RECENT, AND NOT SO RECENT, WORKING PAPERS
Last updated: 15-May-2009 07:02 PM
Grouped according to topics:
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67. Review of Vernon L. Smith, "Discovery - A Memoir"
[Forthcoming in Journal of Economic Psychology.] Back to top |
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66. Stefania Bortolotti, Giovanna Devetag, and Andreas Ortmann, "Exploring the effects of real effort in a weak-link experiment"
[CERGE-EI working paper #] We report results from a weak-link – often also called minimum-effort – game experiment with multiple Pareto-ranked strict pure-strategy Nash equilibria, using a real-effort rather than a chosen-effort task: subjects have to sort and count coins and their payoff depends on the worst performance in the group. While in the initial rounds our subjects typically coordinate on inefficient outcomes, almost 80 percent of the groups are able to overcome coordination failure in the later rounds. Our results are in stark contrast to results typically reported in the literature. [Submitted] Back to top |
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65. Ondrej Rydval, Andreas Ortmann, Sasha Prokosheva, and Ralph Hertwig, "How Certain Is the Uncertainty Effect?"
We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery’s worse outcome. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome. [Resubmitted, this is a hugely expanded version of #54 below] Back to top |
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64. Review of "Experimental Economics in Germany, Austria, and Switzerland. A collection of papers in honor
of Reinhard Tietz", edited by Abdolkarim Sadrieh and Joachim Weimann
[Forthcoming in Journal of Economic Psychology.] Back to top |
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63. Katarina Kalovcova, Andreas Ortmann, "Understanding the Plott-Witt-Yang Paradox"
Plott et al. (2003) conduct a betting market experiment and find: First, information was aggregated. This suggests that traders updated their private information based on observed market odds. Second, a model based only on the use of private information seems to fit their data best. The authors call this paradoxical. Because the original data are lost, we replicate their ex- periment. Our results suggest that the paradox seems due to aggregate rather than individual level data analysis. We analyze the individual level data and explain the paradoxical results reported in Plott et al. (2003). [Submitted] Back to top |
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62. Dirk Engelmann, Andreas Ortmann, "The Robustness of Laboratory Gift Exchange: A Reconsideration"
We report a gift exchange experiment in which we systematically vary the following experimental design and implementation characteristics: the choice of equilibrium (interior versus corner point), the extent of potential efficiency gains, and the choice of frames (abstract versus employer-worker). We also employ a matching mechanism that has been shown to best preserve the nature of one-shot interactions (rotation). Much of the observed play of our participants, especially responders, is at or close to equilibrium. Our results therefore stand in stark contrast to much of what has been reported in the literature. Specifically, we find little evidence for positive reciprocity. We do find more evidence for negative reciprocity which, however, is relatively inexpensive in our setting. Our results, together with other evidence we discuss, suggest that laboratory gift exchange is highly sensitive to the parametrization of the model and the way the model is implemented; they question the wide-spread belief that trust and reciprocity are robust phenomena. [This is a thoroughly revised version of an earlier working paper under the same name (#20 below).] Back to top |
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61. Marian Krajc, Andreas Ortmann, Dmitry Ryvkin, "How To Undo Biased Self-Assessments"
We report the results of two experiments (one field, one laboratory) through which we examine the impact of general information and specific information on the quality of self-assessment (“calibration”) in various tasks and feedback conditions. We find a strong positive effect of naturally available information (both general and specific) on calibration in the field experiment. We also identify a positive effect of specific information separately in the laboratory experiment. Maybe unsurprisingly, in both experiments it is the unskilled who improve their calibration most. Our results suggest that the unskilled may not be doomed to be unaware (if indeed they are). [Submitted] Back to top |
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60. Andreas Ortmann, "Prospecting Neuroeconomics"
[Economics and Philosophy, 24, 2008, pp. 431-448; no abstract, essentially a set of reading notes.] Back to top |
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59. Ondrej Rydval, Andreas Ortmann, Michal Ostatnicky, "Three Very Simple Games and What It Takes to Solve Them"
