the implication of social cognition for experimental economics From the issue entitled "Special issue on Experimental economics and the social embedding of economic behavior and cognition"

Can human social cognitive processes and social motives be grasped by the methods of experimental economics? Experimental studies of strategic cognition and social preferences contribute to our understanding of the social aspects of economic decisions making. Yet, papers in this issue argue that the social aspects of decision-making introduce several difficulties for interpreting the results of economic experiments. In particular, the laboratory is itself a social context, and in many respects a rather distinctive one, which raises questions of external validity.

Consumption and social identity: evidence from India

We examine spending on consumption items which have signaling value in social interactions across groups with distinctive social identities in India, where social identities are defined by caste and religious affiliations. Using nationally representative micro data on household consumption expenditures, we find that disadvantaged caste groups such as Other Backward Castes spend 8 percent more on visible consumption than Brahmin and High Caste groups while social groups such as Muslims spend 14 percent less, after controlling for differences in permanent income, household assets and household demographic composition. The differences across social groups are significant and robust and these differences persist within different sub populations. We find that the higher spending of OBC households on visible consumption is diverted from education spending, while Muslim households divert spending from visible consumption and education towards greater food spending. Additionally, we find that these consumption patterns can be partly explained as a result of the status signaling nature of the consumption items. We also discuss alternative sources of differences in consumption patterns across groups which stem from religious observance.

Gender differences in ultimatum games: despite rather than due to risk attitudes

We analyze experimental data obtained from an ultimatum game framed as a situation of employee-employer negotiation over salaries. Parallel to this, we elicit subjects' risk attitudes. In the existing literature, it has often been conjectured that gender differences in strategic environments are partly due to differences in risky decision making. Our evidence suggests that both gender and risk-related effects co-exist in ultimatum bargaining. However, differences in risk attitudes cannot explain gender effects in ultimatum bargaining.

Accounting for risk aversion in repeated prisoners’ dilemma games: an experimental test

We apply experimental methods to study the role of risk aversion on players’ behavior in repeated prisoners’ dilemma games. Faced with quantitatively equal discount factors, the most risk-averse players will choose Nash strategies more often in the presence of uncertainty than when future profits are discounted in a deterministic way. Overall, we find that risk aversion relates negatively with the frequency of collusive outcomes.

Studying economics reduces overexploitation in a common resource experiment

This paper studies the economic behavior of agents, who make decisions regarding the sustainability of Common-Pool Resources (CPR). For this purpose, economic experiments are applied to simulate the yield of a CPR, taking into account the influence of economics training on the learning process of individuals, regarding their decisions for sustainability. Based on a non-cooperative game with simultaneous choices, the results of experiments show that after several rounds the existence of economics knowledge reflects a better learning process for making decisions regarding sustainability of CPR.

Contract cheating & the market in essays

We conduct the first empirical economic investigation of the decision to cheat by University students. We investigate student demand for essays, using hypothetical discrete choice experiments in conjunction with consequential Holt-Laury gambles to derive subjects risk preferences. Students stated willingness to participate in the essay market, and their valuation of purchased essays, vary with the characteristics of student and institutional environment. Risk preferring students, those working in a non-native language, and those believing they will attain a lower grade are willing to pay more. Purchase likelihoods and essay valuations decline as the probability of detection and associated penalty increase.

Choosing international linkage strategies in the electronics industry: the role of multinational experience

This paper examines how different aspects of multinational experience affect the choice of international linkage strategy. Integrating transaction cost and dynamic efficiency considerations, we empirically test the determinants of the choice between acquisitions, joint ventures (JV), and strategic alliances (SA) for the world’s largest electronics corporations in 1993–1997. We show that “country specific experience” increases the probability of commitment intensive linkage modes (such as acquisitions and joint ventures), while a positive effect on strategic alliances is caused by “variety experience”, deriving from the heterogeneity of international contexts, and by “internationalisation experience” reflecting overall involvement in international markets.

