2018 Shanghai Workshop
of Behavioral and Experimental Economics
Program
School of Economics, Shanghai University of Finance and Economics
(Room 511, the Economics Building, 111 Wuchuan Rd., Yangpu District, Shanghai 200433)


June 14th,  2018

8:30-8:40

Greetings from the Dean

Session 1 Chair: Ninghua Du

8:40-9:40

James C. Cox, Georgia State University

Title: Rational Choice and Moral  Monotonicity

Abstract: In this address I will explain  why published data, from some dictator games with giving and taking  opportunities, and from some payoff-equivalent public good and common pool  games, are inconsistent with conventional rational choice theory. The data  motivate development of moral monotonicity theory, an extension of rational  choice theory that incorporates moral reference points. I will describe new  experiments with dictator games, and with payoff-equivalent public good and  common pool games, that provide data for which conventional rational choice  theory is rejected in favor of moral monotonicity theory. I will also explain  that the new theory can rationalize data from many experiments reported in  previous literature including many types of dictator games and strategic  games with contractions of feasible sets.  

9:40-10:20 

Bin Miao, Shanghai University of Finance and Economics

Title: Multiple-Switching Behavior in  the Elicitation of Risk Preferences

Abstract: In the setting of the  price-list elicitation of certainty equivalents, in which the lottery option  is fixed while the sure options vary, we investigate the pervasive phenomenon  of subjects switching between the fixed lottery option the range of sure  options multiple times. Relating to Agranov and Ortoleva’s (2016) finding of  subjects deliberately switching between two lotteries when they are told in  advance that the same two lotteries will be presented three times in a row,  this multiple-switching behavior (MSB) enables a discrimination in favor of  models of deliberate randomization based on quasiconcavity in probabilities  (Machina, 1985) rather than negative certainty independence (Dillenberger,  2010). In addition, we find an intriguing phenomenon of reference dependence  in MSB – the frequency of MSB for mixed lotteries is higher than those for  gain and loss oriented lotteries. We further show that this observed hump  pattern in MSB is compatible with rank-dependent utility with a concave  probability weighting function and a piecewise linear loss averse utility  function.

10:20–10:45 

Group Photo and Tea Break

10:45–11:25

Hang Ye, Zhejiang University & Zhejiang University of  Finance and Economics         

Title: Logical Demonstration and  Empirical Demonstration – Behavioral Economics and (Generalized) Experimental  Methods

Abstract: The current report discusses  the generalized experimental methods of behavioral economics from the  perspective of methodology, including behavioral experiments (Experimental  economics), neural experiments (Neuroeconomics) and simulation experiments  (Computational economics), which play an important role in behavioral  economics studies. To be specific, a series of case studies concerning the  solution to the social dilemma will be demonstrated in this report, revealing  how the three kinds of experimental methods can provide a powerful technical  analysis support for behavioral economics research.

11:25–12:05 

Tingting Ding, Shanghai University of Finance and Economics  Title: Bargaining and News: An Experimental Study

Abstract: Agreement may not be reached  when asymmetric information exists between buyers and sellers. We conduct a  series of laboratory experiments to examine behavior of subjects and  efficiency in bargaining when a “news” process is introduced to mitigate the  information gap. Our experiments implement the Daley and Green (2018)  bargaining model in which an uninformed buyer makes frequent offers to an  informed seller while gradually learning the seller’s type from an observable  news process. Our results are consistent with theory in several respects: (i)  The buyer’s ability to extract more surplus by leveraging the information is  limited; (ii) Sellers with high values and high costs benefit from the  buyer’s ability to learn; and (iii) The quality of news has a mixed effect on  efficiency.  However, the bargaining  duration in the lab is much longer than theory prediction because sellers  demand “fair” prices. 