[CERGE-EI working paper #347] We study experimentally the nature of dominance violations in three minimalist dominancesolvable guessing games. We examine how subjects’ reported reasoning processes translate into their stated choices and beliefs about others’ choices, and how both reasoning processes and choices relate to their measured cognitive and personality characteristics. Only about a third of subjects reason in line with dominance; they all make dominant choices and almost all expect others to do so. By contrast, nearly two-thirds of subjects reason inconsistently with dominance, yet a quarter of them actually make dominant choices and half of those expect others to do so. Reasoning errors are more likely for subjects with lower ability to maintain and allocate attention, as measured by working memory, and for subjects with lower intrinsic motivation and premeditation attitude. Dominance-incompatible reasoning arises mainly from subjects misrepresenting the strategic nature (payoff structure) of the guessing games. [Forthcoming in Journal of Economic Behavior and Organization. This is the pen-ultimate draft of that paper.] Back to top |
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58. Review (with Sergey Slobodyan) of Tamura, "Human Psychology and Economic Fluctuation. A New Basic Theory of Human Economics"
[Journal of Economic Psychology, Vol. 28/5, October 2007, pp. 628-629. This is the pen-ultimate draft of that paper.] Back to top |
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57. Review (with Katarina Kalovcova) of "Information Markets: A New Way of Making Decisions", edited by Hahn and Tetlock
[Journal of Economic Psychology, Vol. 29/1, February 2008, pp. 123-125. This is the pen-ultimate draft of that paper.] Back to top |
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56. Ralph Hertwig, Andreas Ortmann, "Deception in Psychological Experiments: Two Misconceptions and a Research Agenda"
[Social Psychology Quarterly, 71(3), 2008, pp. 222–227. This is the pen-ultimate draft.] Back to top |
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55. Ralph Hertwig, Andreas Ortmann "Deception in Experiments: Revisiting the Arguments in Its Defense"
In psychology, deception is commonly used to increase experimental control. Yet, its use has provoked concerns that it raises participants’ suspicions, prompts second-guessing of experimenters’ true intentions, and ultimately distorts behavior and endangers the control it is meant to achieve. Over time, these concerns regarding the methodological costs of the use of deception have been subjected to empirical analysis. We review the evidence stemming from these studies. [Ethics and Behavior, Vol. 18/1, 2008, pp. 59-82. This is the pen-ultimate draft of that paper.] Back to top |
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54. Andreas Ortmann, Sasha Prokosheva, Ondrej Rydval, Ralph Hertwig "Valuing A Risky Prospect Less Than Its Worst Outcome: Uncertainty Effect or Task Ambiguity?"
Gneezy, List and Wu [Q. J. Econ. 121 (2006) 1283-1309] document that lotteries are often valued less than the lotteries’ worst outcomes. We show how to undo this result. [See #65 above.] Back to top |
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53. Andreas Ortmann, Sergey Slobodyan "(The Evolution of) Post-Secondary Education: A Computational Model and Experiments"
[CERGE-EI working paper #355] We propose a computational model to study (the evolution of) post—secondary education. “Consumers” who differ in quality shop around for desirable colleges or universities. “Firms” that differ in quality signal the availability of their services to desirable students. As long as they have capacity, colleges and universities make offers to students, who apply and qualify. Our model generalizes an earlier literature (namely, Vriend 1995) in an important dimension: quality, confirms key predictions of an analytical model that we also supply, and allows us to systematically explore the emergence of macro regularities and the consequences of various strategies that sellers might try. We supply three such exercises. In our baseline treatment we establish the dynamics and asymptotics of our generalized matching model. In the second treatment we study the consequences of opportunistic behavior of firms and thus demonstrate the usefulness of our computational laboratory for the analysis of this or similar questions (e.g., the problem of early admission). In the third treatment we equip some firms with economies of scale. This variant of our matching model is motivated by the entry of for—profit providers into low—quality segments of post—secondary education in the USA and by empirical evidence that, while traditional nonprofit or state—supported providers of higher education do not have significant economies of scale, the new breed of for—profit providers seems to capture economies in core functions such as curricular design, advertising, informational infrastructure, and regulatory compliance. Our computational results suggest that this new breed of providers is likely to continue to move up the quality ladder, albeit not necessarily all the way up to the top. [Currently under revision for Economics of Education Review; this manuscript extends significantly #19 below] Back to top |
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52. Silvester van Koten, Andreas Ortmann, "The unbundling regime for electricity utilities in the EU: A case of legislative and regulatory capture?"
