scholarly journals Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

2005 ◽  
Vol 95 (5) ◽  
pp. 1688-1699 ◽  
Author(s):  
Dean S Karlan
Keyword(s):  
Social Capital ◽  
Public Goods ◽  
Experimental Economics ◽  
External Validity ◽  
Credit Markets ◽  
Trust Game ◽  
Information Asymmetries ◽  
Group Lending ◽  
Financial Decisions

Questions remain as to whether results from experimental economics are generalizable to real decisions in nonlaboratory settings. Furthermore, questions persist about whether social capital helps mitigate information asymmetries in credit markets. I examine whether behavior in two laboratory games, Trust and a Public Goods, predicts loan repayments to a Peruvian group-lending microfinance program. Since this program relies on social capital to enforce repayment, this tests the external validity of the games. Individuals identified as “trustworthy” by the Trust Game are indeed less likely to default on their loans. No similar support is found for the game's identification of “trusting” individuals.

scholarly journals Experimental Economics in Agriculture: A Review of Worldwide Research

Agronomy ◽  
2021 ◽  
Vol 11 (8) ◽  
pp. 1566
Author(s):  
Ernesto Mesa-Vázquez ◽  
Juan F. Velasco-Muñoz ◽  
José A. Aznar-Sánchez ◽  
Belén López-Felices
Keyword(s):  
Environmental Policy ◽  
Literature Review ◽  
Public Goods ◽  
Experimental Economics ◽  
Scientific Production ◽  
Bibliometric Study ◽  
Agricultural Activity ◽  
Global Level ◽  
Policy Makers ◽  
Wide Range

Over the last two decades, experimental economics has been gaining relevance in the research of a wide range of issues related to agriculture. In turn, the agricultural activity provides an excellent field of study within which to validate the use of instruments employed by experimental economics. The aim of this study is to analyze the dynamics of the research on the application of experimental economics in agriculture on a global level. Thus, a literature review has been carried out for the period between the years 2000 and 2020 based on a bibliometric study. The main results show that there has been a growing use of experimental economics methods in the research on agriculture, particularly over the last five years. This evolution is evident in the different indicators analyzed and is reflected in the greater scientific production and number of actors involved. The most relevant topics within the research on experimental economics in agriculture focus on the farmer, the markets, the consumer, environmental policy, and public goods. These results can be useful for policy makers and researchers interested in this line of research.

How much would you like to pay? Trust, reciprocity and prosocial motivations in El trato

2012 ◽  
Vol 51 (3) ◽  
pp. 389-417 ◽  
Author(s):  
Francisco J León ◽  
José A Noguera ◽  
Jordi Tena-Sánchez
Keyword(s):  
Social Science ◽  
External Validity ◽  
Laboratory Experiments ◽  
Social Science Research ◽  
Science Research ◽  
Trust Game ◽  
Sales Strategy ◽  
Pay What You Want ◽  
Natural Settings

Prosocial motivations and reciprocity are becoming increasingly important in social-science research. While laboratory experiments have challenged the assumption of universal selfishness, the external validity of these results has not been sufficiently tested in natural settings. In this article we examine the role of prosocial motivations and reciprocity in a Pay What You Want (PWYW) sales strategy, in which consumers voluntarily decide how much to pay for a product or service. This article empirically analyses the only PWYW example in Spain to date: the El trato (‘The deal’) campaign launched by the travel company Atrápalo, which offered different holiday packages under PWYW conditions in July 2009. Our analysis shows that, although the majority of the customers did not behave in a purely self-interested manner, they nonetheless did so in a much higher proportion than observed in similar studies. We present different hypotheses about the mechanisms that may explain these findings. Specifically, we highlight the role of two plausible explanations: the framing of the campaign and the attribution of ‘hidden’ preferences to Atrápalo by its customers, which undermined the interpretation of El trato as a trust game.

scholarly journals El debate sobre la validez externa en economía experimental

2019 ◽  
Vol 23 (2) ◽  
pp. 309-321
Author(s):  
Rodrigo Moro ◽  
Marcelo Auday
Keyword(s):  
Experimental Economics ◽  
Empirical Evidence ◽  
External Validity ◽  
Different Types ◽  
The Difference ◽  
Interpretation Of Results

We focus on the debate on the external validity of lab results in the area of experimental economics. More specifically, we focus on Colin Camerer’s and John List’s views, who postulate opposite positions on the issue. The problem is that they partially analyze the same empirical evidence and draw from it opposite conclusions. The goal of this work is to analyze such empirical evidence to try to explain the difference in interpretation of results. We argue that the dispute in interpretations can be expressed in terms of difference of criteria used to determine external validity. From our analysis we propose the formulation of different types of external validity.

scholarly journals The Effect of Trusting and Trustworthy Environments on the Provision of Public Goods

2020 ◽  
Author(s):  
Sergio Lo Iacono ◽  
Burak Sonmez
Keyword(s):  
Public Goods ◽  
Learning Effect ◽  
Free Rider ◽  
Trust Game ◽  
Similar Distribution ◽  
Incentive Structure ◽  
Free Rider Problem ◽  
Free Ride ◽  
Relevant Effect ◽  
Distribution Of Resources

Abstract Trusting and trustworthy environments are argued to promote collective action, as people learn to rely on their fellow citizens and believe that only few individuals will free ride. To test the causal validity of this mechanism, we propose an experimental design that allows us to create different trusting and trustworthy conditions simply by (i) manipulating the incentive structure of an iterated binary trust game and (ii) allowing information to flow among participants. Findings indicate that, given a similar distribution of resources among subjects, trusting and trustworthy environments strongly foster the provision of public goods. This outcome is largely driven by a learning effect: subjects transfer what they assimilate during a sequence of dyadic exchanges to their decision to act for the collectivity. In particular, results showed that what we learn from the community has a relevant effect on our ability to overcome the free-rider problem: we are more likely to act for the collectivity when we learn from the community to be trustful or reliable in our one-to-one interactions. The same applies in the opposite direction: we are more prone to free ride when we learn from the environment to be distrustful or unreliable in our dyadic exchanges.