12:05–13:30 

Lunch

Session 2 Chair: Bin Miao

13:30–14:30

Erkut Ozbay, University of Maryland

Title: Unavailable Options and  Irrelevant Attributes

Abstract: This paper  experimentally investigates the effect of introducing unavailable  alternatives and irrelevant information regarding the alternatives on the  optimality of decisions in choice problems. We find that interaction between  the unavailable alternatives and irrelevant information regarding the  alternatives generates suboptimal decisions. Irrelevant information in any  dimension increases the time costs of decisions. We also identify a pure   “preference for simplicity” beyond the desire to make optimal decisions or  minimize time spent on a decision problem. Our results imply that the  presentation set, distinct from the alternative set, needs to be a part of  decision making models.

14:30–15:10

Lan Yao, Shanghai University of Finance and EconomicsTitle: Public Discourse and Pro-Social Market Behavior

Abstract: Based on the experiments of  Bartling, Weber, and Yao (2015), in which buyers and sellers trade products  with a negative externality on helpless third party, we investigate formation  of social norm and its roles in ethical market exchange by introducing  pre-play communication before the market game. We ask subjects to discuss  whether to exchange harmful product to the third party is socially  appropriate. Our treatments differ in whether communication is in the veil of  ignorance, where participants discuss without knowing their roles, and  whether third party participates the discussion. We find significantly higher  rates of fair trade in Zurich than Shanghai when pre-play communication is  not allowed, a consistent replication of the results in BWY(2015).  Communication in the Veil of Ignorance significantly improve the fair trade  in both countries, with 96 and 60 percent of fair product transactions in  Zurich and Shanghai, respectively. The results of fair trade in all  communication treatments do not differ much in Zurich, while in Shanghai  excluding the third party in the discussion displayed the least fair trade of  all treatments. 

15:10-15:30

Tea Break

15:30-16:10

Chun-Lei Yang, Nanjing Audit University

Title: Voluntary Separation as a  Disciplinary Device for Long-Term Cooperation: Reconciling Theory with  Evidence

Abstract: In this paper, we provide an  evidence-based theory to explain how partners cultivate a long-term  relationship when either party has the liberty to unilaterally terminate the  match. We utilize laboratory methods to gather insights on the evolution of  cooperation in a voluntarily separable repeated prisoner's dilemma game  (VSRPD). We observe behavioral patterns that are at odds with out-for-tat  which, based on the VSRPD literature, is a disciplinary device that helps  facilitate mutual cooperation in the long run. Our Pro-Partnership  Proposition is formulated to accommodate the observation that players in our  experiment often prefer to use a stay-but-act-like-a-stranger move to punish  defecting partners. A new class of equilibria, called the CoDe-indifferent  equilibria, is introduced to address the within-match rewards and punishments  found in the data.

16:10--16:50

Binglin Gong, East China Normal  UniversityTitle: The Sequence Effect on Hybrid Auction-Lottery Mechanisms

Abstract: Hybrid mechanisms combing  auction and lottery are now widely used to allocate publicly provided private  goods, such as private car license plate, to balance efficiency and equality.  A natural question is how to implement them. We compare the performance of  two sequence designs: “first auction, then lottery” and “first lottery, then  auction”, in a unified framework from perspectives of revenue, efficiency,  and equality. 

Our theoretical results  suggest that given the proportion of goods being auctioned, lottery first is  always more efficient than auction first. Efficiency increases in the  proportion of goods being auctioned. When common distributions of players’   values, such as uniform, normal, lognormal, exponential and Cauchy, are not  heavily right skewed, lottery first generates more revenue than auction  first. 

In a laboratory experiment,  results show that Lottery first can indeed yield significantly higher  efficiency, especially when more goods are auctions. And the more goods are  auctioned, the higher the overall efficiency is. However, contrary to our  theoretical prediction, auction first results in more revenue, because  subjects do not shade their bids as much as predicted in auction first game,  possibly due to risk aversion, and shade a lot in lottery first game,  possibly due to inequality aversion.