[CERGE-EI working paper #328] Theory and empirics suggest that, by curbing competition, incumbent electricity companies – also referred to as Vertically Integrated Utilities (VIUs) – can increase their profitability through combined ownership of generation and transmission and/or distribution networks. Because curbing competition is generally believed to be welfare reducing, EU law requires unbundling (separation) of the VIU networks. However, the EU leaves it up to its member states to choose between incomplete (legal) and complete (ownership) unbundling. There is tantalizing anecdotal evidence that VIUs have tried to influence this choice through questionable (and quite possibly illegal) means of persuasion. Such means of persuasion should be more readily available in countries with a more corrupted political culture. This paper shows that indeed countries which are perceived as more corrupt are more likely to apply weaker forms of unbundling. [Energy Economics, 30, 2008, pp. 3128-3140.] Back to top |
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51. Giovanna Devetag, Andreas Ortmann, "Classic Coordination Failures Revisited: The Effects of Deviation Costs and Loss Avoidance"
[CERGE-EI working paper #327] Are communication failures common? We revisit a classic example of experimental coordination failure and explore, in a 2x2 design, the effects of deviation costs and loss avoidance. Our results suggest how to engineer coordination successes in the laboratory, and possibly in the wild. [pp. 407-432 in J. Sell and M. Webster (eds.), Laboratory Experiments in the Social Sciences, Elsevier, 2007] Back to top |
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50. Giovanna Devetag, Andreas Ortmann, "When and Why? A Critical Survey on Coordination Failure in the Laboratory"
Coordination games with Pareto-ranked equilibria have attracted major attention over the past two decades. Two early path-breaking sets of experimental studies were widely interpreted as suggesting that coordination failure is a common phenomenon in the laboratory. We identify the major determinants that seem to affect the incidence, and/or emergence, of coordination failure in the lab and review critically the existing experimental studies on coordination games with Pareto-ranked equilibria since that early evidence emerged. We conclude that there are many ways to engineer coordination successes. [Experimental Economics, 10, 2007, pp. 331-344] |
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[CERGE-EI working paper #302]
Coordination games with Pareto-ranked equilibria have attracted major theoretical attention over the past two decades. Two early path-breaking sets of experimental studies were widely interpreted as suggesting that coordination failure is a common phenomenon in the laboratory. We identify the major determinants that seem to affect the incidence, and/or emergence, of coordination failure in the lab and review critically the existing experimental studies on coordination games with Pareto-ranked equilibria since that early evidence emerged. We conclude that coordination failure is likely to be the exception rather than the rule, both in the lab and outside of it. Back to top |
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49. Marian Krajc, Andreas Ortmann, "Are the Unskilled Really That Unaware? An alternative explanation"
[CERGE-EI working paper #325] In a series of articles and manuscripts (e.g., Kruger & Dunning, 1999, Dunning et al., 2003, Ehrlinger et al., 2005), Dunning, Kruger and their collaborators argued that the unskilled lack the metacognitive ability to realize their incompetence. We propose that the unskilled-and-unaware problem – rather than being one of biased judgements – is one of unbiased judgements based on biased information. [Forthcoming in Journal of Economic Psychology] Back to top |
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48. Andreas Ortmann, "Understanding Corruption and Corruptibility Through Experiments"
[Kritische Vierteljahresschrift fuer Gesetzgebung und Rechtswissenschaft, vol. 90, issue 112, 2007, pp. 104-119; this manuscript draws heavily on #38 below, which it shortens significantly but also updates, and attempts to make readable to non-economists] Back to top |
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47. Andreas Ortmann, Angelika Weber, "Thomas Schelling and the Theory of Self-Command"
What is self-command? What is the theory of self-command? In this chapter we explore what Thomas Schelling had to say about the problem of self-command. We summarize his theory of self-command and contextualize and critically assess it. [Draft of an invited contribution to Ingo Pies & Martin Leschke (forthcoming), Thomas Schellings strategische Oekonomik, Mohr-Siebeck, Tuebingen, English version August 31, 2006; German version August 31, 2006.] Back to top |
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46. Review of Evensky, "Adam Smith’s Moral Philosophy" and Kennedy, "Adam Smith’s Lost Legacy"
[History of Political Economy, Vol. 39/2, 2007, pp. 326-329. This is the pen-ultimate draft of that paper.] Back to top |
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45. Review of Gladwell, "Blink, The Power of Thinking without Thinking"
[Journal of Economic Psychology, Vol. 27/6, December 2006, pp. 805-807. This is the pen-ultimate draft of that paper.] Back to top |
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44. Andreas Ortmann, Ralph Hertwig, "Monetary Incentives: Usually Neither Necessary Nor Sufficient?"
