Experimental Economics Methods Research Articles

Herders' risk preference and grassland transfer strategy: Evidence from a field experiment in pastoral areas of China

AbstractEncouraging and guiding herders to participate in grassland transfer promotes the high‐quality development of grassland animal husbandry. We conducted a survey among 356 herders from Qinghai and Gansu provinces in China, to explore the impact of herders' risk preference and perceptions on their grassland transfer strategies. We used experimental economics methods to measure the risk preferences of herders. Our results indicate that the majority of herders exhibit risk‐averse attitudes. A theoretical model was used to establish hypotheses on the relationship between risk preference and grassland transfer decision‐making. The double‐hurdle model and moderating effect model were used to test these hypotheses. Our analysis shows that herders' risk preferences have a significant negative effect on their decisions to engage in grassland transfer. Both risk preferences and risk perception have a significant impact on grassland transfer‐in decisions, but no significant impact on grassland transfer‐out. A heterogeneity analysis revealed that the impact of risk preferences on grassland transfer participation is more pronounced among herders in Qinghai compared to those in Gansu. Moreover, we found that risk perception plays a moderating role on the influence of risk preferences on decisions regarding grassland transfer. These findings are crucial to formulate strategies for the sustainable management of the grassland transfer market.

The Impact of Herders’ Risk Attitudes on Livestock Insurance: Evidence from the Pastoral Areas of Tibetan Plateau

In the context of advancing the transformation and upgrading of grassland animal husbandry, encouraging and guiding the widespread adoption of livestock insurance plays an important role in promoting the sustainable development of the livestock industry. This paper explores the impact of herders’ attitudes and perceptions towards climate change risks on their livestock insurance strategies. Firstly, experimental economics methods are employed to measure the risk preferences of herders on the Tibetan Plateau. Secondly, a theoretical model incorporating risk preferences and insurance adoption behavior is constructed. Finally, the effects of herders’ risk preferences on insurance adoption behavior are empirically examined through double-hurdle models, instrumental variable models, and moderating effect models. The results reveal that (1) most herders on the Tibetan Plateau exhibit risk-averse characteristics. (2) The degree of risk preference has a significant negative impact on herders’ insurance adoption behavior, while the risk perception significantly positively influences insurance adoption. The results remain valid even after addressing issues of endogeneity and conducting robustness checks. (3) Livestock income plays a crucial moderating role in the mechanism through which risk attitudes affect insurance adoption behavior. (4) The impact of risk preference on insurance adoption behavior shows regional and income heterogeneity.

Perceived Organizational Support, Inter-Temporal Choice, and Farmer Conservation Tillage Adoption

To solve the problem of the insufficient driving force and low adoption rate of conservation tillage adoption and to enhance the effect of industrial organization in influencing technology diffusion, this paper explored the relationship and the mechanism of perceived organizational support and inter-temporal choice in the adoption of conservation tillage by using micro-research data from 725 melon farmers in the Shaanxi and Shanxi provinces in China and by applying the experimental economics method to obtain the inter-temporal choices of the farmers. This paper also analyzed farmers’ risk preferences’ moderating effect on the relationship between inter-temporal choice and conservation tillage. Additionally, it examined the impact of perceived organizational support on the differentiation of different conservation tillage technologies. The study found that perceived organizational support significantly contributes to adopting zero tillage and minimum tillage, and water-saving irrigation. Perceived organizational support was not conducive to farmers’ adoption of furrow and ridge tillage. The impact of perceived organizational support on technology adoption is heterogeneous, depending on the differences in the size of the family’s cultivated land. The inter-temporal choice of farmers significantly impedes the adoption of conservation tillage. The increase in risk preference helps alleviate the hindering effect of inter-temporal choice on farmers’ adoption of conservation tillage. Perceived organizational support can promote the adoption of conservation tillage by reducing farmers’ inter-temporal choices. Inter-temporal choice is an essential mechanism by which perceived organizational support affects the adoption of conservation tillage. Compared with the existing studies, this paper incorporates the technology-attribute-induced inter-temporal choice of farmers into the impact analysis framework and considers the relationship between perceived organizational support, inter-temporal choice, and the adoption of conservation tillage and the mechanism of its action. The findings of the study provide a theoretical basis for the enrichment of incentive mechanisms for the adoption of conservation tillage, which is of great significance for the improvement of the tool for the integration of small farmers in developing countries into the industrial activities of the new agricultural business central bodies and for promoting the diffusion of conservation tillage in agriculture.

