Experiments in psychology and economics

Experiments are very common in psychology and increasingly so in economics particularly in areas like behavioural economics and neuroeconomics which would hardly exist without them. The abstracts of papers in such fields often make quite grand claims for the implications of their results. Leaving aside the question of ecological validity - whether you are going to behave the same in the real world as when lying prostrate in an MRI scanner - there is an important question of how culturally general one's results are.
A favourite task in experiments is the Ultimatum Game. It turns out that a characteristic finding in experiments conducted in the US (that the first movers irrationally offer too much and the second movers irrationally reject what they regard as too little) is not replicated in one study in the Peruvian Amazon. The Machiguenga tribe behave much more like economists would predict which is somewhat ironic since they have probably managed to avoid any exposure to the dismal science.

How not to get rejected: evidence on the Ultimatum Game & some advice from Dr Kev

The Ultimatum Game is widely used in experimental economics. One of the peculiar findings is the high rate of rejection. A good homo economicus would never reject. The paper below reports the interesting finding that people are more likely not to reject the offer in this game if they delay the decision just by a few minutes.
One might conjecture that this has implications for other offers like asking someone out on a date. If you can contrive to have the decision delayed then maybe you are in with a better chance. What have you got to lose?

Let me sleep on it: Delay reduces rejection rates in Ultimatum Games
Grimm, Veronika, & Mengel, Friederike
We show that delaying acceptance decisions in the Ultimatum Game drastically increases acceptance rates of low offers. While in standard treatments without delay less than 20% of low offers are accepted, these numbers increase to around 65-75% as we delay the acceptance decisions by around 10 minutes. Our findings provide precise evidence for familiar notions such as ''sleeping on it'' and show that there may be a good reason why public administrations often communicate bad news on Friday afternoons. They shed new light on recent evidence in Neuroscience on brain activation after receiving bad news and raise questions about the extent to which decisions reveal the preferences of a decision-maker.
http://edocs.ub.unimaas.nl/loader/file.asp?id=1491

The Psychology of Taxation

An article in the Journal of Economic Psychology (A Behavioural Laffer curve: Emergence of a social norm of fairness in a real effort experiment, Levy-Garboua, Masclet and Montmarquette, 2008) raises concerns about the impact of marginal tax rates which are viewed as unfair. Pairs of players participated in their experiment, the first being the tax payer, the second the tax setter. Player A performed a series of tasks for reward, but “taxed” at a particular rate, with the proceeds going to player B. In the endogenous condition player B chose a tax rate, while in the exogenous condition rates were randomly assigned.


The authors find that participants in their experiment reacted to “punish” tax setters who set rates too high (>50%) by reducing their effort. They develop a model where social norms promote productive efficiency in the long run.