[CERGE-EI working paper #307] Read (2005), in the Journal of Economic Methodology, took our target article in Behavioral and Brain Sciences (Hertwig & Ortmann 2001) as one point of departure to question the usefulness of monetary incentives for experimental work. In making his case, he misrepresents our analysis, and continues the unfortunate ritual of opportunistic sampling of evidence. As in our target article, we call for an empirical analysis of the impact of monetary incentives. Back to top |
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43. Dmitry Ryvkin, Andreas Ortmann, "Three Prominent Tournament Formats: Predictive Power and Costs"
[CERGE-EI working paper #303] We analyze tournaments of heterogeneous players from an organizer's perspective. Using a simple model of a noisy tournament, we demonstrate how the likelihood of selecting the best player, here termed the "predictive power" of a tournament, depends on the tournament format, the distribution of players' types, and the overall noise level. We formalize the organizer's decision problem for varying time and measurement costs and compare the predictive power of three widely used tournament formats - contests, binary elimination tournaments, and round-robin tournaments. We show which formats are preferred in the various scenarios and and that for certain parameter constellations, certain formats are not viable. [Management Science 54.3, 2008, pp. 492-504; this manuscript extends significantly #27 below and is the pen-ultimate draft.] Back to top |
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42. Petra Brhlikova, Andreas Ortmann, "The Impact of the Non-distribution Constraint and Its Enforcement on Entrepreneurial Choice, Price, and Quality"
[CERGE-EI working paper #299] We study the conditions under which it is rational for a representative entrepreneur to start a nonpro.t .rm. Taking as point of departure a model of entrepreneurial choice proposed by Glaeser and Shleifer (2001), we analyze consequences of weak enforcement of the non-distribution constraint on entrepreneurial choice and price and quality of the product. We .nd that the nonpro.t organizational form becomes unequivocally more attractive to entrepreneurs if enforcement of the non-distribution constraint is weak. We also .nd that the quality delivered by nonpro.t .rms is lower under weak enforcement than that of the nonpro.t .rm under strict enforcement, but higher than the quality delivered by a for-pro.t .rm. We discuss the implications and limitations of our results. Back to top |
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41. Andreas Ortmann, "Capital Love: Why Wall Street Fell in Love With Higher Education"
[An earlier version of this paper was published under the same title in Education Economics, 9, pp. 293 – 311. See also entry #1 below. This version has been significantly updated and rewritten during March 2005; pp. 145-166 in Brenemann et al. (2005), Earnings from Learning: The Rise of For-Profit Universities. Albany: SUNY Press] Back to top |
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40. Katarina Svitkova, Andreas Ortmann, "Certification As A Viable Quality Assurance Mechanism: Theory and Suggestive Evidence"
[CERGE-EI working paper #288] In this paper we address an asymmetric information problem in the fundraising industry, the fundraising problem. The problem arises from donors’ lack of information about the quality of charities that solicit donations. We focus on one particular solution of this problem, certification, where an independent agency provides a costly signal, a certificate, to charities that can use it to signal their ‘high’ quality. Our model is a signaling game involving three types of player: donors, charities and a certifier. We compare the decisions and impact of two types of certifier: one profit maximizing and one nonprofit. The assumptions of our model are derived from stylized facts that we distilled from certification systems currently existing in the fundraising industries of some European countries. While the current manuscript is meant to inform the real-world design and implementation of such a system in the Czech Republic and other transition economies, our work complements the literature on certification and provides results that are different from those reported up to now. Back to top |
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39. Andreas Ortmann, Katarina Svitkova, Adriana Krnacova, "Certification As A Viable Quality Assurance Mechanism in Transition Economies: Evidence, Theory, and Open Questions"
Traditionally, enforcement of (consumer protection) laws meant to provide quality assurance of goods and services was considered a responsibility of the state in its various guises (e.g., national government, regional government, local government). Unfortunately, enforcement is an expensive, and hence particularly problematic, proposition in transition economies that have many competing demands on their very scarce resources. An alternative mode of enforcement is through reputation. The idea is that consumers, rather than relying on the state, will trace producers’ past performance and translate it into expected quality. Yet for reputation to be able to fulfill this disciplining role, a high degree of information flow, or transparency, is imperative. Transparency, of course, is not something that transition economies typically excel in. In this article we discuss a third form of enforcement that relies much less, or not at all, on the state, and that relies on the market only indirectly: Certification agencies force their members to reveal their (good) type through costly signals that can be “engineered” to induce a separating equilibrium. We discuss the viability of this system of enforcement in an environment where state and market have failed to deliver a satisfying degree of quality assurance (namely, fundraising), and also discuss related information systems and systems of quality assurance. [Prague Economic Papers, 16.2, 2007, pp. 99-115. This is the pen-ultimate draft of that article.] Back to top |