Risk preferences and the low-carbon agricultural technology adoption: Evidence from rice production in China

Climate change which is mainly caused by carbon emissions is a global problem affecting the economic development and well-being of human society. Low-carbon agriculture is of particular significance in slowing down global warming and reaching the goal of “carbon peak and carbon neutrality”. Therefore, taking straw incorporation as an example, this paper aims to investigate the impact of risk preferences on farmers’ low-carbon agricultural technology (LCAT) adoption. Based on a two-phase micro-survey data of 1 038 rice farmers in Jiangsu, Jiangxi, and Hunan provinces, this paper uses experimental economics methods to measure farmers’ risk aversion and loss aversion to obtain the real risk preferences information of the farmers. We also explore the data to examine the actual LCAT adoption behavior of farmers. The results revealed that both risk aversion and loss aversion significantly inhibit farmers’ LCAT adoption: more risk-averse or more loss-averse farmers are less likely to adopt LCAT. It is further found that crop insurance, farm scale and governmental regulations can alleviate the negative impact of risk aversion and loss aversion on farmers’ LCAT adoption. Therefore, we propose that local governments need to promote low-carbon agricultural development by propagating the benefits of LCAT, extending crop insurance, promoting appropriate scale operations, and strengthening governmental regulations to promote farmers’ LCAT adoption.

Fairness Preference of Preschoolers and the Effects of Family Background in China

Purpose This study investigates the fairness preference of five-year-old children in Shanghai, observing their distributive behaviors in both stakeholder and spectator games and showing how this behavior is linked to their family background. Design/Approach/Methods Participants had to make distributive choices in two experiments and distribute between themselves and another participant in the first choice. They had to distribute between two other participants in luck, merit, or efficiency situations in the second choice. Findings The results suggest that preschoolers showed a preference for splitting equally between themselves and another participant. The second choice showed a significant difference in fairness preference under a situation of luck between genders, and only children were more likely to accept an unequal allocation than those who had siblings. Originality/Value We believe that our study makes a significant contribution to the literature because it illustrates the variety of factors that can influence a child's fairness preference and fairness behavior and suggests when and how these aspects develop in children. Further, this is an original study exploring the fairness preference of preschoolers in Shanghai using an experimental economics method.

Economic experiments support Ostrom's polycentric approach to mitigating climate change.

The late Nobel laureate Elinor Ostrom envisioned a polycentric approach to mitigating climate change rather than a centralised solution. Debating about global efforts to solve climate-change problems has yet not led to an effective global treaty. Ostrom argued that instead of focusing only on global efforts, it is better to encourage polycentric efforts to reduce the risks associated with the emission of greenhouse gases. Many problems conceptualised as 'global problems' are the cumulative results of actions taken by individuals, families, small groups, private firms, and local, regional, and national governments. Ostrom and colleagues pointed to many examples of successfully managing a common good through interaction within a community. Energy-saving actions undertaken by individuals, families and actors at a small-scale pay off and, when multiplied, may reduce emissions globally. The incentive to achieve an individual net gain may trigger human investment decisions. Here we provide experimental support for Ostrom's basic ideas using methods of experimental economics. By subdividing experimental populations in subgroups that approach sub-goals of mitigating simulated dangerous climate change combined with incentives, the 'global' solution is achieved by combined subgroup contributions exceeding the 'global' threshold for averting simulated dangerous climate change. Incentives from refunded saved energy motivate reaching sub-goals, as Ostrom suggested. By contrast, coercing free-riding subgroups through sanctioning at a cost fails, because sanctioning also hits fair individuals who then reduce their contributions. However, the power of polycentricity with numerous successful units can help mitigate climate change.

How carbon trading policy should be integrated with carbon tax policy-laboratory evidence from a model of the current state of carbon pricing policy in China.