16:50—17:20

Gergely Horvath, Xi'an Jiaotong Liverpool  UniversityTitle: Network Structure and Conspicuous Consumption: An  Experiment

Abstract: A laboratory experiment has  been designed to study the dynamics of social competition under different  social network structures. In the experiment, we employ a so-called social  competition game, i.e., each individual maximizes her utility by allocating  her endowment between two goods, a private one and a competitive one. A  competitive good means that an individual can get higher payoffs if she  consumes “more than the average of her neighbors in a network”, for instance,  a status good or national-defense good. By spending more on the competitive  good, however, everybody decreases their utility/payoffs. In the  welfare-maximizing allocation everybody restricts themselves and spends a low  amount on the competitive good. In the experiment, subjects simultaneously  make consumption decisions and receive feedbacks about the payoffs and the  consumption decisions of subjects with whom they are directly connected in  the network. We study this game in four networks that differ in connectedness  and the symmetry of network positions. 

We  found in most cases the results converge to the Nash predictions about the  competitive good consumption levels and payoffs. In none of the network  structures can participants fully coordinate on the welfare-maximizing  outcome. The consumption choices of individuals are determined by their  network position: by a specific measure of centrality, the so-called  Katz-Bonacich centrality. The only exception happens in the network with only  one central individual who tries to lower the intensity of competition and  hence consumes less of the competitive good than the Nash equilibrium  consumption level. We also study the impact of overall network structure, and  find that in a more connected network, individuals spend more on the competitive  good and earn lower payoffs. Further, we find evidence that the convergence  to Nash equilibrium can be described by myopic best-response dynamics.

June 15th,  2018

Session  3 Chair: Tingting Ding

8:30-9:30

Antonio Guarino, University College London 

Title: Non-Bayesian Updating in Social  Learning: An Experiment

Abstract: We present a novel experimental  design to study social learning in the laboratory. Two subjects, in sequence,  have to predict the value of a good on which they receive private information.  We elicit the second subject’s belief twice: first (“first belief”), after he  observes his predecessors’ action; second (“posterior belief”), after he  observes his private signal. We are, therefore, able to disentangle social  learning from learning from private information. Our main result is that  subjects update on their private signal in an asymmetric way. They weigh the  private signal as a Bayesian agent would do when the signal confirms their  first belief; they overweight the signal when it contradicts their first  belief. We show that this way of updating, incompatible with Bayesianism, can  be explained by multiple priors on the predecessor’s rationality and a  generalization of the Maximum Likelihood Updating rule. In another  experiment, we directly test this theory and find further support for it.

9:30-10:10 

Peiyao Shen, Shanghai Tech University 

Title: Market Power and Transparency  in a Multi-unit Auction

Abstract: We study the effects of  different information structures (complete information, asymmetric  information and symmetric but incomplete information) and different levels  (monopoly, duopoly, competitive) and types (pivotal power and limit pricing)  of market power on equilibrium prices, efficiency and bidding behavior in  uniform multi-unit auctions, using a supply function equilibrium approach and  a novel experimental design. The implemented auction design is motivated by  expected changes in available information when high shares of renewables are  integrated in electricity markets. The experimental data strongly suggests  that asymmetric information (cost uncertainty) leads bidders to coordinate on  a much more competitive equilibrium, implying that both pivotal market power  and limit pricing are substantially reduced. We find no such effect in case  of demand uncertainty.

10:10-10:25 

Tea Break

10:25-11:05

Jianbiao Li, Nankai University

Title: Using Non-Invasive Brain Stimulation to Test the Effect of Self-Control on  Investor Behavior

Abstract: We test whether self-control  causally affects investor behavior. Using non-invasive brain stimulation, we  exogenously vary self-control. Subjects trade stocks in an experimental asset  market while they receive anodal, cathodal, or sham stimulation over a brain  area related to self-control. Anodal and cathodal stimulations are known to  increase or decrease the neural excitability of the targeted regions,  respectively; whereas sham stimulation mimics the peripheral effects and does  not affect any neural processing. We document that cathodal stimulation  significantly reduces the disposition effect by helping subjects exhibit a  sufficient self-control, which is reflected by a high percentage of  actual-ideal consistent decision. These results provide support for the role  of self-control in disposition effect. Generally, we demonstrate that  non-invasive brain stimulation can be helpful in causally testing the  underlying mechanism of investor behavior.

