually valuable transactions. In this study, we examine conditions for the endogenously emerging markets based on trust and reputation. The analysis is focused on the effects of different forms of feedback information in markets that suffer from moral hazard due to sequential trading. The study presents data-oriented evidence on why and when people trust each other in economic transactions. Electronic markets, particularly electronic auctions, are presented as the primary application context for the feedback system based on trust and reputations. The experimental data for the research were collected in a laboratory experiment taking advantage of newly designed and implemented computer application. The participants in experimental sessions were all students at the University of Helsinki. The contribution of the thesis is threefold. Firstly, we develop further the idea of tailored trustworthiness aggregates. Secondly, we introduce a novel extensive form game to model trust decisions with endogenous payoff formation. This game design unites the ordinary Trust Game with auctions. Thirdly, based on the unique data from the experiment, we tackle the motivation behind the individual’s trust decision. The experimental results in this study demonstrate that, in an economic exchange, the economic agent behaves simultaneously both fairly and selfishly. Furthermore, the expression of mixed motives appears to be sensitive to the variations in the flow of information. The data collected for this study clearly indicate that the augmentation of information improves the economic efficiency of endogenously organized marketplaces. Market efficiency does not require a large number of participants, complete information or full economic understanding, but incentives to trust each other.
  • Nagatsu, Michiru; Favereau, Judith (2020)
    While the history and methodology of laboratory experiments in economics have been extensively studied by philosophers, those of field experiments have not attracted much attention until recently. What is the historical context in which field experiments have been advocated? And what are the methodological rationales for conducting experiments in the field as opposed to in the lab? This article addresses these questions by combining historical and methodological perspectives. In terms of history, we show that the movement toward field experiments in economics has two distinct roots. One is the general orientation of medical and social sciences to evidence-based policy evaluation, which gave rise to randomized field experiments in economics (e.g., behavioral public policy, poverty alleviation policy). The other is an awareness of several methodological limitations of lab experiments in economics, which required practitioners to get out of the lab and into the field. In these senses, the movement is a consequence of influences from both outside and inside economics: the general evidencebased trend in policy science and an internal methodological development of experimental economics. In terms of methodology, we show that these two roots resulted in two somewhat different notions of “external validity” as methodological rationales of field experiment. Finally, we suggest that analysis of experiments as exhibits highlights a methodological strategy in which both strands complement each other.