China is planning to introduce carbon tax policy to control the carbon emissions of the country better and achieve the "3060 goals", but there is still widespread discussion about how to introduce it and how to combine it with cap and trade. China has already established a national carbon emission trading market; however, there is also disagreement on whether to impose the carbon tax on companies and projects that have been included in scope of cap and trade. This paper adopts the research method of experimental economics to study the effect on social economy and social emission reduction under cap and trade, carbon tax, and carbon tax-carbon trading policies, and analyzes average prices of carbon market under cap and trade and carbon tax-carbon trading policies. The study finds that under the carbon tax-carbon trading policy, carbon emissions cannot be reduced significantly; but the profits of manufacturers will be reduced significantly; meanwhile, this reduction effect is even more severe for high consumption manufacturers; and it will be resulting in a lower average carbon market price under the carbon tax-carbon trading policies than under the cap and trade policy. This paper will provide theoretical suggestions for introducing carbon tax policy into China in the future and make policy recommendations for the better development of China's carbon market.

The Effect of Observability on Professed Moral Values and Pro-social Behavior in an Asian Context: An Experimental Study

AbstractMinority communities frequently draw upon voluntary donations to support their unique needs and giving prominent recognition to donors is a widely used strategy, although anonymous donors are not uncommon. Studies in the West suggest that consequentialists (those concerned with the overall benefit from the outcomes, including to themselves) value the recognition gained by engaging in pro-social behavior. Deontologists, or those holding to values that stress right conduct, would engage in pro-social behavior even without recognition. The latter values parallel principles espoused in Eastern thought. What would be the optimal strategy to maximize donations from both groups? Using the methods of experimental economics, we examined the effect of observability on pro-sociality, and the interaction of moral judgment and observability on the cooperative behavior of participants in a Public Good game. The finding shows that participants who felt they were being observed made significantly higher contributions to the public pool as compared to those who felt anonymous, regardless of the values they professed. This validates the strategy of promising recognition to donors used by Asian immigrant communities because it motivates those who value recognition to donate, and prods those who give without recognition to donate more than they otherwise would.

Experimental Research on the Impact of Interest Rate on Real Estate Market Transactions

Based on the close relationship between real estate and capital financing, this paper specifically discusses the impact of interest rate changes in China on real estate market transactions. Housing price regulation has been a hot and focused topic of economics research. It is important to explore the effect of interest rate on real estate market transactions, for the interest rate is an important tool for the government to carry out macrocontrol of the real estate market and affects residents’ consumption choices of goods. Currently, most scholars believe that interest rate changes have a significant impact on house prices, but their studies are often based on empirical analysis of macro data, making it difficult to exclude the effects of economic differences, geographic characteristics, and other factors. Also, some scholars believe that it is difficult for interest rates to have a long‐term impact on real estate prices. This paper applies the experimental economics method to simulate real estate transactions in the real market and control the irrelevant variables to study the movements of housing prices, transaction volumes, consumer transaction intentions and bubble indices under different deposit and lending rates. The results show that: (1) The level of deposit interest rate has a significant inhibitory effect on housing price and a significant promoting effect on real estate market transaction volume and traders’ house‐buying behavior. The higher the level of deposit interest rate is, the better the degree of regulating house prices deviating from the theoretical price is and the better the effect of inhibiting market bubbles. (2) The level of lending rate has a significant inhibiting effect on the volume of real estate transactions and a significant promoting effect on the house‐buying behavior of traders, but its effect on housing prices and market bubbles is not significant. The higher the level of lending rate is, the better the degree of regulating housing prices deviating from the theoretical price is. (3) The effect of deposit interest rate and lending rate policies on the house selling behavior of market traders is not significant.

Experimental Economics in Agriculture: A Review of Worldwide Research

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.

The Deceiving Game

AbstractThe moral comparison of the three venues of deception—lying, falsely implicating, and nonverbal deception—is a central, ongoing debate in the ethics of deception. To date there has been no attempt to advance in the debate through experimental philosophy. Using methods of experimental economics, we devised a strategic game to test positions in the debate. Our article presents the experimental results and shows how philosophical analysis of the results allows drawing valid normative conclusions. Our conclusions testify against the dominant position in the debate—that lying is morally worse than all non-lying deceptions. They offer prima facie support to the view that the venue of deception makes no moral difference.