11:05-11:45 

Xiaolan Yang, Shanghai International Studies University

Title: Social Distance and Job  Referral: An Experimental Study

Abstract: Job referral through social  network plays an important role in labor markets worldwide. In this study, we  investigate how social distance affects job referral decisions in a lab  experiment. We set up a job referral game which includes three players, one  worker, one advisor and one employer. The ability of the worker is only  revealed to the worker and the advisor. The advisor has to decide whether to  recommend the worker to the employer or not. The employer receives a noisy  signal about the worker’s ability and decides whether to employ the worker or  not after he/she receives the recommendation. Subjects are recruited from  three different university halls at one university. We have three treatments  which differ in whether the three players are from the same university hall.  In the control treatment, subjects have no information about where their  partners come from. In the in-group (out-group) treatment, all three players  know that the worker and the advisor are from the same (different) university  hall. Results show that advisors in the in-group treatment have the highest  recommendation rate, even when such decisions could only benefit the workers.  Besides, compared with advisors in the control treatment, the advisors in  both the in-group and the out-group treatments are more inclined to  recommend. This result suggests that providing background information may  narrow the social distance between the worker and the advisor, hence increase  the referral. There is no significant difference in employer’s behavior  across three treatments.

11:45-12:25 

Danyang Li, Hofstra University

Title: Liar Liar: Experimental  Evidence of the Effect of Confirmation-reports on Dishonesty

Abstract: We identify the effect of  confirmationreports on dishonesty using data from an experiment where subjects are asked to roll a die and  report its outcome using either a self-report or confirmation-report  mechanism. We find that relative to self-reports, confirmation-reports have a  positive effect on the share of subjects who report honestly. The effect on  the magnitude of lies told depends greatly on the accuracy of the prefilled  information on the confirmation-report. We argue that these results are  driven by changes in the intrinsic costs of lying induced by the confirmation  report.

12:25- 13:30

Lunch

Session  4 Chair: Zhengxing Huang

13:30–14:10

Zhiqiang Dong, South China Normal UniversityTitle: Impact of  Being Left-behind on Competitive Behavior of Children in Rural China: A Field  Experiment

Abstract: Since the progress of China's  economic system reform and urbanization in last decades, millions of young  parents migrated from countryside to cities, which induced lots of  left-behind children. The absence of parents' upbringing caused different  kinds of mental and physical problems of left-behind children. The  competition plays a vital role in children's development and socialization by  encouraging children's engagement, mastery of a task and a desire to achieve  their best. We firstly explored the effect of left-behind experience on  children's competitive behaviors through a field experiment in a rural area  of central China. The results show that left-behind children are  significantly reluctant to choose competition with others compared with  non-left-behind children, even though their performances under competition  have no difference. Father plays a more important role in the development of  children's competition preference. Our study implicates that more  encouragements should be provided to left-behind children to build their  confidence and cultivate their good competition concepts.

14:10–14:50

Lingfang Li, Fudan University

Title: The Displaying Effect of Price  History on Consumers’ Purchase Decisions

Abstract: As visualization has become  increasingly common today, consumers’ perception is likely to be influenced  by the displayed reality, rather than the reality. In this research, we  explore the effects of the visualization of price history on consumer  purchase decisions through a series of experiments. In addition to study the  factors of price history, including last price changes, price change  frequency and time window, we especially focus on the factors of displaying,  including visual turbulence and length of price charts. Our findings suggest  that (a) the factors of displaying affect consumers’ purchase decisions; (b)  different factors of displaying may mitigate each other’s effect on  consumers’ purchase decisions; (c) the factors of displaying and the factors  of price history may offset each other’s effect on consumers’ purchase  decisions.