Testosterone is associated with self-employment among Australian men

Testosterone has pronounced effects on men’s physiological development and smaller, more nuanced, impacts on their economic behavior. In this study of 1199 Australian adult males, we investigate the relationship between the self-employed and their serum testosterone levels. Because prior studies have identified that testosterone is a hormone that is responsive to external factors (e.g. competition, risk-taking), we explicitly control for omitted variable bias and reverse causality by using an instrumental variable approach. We use insulin as our primary instrument to account for endogeneity between testosterone and self-employment. This is because prior research has identified a relationship between insulin and testosterone but not between insulin and self-employment. Our results show that there is a positive association between total testosterone and self-employment. Robustness checks using bioavailable testosterone and another similar instrument (daily alcohol consumption) confirm this positive finding.

Risk taking of executives under different incentive contracts: experimental evidence

Classic financial agency theory recommends compensation through stock options rather than shares to counteract excessive risk aversion in agents. In a setting where any kind of risk taking is suboptimal for shareholders, we show that excessive risk taking may occur for one of two reasons: risk preferences or incentives. Even when compensated through restricted company stock, experimental CEOs take large amounts of excessive risk. This contradicts classical financial theory, but can be explained through risk preferences that are not uniform over the probability and outcome spaces, and in particular, risk seeking for small probability gains and large probability losses. Compensation through options further increases risk taking as expected. We show that this effect is driven mainly by the personal asset position of the experimental CEO, thus having deleterious effects on company performance.

Economic experiments used for the evaluation of building users’ energy-saving behavior

Different treatments that could be implemented in the home environ-ment are evaluated with the objective of reaching a more rational and efficient use of energy. We consider that a detailed knowledge of energy-consuming behaviour is paramount for the development and implementation of new technologies, services and even policies that could result in more rational energy use. The proposed evaluation methodology is based on the development of economic experiments implemented in an experimental economics laboratory, where the behaviour of individuals when making decisions related to energy use in the domestic environment can be tested.

Effects of UV-blocking films on the dispersal behavior of Encarsia formosa (Hymenoptera : Aphelinidae)

The parasitoid Encarsia formosa Gahan (Hymenoptera: Aphelinidae) has been used successfully for the control of Trialeurodes vaporariorum (Westwood) (Homoptera: Aleyrodidae). The development of UV-blocking plastic films has added a new component to future integrated pest management systems by disrupting insect pest infestation when UV light is excluded. Because both T. vaporariorum and E. formosa are reported to have similar spectral efficiency, there was a need to identify the impact of UV-blocking films on the dispersal behavior of both the pest and the natural enemy. In field studies, using choice-chamber experiments, E. formosa showed some preference to disperse into compartments where less UV light was blocked. However, further studies indicated that the effect was primarily attributable to the different light diffusion properties of the films tested. Thus, unlike its whitefly host, when the UV-absorbing properties of the films were similar, but the light diffusion properties differed, E.formosa adults preferred to disperse into compartments clad with films that had high light diffusion properties. When the plastic films differed most in their UV-absorbing capacity and had no light-diffusion capability, the initial dispersal of E. formosa between treatments was similar, although a small preference toward the environment with UV light was observed over time. When parasitoid dispersal was measured 3 h after release, more parasitoids were found on plants, suggesting that the parasitoids would search plants for whitefly hosts, even in a UV-blocked light environment. The potential for the integration of UV-blocking films with E. formosa in an advanced whitefly management system is discussed.

A complex system perspective on the emergence and spread of infectious diseases: integrating economic and ecological aspects

The emergence and spread of infectious diseases reflects the interaction of ecological and economic factors within an adaptive complex system. We review studies that address the role of economic factors in the emergence and spread of infectious diseases and identify three broad themes. First, the process of macro-economic growth leads to environmental encroaching, which is related to the emergence of infectious diseases. Second, there are a number of mutually reinforcing processes associated with the emergence/spread of infectious diseases. For example, the emergence and spread of infectious diseases can cause significant economic damages, which in turn may create the conditions for further disease spread. Also, the existence of a mutually reinforcing relationship between global trade and macroeconomic growth amplifies the emergence/spread of infectious diseases. Third, microeconomic approaches to infectious disease point to the adaptivity of human behavior, which simultaneously shapes the course of epidemics and responds to it. Most of the applied research has been focused on the first two aspects, and to a lesser extent on the third aspect. With respect to the latter, there is a lack of empirical research aimed at characterizing the behavioral component following a disease outbreak. Future research should seek to fill this gap and develop hierarchical econometric models capable of integrating both macro and micro-economic processes into disease ecology.