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38. Libor Dusek, Andreas Ortmann, Lubomir Lizal, "Understanding Corruption and Corruptibility Through Experiments: A Primer"
Corruption and corruptibility - due to their illegal and therefore secretive nature – are difficult to assess either with traditional tools such as hard data on criminal convictions or soft data elicited through opinion polls, questionnaires, or case(s) studies. While there seems to be agreement nowadays that corruption does have a negative impact on (foreign) private investment and growth, government revenue and infrastructure, and social equality, and while there seems to be evidence that low economic development, federal structure and short histories of experience with democracy and free trade all favor corruption on the macro-level, it is poorly understood what exactly, on the micro-level, the determinants of corruptibility are and what institutional arrangements could be used to fight (the causes of) corruption. In this article we review a third, complementary mode of investigation of corruption and corruptibility: experiments. We assess their strengths and weaknesses, and identify areas where they could be particularly useful in guiding policy choices – namely in designing incentive-compatible and effective anti-corruption measures in public procurement. [Prague Economic Papers, 14.2, 2005, pp. 147-163. This is the pen-ultimate draft of that article.] Back to top |
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37. Kjell Hausken, Andreas Ortmann, "A First Experimental
Test of Multilevel Game Theory: The PD Case"
The prisoner’s dilemma is played by two players in each of two groups. The two groups compete for an external prize whose allocation is determined by the degree of within-group coordination. The experimental evidence supports the predictions of multilevel game theory well. [Applied Economics Letters, Vol. 15/4, 2008, pp. 261-264. This is the pen-ultimate draft of that paper.] Back to top |
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36. Andreas Blume, Andreas Ortmann, "The Effects of Costless Pre-play Communication:
Experimental Evidence from Games with Pareto-ranked Equilibria"
Cheap talk is shown to facilitate coordination on the unique efficient equilibrium in experimental order-statistic (Median and Minimum) games. This result is roughly consistent with theoretical predictions according to which cheap talk promotes efficient Nash play. The evidence concerning the mechanisms that theory appeals to is mixed: Frequent agreement of messages and actions is consistent with messages being viewed as self-committing. Risk in the underlying game and the absence of self-signaling messages may explain why message profiles are not unanimous. Time-varying message profiles can be interpreted as evidence for players trying to negotiate equilibria and/or trying to rely on secret handshakes. [Journal of Economic Theory, vol. 127(1), 2007, pp. 274-290. This is the radically revised and expanded version of #7 below and the pen-ultimate draft.] Back to top |
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35. Eugen Kovac, Andreas Ortmann, Martin Vojtek, "Comparing Guessing Games with
Homogeneous and Heterogeneous Players: Experimental Results and a CHM Explanation"
We investigate the decisions of individuals in simple and complex environments. As vehicle for our investigation we use a recent version of the Guessing Game first explored by Guth et al. (2002). We find that individuals in complex environments think more carefully before making the decisions. We rationalize our findings with the Cognitive Hierarchy Model (CHM) proposed by Camerer et al. (2002).We relate our findings to the emerging literature on the decision making of collective actors. [Economics Bulletin, 3, no.9 (February 12), 2008, pp. 1-16. This is a thoroughly revised and expanded version of Eugen Kovac, Martin Vojtek, Andreas Ortmann, Frantisek Brazdik. See #24 below] Back to top |
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34. Ralph Hertwig, Andreas Ortmann, "The Cognitive Illusions Controversy: Why This Methodological Debate in Disguise Should Matter to Economists" [Chapter in Rami Zwick and Amnon Rapoport (eds.), 2004, Experimental Business Research, Boston, MA: Kluwer, pp. 361-378. This is the pen-ultimate draft.] Back to top |
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33. Review of Giocoli, "Modeling Rational Agents. From Interwar Economics to Early Modern Game Theory." [History of Political Economy, 37(1), 2005, pp. 161-164. This is the pen-ultimate draft.] Back to top |
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32. Review (with Ondrej Rydval) of Glimcher, "Decisions, Uncertainty, and the Brain. The Science of Neuroeconomics" [Journal of Economic Psychology, 25(6), 2004, pp. 891-894. This is the pen-ultimate draft.] Back to top |
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31. Review (with Ondrej Rydval) of Camerer, "Behavioral Game Theory" [Journal of Economic Psychology, 25(4), 2004, pp. 671-674. This is the pen-ultimate draft.] Back to top |
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30. Andreas Ortmann, "Are Collective Actors Different...?" [Powerpoint slides of the invited presentation at Schloss Ringberg conference of three MPI centers, Tegernsee, March 9, 2004.] Back to top |
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29. Ondrej Rydval, Andreas Ortmann, "Loss Avoidance As Selection Principle:
Evidence From Simple Stag-Hunt Games" We investigate experimentally the conjecture by Cachon and Camerer (1996) that loss avoidance solves the tension that arises in stag-hunt games for which payoff dominance and risk dominance make conflicting predictions. Contrary to the conjecture, money-losing outcomes do not shift behavior strongly toward the payoff-dominant equilibrium. [Economics Letters, 88(1), 2005, pp. 101-107. This is the pen-ultimate draft.] Back to top |