Experimental Study Based on Game Theory on the Private, Voluntary Supply Mechanisms of Goods for Forestry Infrastructure from the Perspective of Quasi-Public Goods

The existing research on forestry infrastructure has focused on suggestions from other areas of forestry research: that forestry infrastructure should be completed and improved. However, research on forestry infrastructure is relatively rare. In the real world, there are various problems with creating forestry infrastructure, such as complex approval procedures for facility construction, irrational facility layout, insufficient funding for facility construction, and conflicts between the nature of land used for facility construction and the nature of forest land. This paper uses game theory to analyze the behavior of forest infrastructure goods suppliers. Relevant parameters related to forest area infrastructure were designed, including communication, environmental certainty, information feedback, and reward and punishment mechanisms, and experimental economics methods were used to simulate accurate behavior regarding the supply of goods. Then, the key factors that affect the provision of quasi-public goods for forestry infrastructure were studied. At the end of the paper, some targeted suggestions that distinguish rural infrastructure from general infrastructure are given.

RECIPROCITY IN STUDENT GROUPS: EXPERIMENTAL EVIDENCE FROM GREECE

Every correlated theory on the decision-making process takes for granted that individuals have a self-seeking behaviour in a self-regulating economic system. That means that under emergency and risk situations subjects make decisions following the above theories, among fixed-various alternatives. Nevertheless, the results have emerged from many investigations of recent years indicate a completely different approach on people's everyday decision making. Elements of human character such as justice, altruism and reciprocity seem to overlap the overall aspects of them. So, in this paper we aim to investigate the existence of reciprocity, or not, in student communities. In order to achieve this, two games of Game Theory list were adopted and applied in two different Greek Universities while Experimental Economics methods were used. These non-cooperative games (Ultimatum & Dictator game) interacted as one in an uncertain environment. The results of the experimental process showed a reciprocal behaviour (positive or negative) among students with small differences between the two universities.

Comparative Analysis of Emission Trading Institution: Based on Experimental Economics Method

As China’s economic development enters a new stage, the government demands the enterprises with high energy consumption and high pollution to save energy and reduce emission. Although the improvement and promotion of the emission trading institutions between enterprises has been proved to be an effective way to control pollution, but only the emission trading theoretical research and practical support can promote China’s environmental protection work in a long term. Using the method of experimental economics with the same market structure, this paper compares and analyzes the features of deal price, transaction volume and market efficiency of enterprises under several different transaction mechanisms, such as double auction, bid auction and offer auction, and provides some reference opinions for the current emission trading market.

Experiments in Economics: A Survey

Application of experimental methods in Economics, over the last few decades, has given researchers in the field access to hitherto unobtainable data that can be used to validate or refute theoretical propositions. This field has grown exponentially during this time but is still rather new to the average academic. This article is in the nature of a survey of more recent literature. It begins with the early beginnings in the area and goes on to discuss recent advances, thematically, with special emphasis on artefactual and framed field experiments as well as natural experiments. The discussion is by no means exhaustive and is intended to bring to the interested reader a flavor of experimental methods.

Investigation of traders’ behavioral characteristics: experimental economics methods and machine learning technologies

Investigation of traders’ behavioral characteristics: experimental economics methods and machine learning technologies

Let’s play the search game: Strategic and behavioral properties of sponsored search auction mechanisms