Microfinance Games

2010 ◽  
Vol 2 (3) ◽  
pp. 60-95 ◽  
Author(s):  
Xavier Giné ◽  
Pamela Jakiela ◽  
Dean Karlan ◽  
Jonathan Morduch
Keyword(s):  
Experimental Economics ◽  
Risk Taking ◽  
Free Riding ◽  
Risk Averse ◽  
Group Lending ◽  
Dynamic Incentives ◽  
Theoretical Predictions ◽  
Experimental Games

Microfinance banks use group-based lending contracts to strengthen borrowers' incentives for diligence, but the contracts are vulnerable to free-riding and collusion. We systematically unpack microfinance mechanisms through ten experimental games played in an experimental economics laboratory in urban Peru. Risk-taking broadly conforms to theoretical predictions, with dynamic incentives strongly reducing risk-taking even without group-based mechanisms. Group lending increases risk-taking, especially for risk-averse borrowers, but this is moderated when borrowers form their own groups. Group contracts benefit borrowers by creating implicit insurance against investment losses, but the costs are borne by other borrowers, especially the most risk averse. (JEL D82, G21, G31, O16)

Convertible local currency and trust: ‘It’s Not You, It’s Me’ – A field experiment in the French Basque Country

2020 ◽  
Vol 35 (2) ◽  
pp. 105-120
Author(s):  
Hayyan Alia ◽  
Eli Spiegelman
Keyword(s):  
Field Experiment ◽  
Experimental Economics ◽  
Strong Evidence ◽  
Basque Country ◽  
Trust Game ◽  
Local Currency ◽  
Economics Literature ◽  
Community Currencies ◽  
Weak Evidence ◽  
Community Currency

We present a field experiment investigating the mechanism by which community currencies enhance trust. Our question is the following: do I trust more when using a community currency because I am a trusting-type person or because I think that you are trustworthy? We call the former preference-based trust; while the latter is belief-based trust. We apply a modification of the standard trust game from the experimental economics literature to disentangle these mechanisms. Player A has to choose whether or not to trust player B, and player B can either reciprocate that trust or not. Our innovation is in experimentally separating the currency in which the game is played ( effective currency), from the currency preferred by the participant ( preferred currency). If the mechanism is preference-based, then preferred currency will determine trust more than effective; if it is belief-based, then the effective currency will be determinant. We find strong evidence of the preference-based mechanism of community currencies on trust, and only weak evidence of the belief-based mechanism.

scholarly journals Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

2013 ◽  
Vol 5 (4) ◽  
pp. 256-282 ◽  
Author(s):  
Will Dobbie ◽  
Paige Marta Skiba
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Regression Discontinuity ◽  
Credit Markets ◽  
Consumer Credit ◽  
Probability Of Default ◽  
Information Asymmetries ◽  
Payday Lending ◽  
Loan Market ◽  
Payday Loans

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink approaches suggest that payday borrowers are less likely to default on larger loans. A $50 larger payday loan leads to a 17 to 33 percent drop in the probability of default. Conversely, there is economically and statistically significant adverse selection into larger payday loans when loan eligibility is held constant. Payday borrowers who choose a $50 larger loan are 16 to 47 percent more likely to default. (JEL D14, D82, G21)

scholarly journals Methodological Aspects of Social Preferences Research in the Context of Solving Social Dilemmas

2021 ◽  
Vol 1 (13) ◽  
pp. 33-37
Author(s):  
Alla Kovalenko ◽  
◽  
Albina Holovina ◽  
Keyword(s):  
Public Goods ◽  
Social Preferences ◽  
Ultimatum Game ◽  
Social Dilemmas ◽  
Dictator Game ◽  
Psychological Research ◽  
Trust Game ◽  
Altruistic Behavior ◽  
Public Goods Game ◽  
Trust And Reciprocity

The article presents an analysis of the main methodological principles and schemes of social preferences experimental research, which are determined as a fundamental concept to understanding the behavior of decision-makers in the process of resolving social dilemmas. The models presented in the article include an analysis of the factors that determine social preferences. Among them are the factors of trust, reliability, reciprocity, rejection of inequality, unconditional altruism and competitive advantage. The article provides a description of the strengths and weaknesses of the classic methods for studying social preferences, which usually take the form of ultimatum game, dictator game, trust game and public goods game. The study reveals the importance of the Nash equilibrium as a way to interpret human behavior in resource allocation during the game. Analysis of numerous literary sources shows that the ultimatum game is a classic scheme for studying the altruistic behavior of people. The submission of a proposal and its acceptance is an example of Nash's ideal equilibrium. Deviation from this balance can be interpreted as altruism. In turn, the trust game is a classic scheme for studying the reciprocity and prosocial orientation. If the behavior of players deviates from Nash's equilibrium, it is interpreted as being caused by trust and reciprocity. The dictator game is a classic scheme for studying the rejection of inequality. The subject's behavior can be interpreted as a rejection of inequality or altruism, but not as a rejection of risk, as the offer of Player 1 is mandatory for Player 2. Public goods game is a classic scheme for studying the competitive orientation. Nash's ideal balance in this form of play is to do nothing for public consumption, but deviating from this rule is interpreted as altruistic behavior that is the opposite of competitive orientation. As a result, the design of psychological research is presented, which most accurately typologies the social preferences of the subjects and can contribute to the creation of a representative model of decision-making process.

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