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28. Ondrej Rydval, Andreas Ortmann, "How financial incentives and cognitive abilities
affect task performance in laboratory settings: an illustration" Drawing on Gneezy and Rustichini (2000), we show that cognitive abilities seem at least twice as important as financial incentives. This result backs up the exhortation of Camerer and Hogarth (1999) to pay attention to both the labor and capital aspects of cognitive production in experiments. [Economics Letters, 85(3), 2004, pp. 315-320. This is the pen-ultimate draft.] Back to top |
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27. Dmitry Ryvkin, Andreas Ortmann, "The predictive power of noisy round-robin tournaments" The round-robin tournament format for N players is a scheme that matches players with one another in all possible N(N - 1)/2 pairwise comparisons. A noisy round-robin tournament adds to the particular matching scheme performance fluctuations of the participating players, or noise. With noise, upsets become possible and hence the possibility that the ex ante best player is not the winner ex post. Thus, noise reduces the predictive power of a tournament. In this article we study theoretically (analytically and by way of computational simulations) the predictive power of a noisy round-robin tournament for three prominent distributions of players’ abilities, as a function of the level of noise, and the number of players. At first sight, some of our results (e.g., non-monotonicity as a function of the number of players N and the noise level σ, which can make some ranges of N non-optimal) are quite counterintuitive but should be of help to a tournament designer who tries to maximize, or maybe minimize, the probability of the best player winning. Back to top |
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26. Andreas Ortmann, "Field Experiments in Economics: Some Methodological Caveats" The results of standard lab experiments have long been questioned because of the convenience sample of subjects - college students - they typically employ and the abstract nature of the typical lab setting. These procedural conventions of experimental economics, it is argued, endanger the external validity of experiments. Various forms of field experiments (see Harrison and List 2003a for a taxonomy) have tried to address these issues by bringing the lab to non-traditional subjects (including participants in exotic locales), and/or to move the setting of experiments closer to reality by using real goods and settings that are not stripped of context. While field experiments might help experimental economists to broaden their subject pools, and to increase the external validity of their investigations, I argue that these potential advantages do come at costs that can be considerable. Specifically, going into the field is likely to increase the demands on careful controls dramatically, and it also confronts experimenters with the tricky issue of how to deal with the rules of thumb, or heuristics, that subjects bring to the laboratory, whether the traditional one or the nontraditional one. The recent surge in field experiments has prompted, quite rightly in my opinion, a surge of ruminations about experimental methods both in the field and in the lab. This is a healthy development because methodological discussions have been marginalized in experimental economics far too long, to the detriment of overdue reflections on the practices of experimental economists (Hertwig & Ortmann, 2001; Ortmann, Hertwig, & Harrison, in prep). When the dust has settled, the most important contribution of field experiments might well be their having opened the door for methodological discussions that experimental economists have avoided for too long. [pp. 51-70 in Carpenter, Harrison, List (eds), Field Experiments in Economics, Greenwich, CT: JAI Press. Research in Experimental Economics, Volume 10, 2005. This is the pen-ultimate draft.] Back to top |
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25. Andreas Ortmann, Michal Ostatnicky, "Proper experimental design and implementation are necessary conditions for the move towards a balanced social psychology" This is a comment on a target article By Krueger and Funder. We applaud the authors' basic message. We note that the negative research emphasis is not special solely to social psychology and judgement and decision making. We argue that the proposed integration of NHST and Bayesian analysis is promising but will ultimately succeed only if more attention is paid to proper experimental design and implementation. [Behavioral and Brain Sciences, 27.3, 2004, pp. 362-363. This is the pen-ultimate draft.] Back to top |
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24. Andreas Ortmann, "Plotting the behavioralist conspiracy ... :)"
This is a review essay of Charles R. Plott's "Collected papers on the experimental foundations of economic and political science: 1. Public economics, political processes, and policy applications 2. Market institutions and price discovery 3. Information, finance and general equilibrium" [Journal of Economic Psychology, 24, 2003, pp. 555-575. This is the pen-ultimate draft.] Back to top |
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23. Eugen Kovac, Martin Vojtek, Andreas Ortmann, Frantisek Brazdik,
"Guessing Games with Homogeneous and Heterogeneous Players:
An Experimental Reconsideration"
We replicate an experiment previously reported in Economics Letters (Gueth, Kocher and Sutter 2002). Our results are at variance with their results, but confirm their key hypothesis that heterogeneous players guess closer to the equilibrium than homogeneous players. Back to top |
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22. Michal Kejak, Andreas Ortmann, "E-Learning: A Way to Solve the Human
Capital Bootstrapping Problem in Transitional Economies in Central Europe?"