14:50-15:10

Tea Break

15:10-15:50

Zhi Li, Xiamen University

Title: Generalized Serial Cost Sharing  Mechanisms for the Provision of Non-excludable Threshold Public Goods: An  Experimental Investigation

Abstract: Following Gailmard and Palfrey  (J Pub E, 2005, GP thereafter), we introduce two uniform price mechanisms,  the uniform price auction (UPA) mechanism to extend the direct serial cost  sharing to non-excludable public goods, and the uniform price cap (UPC)  mechanism to solve the inefficiency of serial cost sharing by a variation of  residual serial cost sharing. Both cost sharing mechanisms are budget  balanced, individually rational, anonymous, but are not strategy proof. We  compare these two cost sharing rules with voluntary cost sharing with  proportional rebates (PR) and with no rebates (NR, or PPM) as in GP for the  provision of non-excludable public goods under incomplete information. We  characterize the Bayesian Nash equilibria (BNE) of the two new mechanisms and  conduct laboratory experiments to compare the performance of the four  mechanisms. We find that UPA induces significantly higher value revelations  than all the other three and UPC generates significantly more efficient  allocations than all the others. In both uniform price mechanisms, that an  individual's payment is not affected by the declarations of valuation higher  than their own contributes to the higher value revelation and more efficient  allocations by reducing the equilibrium size and facilitating coordination  toward more efficient equilibria. Our results are robust to group size.

15:50--16:30

Yun Wang, Xiamen University

Title: Rebate Policies in Large Group  Threshold Public Goods Experiment: Belief, Information, and Repetition

Abstract: This paper explores multi-round  threshold public goods provision in large groups. We elicit subjects' beliefs  regarding others' contributions and the project's cost; and we vary the  amount of information between Round-0 and subsequent rounds to examine how  the demand revelation changes with information, repetition, and cost. Our  Round-0 decision-task replicates the large-group one-shot game of Rondeau et  al. (1999) and Spencer et al. (2009), in which the project cost and group  members' value distribution are unknown to subjects. In addition to the  proportional rebate and three winner-take-all policies (Spencer et al.,  2009), we introduce and compare two novel rebate rules: the uniform price cap  (UPC) and the uniform price auction (UPA) mechanisms.

Our  Round-0 result shows that, in the one-shot unknown-cost setup, all rebate  policies induce group contributions higher than the actual cost. Nonetheless,  only UPC and UPA achieve almost 100% demand revelation, while the demand  revelation under all other rebate policies is significantly below 100%. This  result is different from Rondeau et al. (1999) and Spencer et al. (2009),  which suggest 100% or more demand revelation for most rebate policies under  the one-shot large-group design. Interestingly, subjects' perceived cost is  not significantly different from their induced values for all mechanisms but  two winter-take-all policies. Subjects contribute significantly less than  their perceived cost except for UPC and UPA treatments. Furthermore, in the  subsequent rounds when the cost information is revealed and decisions are  repeated, full demand revelation disappears. Group contributions increase  with cost; yet the rates for successful provision decrease.

16:30--17:10

Yang Yang, Sun Yat-sen University

Title: On Language and Meaning: A  Randomized Experiment

Abstract: We develop a method for random  assignment of language to participants in a laboratory experiment. We use  this approach to test the linguistic relativity hypothesis (also referred to  as the Sapir-Whorf hypothesis). Linguistic relativity suggests that the  structure of one’s language can influence one’s perceptions, interpretations  and beliefs about the world around them. Although provocative, empirical  evidence on this hypothesis has been elusive. A reason is that previous  empirical studies typically rely on naturally occurring languages whose  speakers differ in ways that correlate with grammar differences. Here we  hypothesize that linguistic relativity can emerge when the same object resides  in different semantic categories across different languages. To test this, we  develop a novel extension of laboratory games within which grammars emerge  endogenously. We show, first, that one can control the semantic categories of  an emergent grammar by varying the game’s incentives. This finding enables  random assignment of language to participants. Advantaged by this  randomization, our data support the hypothesis that the same object’s meaning  can vary according to its semantic category. Our methodological and  substantive insights promise to be important in improving communication,  cooperation and understanding across human societies.

17:10-17:20

Concluding Remarks: Lan Yao




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