Showing papers in "Artefactual Field Experiments in 2005"

A simple test of expected utility theory using professional traders

Abstract: We compare behavior across students and professional traders from the Chicago Board of Trade in a classic Allais paradox experiment. Our experiment tests whether independence, a necessary condition in expected utility theory, is systematically violated. We find that both students and professionals exhibit some behavior consistent with the Allais paradox, but the data pattern does suggest that the trader population falls prey to the Allais paradox less frequently than the student population.

Groups, Commons and Regulations: Experiments with Villagers and Students in Colombia

Abstract: Group externalities imply a situation where individual and group interests are not aligned and therefore require the design of rules or institutions that correct the failure in order to improve social outcomes. Public goods, team work, the use of natural resources under joint access, or any pollution problems, are examples of such potential divergence between individual and group incentives. Institutional corrections can come exogenously from a regulatory state that brings in command and control or incentive mechanisms (pecuniary or not-pecuniary), or that reassigns property rights to correct the failure. But solutions can also emerge endogenously from the group, through self-governed institutions, with similar mechanisms of material or non-material incentives, as well as social norms or conventions.

Choice under uncertainty in developing countries

Abstract: We review experimental evidence collected from risky choice experiments using poor subjects in Ethiopia, India and Uganda Using these data we estimate that just over 50% of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory Our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately However, when we allow both models to explain portions of the data simultaneously, we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behavior for subjects behaving according to prospect theory We conclude that the current practice of designing policies under the assumption that one or other explains all behavior is fundamentally flawed

Dynamic consistency in denmark: A longitudinal field experiment

Abstract: Evidence that individuals have dynamically consistent preferences is usually generated by studying the discount rates of the individual over different horizons, but where those rates are elicited at a single point in time. If these elicited discount rates vary by horizon, the individual is typically claimed to have preferences that imply a dynamic inconsistency, although this inference requires additional assumptions such as intertemporal separability. However, what one really wants to know is if the same subject has the same discount rate function when that individual is asked at a later point in time. Such panel tests then require that one allow for possible changes in the states of nature that the subject faces, since they may confound any in-sample comparisons of discount rate functions at different points in time. We report the results of a large-scale panel experiment undertaken in the field that allows us to examine this issue. In June 2003, we elicited subjective discount rates from 253 subjects, representative of the adult Danish population. Between September 2003 and November 2004, we re-visited 97 of these subjects and repeated these tasks. In each visit, we also elicited information on their individual characteristics, as well as their expectations about the state of their own economic situation and macroeconomic variables. We find evidence in favor of dynamic consistency.

The effect of social capital on group loan repayment: Evidence from artefactual field experiments

Abstract: An important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending. This research presents evidence from field experiments in South Africa and Armenia, in which subjects participate in trust games and a microfinance game. We present moderately strong evidence that personal trust between group members and peer homogeneity are more important to group loan repayment than general societal trust or mere acquaintanceship between members. We also find some evidence of reciprocity in groups: those who have been helped by other members are more likely to contribute themselves.

Social capabilities preserved in Alzheimer patients

Abstract: Alzheimer patients in the early stage of the disease were asked to participate in the Dictator game, a game in which each subject has to decide how to allocate a certain amount of money between himself and another person. The game allows the experimenter to view the influence of social norms and preferences on the decisionmaking process. When the data from the experiment are compared with the results of an identical experiment involving two control groups with similar ages and social background, one group with Mild Cognitive Impairment patients, the other with healthy subjects, it appears that the results from the three groups are statistically undistinguishable. This is an indication that Stage I AD patients are as capable of making decisions involving social norms and preferences as any person of their age, and that whatever brain structures are affected by the disease, they do not include, at this stage, the neural basis of cooperation-enhancing social interactions.