[Figures]
We propose a general equilibrium model of endogenous growth in which human capital investment is the engine of growth. Within that model we analyze the potential role of e-learning in the elimination of the human capital boostrapping problem so typical for transition economies. We find that e-learning can indeed speed up convergence to the frontier of knowledge. The intuitive idea behind this result is the ability of a transition economy to access external knowledge sources that do not require local teachers to first learn the requisite skills before they can teach them. Our results are derived in an economy with two education sectors - traditional public classroom education and private e-learning - which are modelled in a unified manner, with relative teacher quality and class size being the key variables. The endogenous class size creates a negative externality in the public education sector and is responsible for multiple equilibria: ’bad’ or ’passive parents’ equilibrium, ’good’ or ’active parents’ equilibrium, and corner ’zero e-learning trap’. We show that there are typically two transitions: ’catch-up transition’ along good equilibria to balanced growth path equilibrium with sustained growth, and ’stagnation transition’ along bad equilibria to autarchic zero e-learning equilibrium. If the economy is currently at a ’good’ (’bad’) equilibrium, then a pro-elearning policy can have positive (negative) effects on the performance of the economy. Similarly, a pro-public education policy can have positive (negative) effects on the economy only if the economy is currently at a ’bad’ (’good’) equilibrium. [Draft of October 22, 2002 COMMENTS WELCOME.] Back to top |
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21. Ralf Hertwig, Andreas Ortmann, "Deception in Experiments:
The Costs of an Alleged Method of Last Resort"
In psychology, deception is commonly used to increase experimental control. Yet, its use has provoked concerns that it raises participants' suspicions, prompts second-guessing of experimenters' true intentions, and ultimately distorts behavior and the control it is meant to achieve. These concerns can and have been subjected to empirical analysis. Our review of the evidence yielded two key results: First, there is evidence that participants who experienced deception firsthand are likely to become suspicious and that there are non-negligible differences between suspicious and reportedly na‹ve participants. Second, there are surprisingly few studies addressing the question of whether suspicion can result from secondhand experience with deception such as undergraduate psychology training or the profession's reputation more generally. In light of the latter finding, we propose an incentive-compatible mechanism designed to encourage researchers to search for and implement alternatives that forego deception. Thus, making this tool truly the strategy of last resort, as intended by the rules of conduct of the American Psychological Association. [Under review; this manuscript is a thoroughly revised version of #12 below.] Back to top |
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20. Dirk Engelmann, Andreas Ortmann, "The Robustness of
Gift Exchange: An Experimental Investigation"
We report a gift exchange experiment which is differentiated from most of the literature by the following experimental design and implementation characteristics: the choice of equilibrium (interior rather than corner point), the choice of a matching mechanism that has been shown to best preserve the nature of one-shot interactions (rotation), extent of e›ciency gains, and frames (abstract versus employer-worker). Much of the observed play of our participants, especially responders, is at or close to equilibrium. Our results therefore stand in stark contrast to much of what has been reported in the literature. In particular, we .nd little evidence for positive reciprocity but substantial evidence for negative reciprocity. Our results suggest strongly that laboratory gift exchange is highly sensitive to the parameterization of the gift exchange or implementation characteristics. [Draft of September 22, 2002 UNEDITED DRAFT - COMMENTS WELCOME - UNEDITED DRAFT; paper is currently under revision.] Back to top |
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19. Andreas Ortmann, Sergey Slobodyan, Samuel S. Nordberg, "(The Evolution of)
Post-Secondary Education: A Computational Model and Results"
We propose a computational model to study (the evolution of) post-secondary education."Consumers" that differ in quality shop around for desirable colleges or universities. "Firms" that differ in quality signal the availability of their services to desirable students. Colleges and universities, as long as they have capacity, make offers to students that apply and qualify. We study the dynamics and asymptotics for three nested variants of this matching model: the first variant replicates the Vriend (1995) model, the second stratifies both firms and consumers by quality, while the third variant of our model equips some firms additionally with economies of scale. The last variant of our model is motivated by the entry of for-profit providers into some segements of post-secondary education in the USA and empirical evidence that, while traditional nonprofit or state-supported providers of higher education do not have significant economies of scale, the new breed of for-profit providers seems to capture economies of scale in core functions such as advertising, informational infrastructure, and regulatory compliance. Our computational results suggest that this new breed of providers is likely to capture additional segments of that market. Our model lends itself also to the study of such issues as the consequences of opportunistic behavior of firms (admittance of unqualified students for fiscal reasons) and the emergence of behaviorally different consumers (traditional "patronizers" vs "hoppers"), among others. Our computational results suggest that opportunism is a poor long-run strategy, that consumers are rather heterogenous in their shopping behavior but that the mix of behaviorally different consumers is unaffected by the presence of for-profits or opportunistically behaving firms. [Draft of September 11, 2002; see #53 above for a thoroughly revised vresion.] Back to top |
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18. Andreas Ortmann, Mark Schlesinger, "Trust, Repute, and the Role of Nonprofit Enterprise"[The book
version.]