Abstract This paper develops a model of buyer (consumer) and seller (advertiser) strategic behavior in sponsored search auctions. Through its various extensions, the model is able to predict the effect of different ranking and payment policies on auction performance in terms of consumer surplus as well as advertisers’ and search engine profits. The theoretical model demonstrates that 1) payment policies should not have an effect on auction performance, 2) ranking policies that do not include the advertiser’s bid as a ranking criterion should not have an effect on auction performance 3) policies that use advertisers’ bids as the single ranking criterion should be just as good as using advertisers’ bids combined with other criteria over which advertisers have no short-term influence (e.g., relevance and click-through rate), 4) some sort of a coordination mechanism is necessary in order for buyers and sellers to achieve a fully efficient outcome, however, coordination should prove much more difficult when the bid is not used as at least one of the ranking criteria, 5) decreasing the number of sponsored links shown to consumers and displaying product prices should improve coordination and increase the likelihood of a fully efficient outcome. We use economically-motivated human subjects and the methods of experimental economics to test the first two of the model’s predictions. We investigate six different sponsored search auction formats: two different pricing policies (pay-per-transaction and pay-per-click) and three different ranking policies (rank by relevance, rank by click-through rate, & rank by both relevance and click-through rate). As predicted by the model we find no significant effect due to difference in ranking policies. However, contrary to the model’s predictions, we find significant differences in total surplus due to payment policies. We discuss two behavioral effects that could be the reason for these differences.

An experimental approach to estimating the value of grain moisture information to farmers in Bangladesh

In the developing world grain storage losses are high and in humid areas inadequate grain drying is often a source of storage problems. Farmers and traders depend on traditional grain moisture estimation methods which are subject to a wide error margin. Grain storage decisions could be improved if farmers and traders had a low cost grain moisture meter that fit their needs. The goal of this study was to determine the desired grain moisture meter functionality and to estimate the value of grain moisture measurement for small holder farmers and for small-scale grain traders, using Bangladesh as a case study. This study was based on interviews with 140 randomly selected Bangladeshi rice farmers in 2016 and 2017, discussions with millers at 30 rice mills and a voucher based moisture meter sales program. It shows that except for rice kept for seed and home consumption, most Bangladeshi farmers sell their rice shortly after harvest to satisfy cash needs and to eliminate storage risks. They say that they would store more rice on-farm if they had better storage methods including cost-effective grain moisture testing. Survey results show that the average farm storage loss was 52 kg or 563 Taka (US$6.78) annually. Using experimental economics methods, farmers were given the opportunity to purchase a probe type grain moisture meter through vouchers with a range of prices. Twenty three of the 140 of the participants (i.e. 16%) purchased at an average of price of 374 Taka (i.e. US$4.67). No farmer purchased a voucher price over 800 Taka (US$10.00). Those who purchased moisture meters had larger farms and produced more rice than those who did not exercise the voucher. They were also younger on average, have more education and more off farm income than non-purchasers.

OTree: Ready-made apps for risk preference elicitation methods

Since the emergence of experimental methods in economics, a variety of methodologies to elicit and classify individual-level risk preferences have evolved. This paper presents ready-to-use software applications for widely used choice list methodologies for use with oTree, including (i) multiple price lists, (ii) certainty equivalent tests, (iii) staircase methods, and (iv) single choice lists. The parameterization and configuration of different features of a task are administered by specifying predefined variables in a single, thoroughly documented file. All apps feature responsive graphical designs, are prepared for multilingual use, and include predefined “bots” for automated testing. By this means, each task can be implemented in the laboratory, the field, or online within only a few minutes.

Cognitive-Based Design Principles in Experimental Economics: How to Devise More Effective Instructions, Software, and Comprehension Tests

Economic laboratory experiments are often used for testing real-world economic mechanisms, such as multi-item auctions and multi-contract cost sharing. Ensuring that participants understand these increasingly complex tasks is crucial in order to maintain control, the reproducibility, and the internal validity of the experiments. Traditionally, experimental economists communicate tasks through written instructions. Learning from instructions by reading, understanding, and memorizing involves advanced cognitive processes. However, economists have as yet not fully integrated the findings of cognitive research into their instruction and experiment design. A large body of previous work has shown that cognitive-based designs substantially increase the effectiveness of learning. This paper seeks to leverage the findings of cognitive research for the design of economic laboratory experiments. In an interdisciplinary approach, it reviews and transfers results between the two fields. It discusses the practical limitations of traditional methods of experimental economics; provides an overview of the related cognitive research; and presents concrete guidelines for devising cognitive-based instructions, software, and comprehension tests for reproducible economic laboratory experiments.