In this chapter we examine the trust hypothesis: the proposition that information asymmetries between providers and consumers of services can explain the existence of nonprofit enterprise in certain markets. We argue that this hypothesis, in order to be viable, has to meet three challenges: (1) the de jure inability of nonprofits to distribute profits to shareholders and/or management must affect incentives within the nonprofit firm in ways that are compatible with trustworthiness ("incentive compatibility challenge"), (2) nonprofit behavior must not be adulterated by individuals taking advantage of the perceived trustworthiness ("adulteration challenge"), and (3) nonprofit status must be treated as a reliable predictor of organizational behavior by consumers, when the reputation of individual firms is not seen as reliable ("reputational ubiquity challenge"). We propose that the trust hypothesis stands on shaky ground. It can be sustained only under particular conditions that have been neither carefully described in theory nor subject to empirical assessment. The available evidence, patchy and inadequate as it is, seems to suggest that there are ownership-related differences in the organizational behavior of non-profits and for-profits. However, there is little evidence that these differences can be connected to trust per se or provide a rationale for the existence of nonprofit ownership. [A shorter version of this paper has been published under the same title in Voluntas, 8:2, 1997, 97 - 119. The current version has been updated and significantly revised; it appeared in a volume edited by Helmut K. Anheier and Avner Ben-Ner The Study of Nonprofit Enterprise: Theories and Approaches, Kluwer/Plenum, 2003, pp. 77-114; see also the following chapter by Henry Hansmann which is a comment on our chapter.] Back to top |
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17. Andreas Ortmann, "Money, Lies and Publications"
[Powerpoint slides of the presentation at Berlin Summer School on Bounded Rationality in Economics and Psychology.] Back to top |
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16. Andreas Ortmann, "The Economics and Industrial Organization of e-Learning: An introduction"
[Powerpoint slides of the presentation at Bank Austria Seminar, Prague, July 12, 2001.] Back to top |
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15. Ralph Hertwig, Andreas Ortmann, "Money, Lies, and Replicability: On the Need For Empirically
Grounded Experimental Practices and Interdisciplinary Discourse"
This response reinforces the major themes of our target article. The impact of key methodological variables should not be taken for granted. Rather, experimental practices should be grounded in the empirical evidence. If no evidence is available, decisions on design and implementation should be subjected to systematic experimentation. In other words, we argue against empirically blind conventions and against methodological choices based on unreflected beliefs, habits or rituals. Our approach will neither inhibit methodological diversity nor constrain experimental creativity. More likely, it will promote both goals. [Behavioral and Brain Sciences, 24/3, 2001, pp. 433-451. This is the pen-ultimate draft of our response to commentaries on the target article below.] Back to top |
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14. Ralph Hertwig, Andreas Ortmann, "Experimental Practices in Economics:
A Challenge for Psychologists?"
We discuss four key variables of experimental design that tend to be realized quite differently in economics and in areas of psychology relevant to both economists and psychologists, such as judgment and decision making. On theoretical and empirical grounds, we argue that these different realizations, which concern enactment of scripts, repetition of trials, performance-based monetary payments, and the use of deception, are bound to produce divergent experimental results. Furthermore, we argue that the wider range of experimental practices in psychology reflects a lack of procedural regularity that may contribute to the variability of empirical findings. We call for more research on the consequences of particular methodological preferences and to further this goal propose a "do-it-both-ways" rule. [Behavioral and Brain Sciences 24.3., 2001, pp. 383-403. (target article) This is the pen-ultimate draft of that article.] Back to top |
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13. Ralph Hertwig, Andreas Ortmann, "Economists' and Psychologists' Experimental
Practices: How They Differ, Why They Differ, And How They Could Converge"
[Graph] [pp. 253-272 in Brocas, Carillo (eds.) Economics and Psychology. New York: Oxford University Press. This is the pen-ultimate draft.] Back to top |
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12. Ralph Hertwig, Andreas Ortmann, "Does Deception Impair Experimental Control? A Review of the Evidence"
In an attempt to increase experimental control, many psychologists employ deception. This modus operandi has been a longstanding concern among other psychologists who have suggested that deceptive practices make participants suspicious, prompt them to second-guess experimentersí true intentions, and ultimately affect their behavior. According to these critics, deception impairs or even destroys the experimental control it is meant to achieve. Here we review evidence bearing on this argument. We find important observable methodological costs of deception. We propose a pragmatic and incentive-compatible response that over time is likely both to reduce deception to a last-resort strategy (as recommended by the APA), and to spur methodological innovation. Back to top |
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11. Andreas Ortmann, Ralph Hertwig, "The Costs of Deception: Evidence From Psychology"
Recently, it has been argued that there is no evidence in social science research that deceiving subjects in an experiment leads to a significant loss of experimental control. Based on this assessment, experimental economists were counseled to lift their de facto prohibition against deception to capture its allegedly significant benefits. Previous reviews of the evidence, however, have not been systematic. Here we provide a systematic assessment of the methodological costs of deception, mostly drawing on evidence from psychology where deception, in areas such as social psychology, is wide-spread and frequent and has a long tradition. We report two major results. First, the evidence suggests that deception is bound to generate suspicion and second-guessing of the research design and is likely to affect judgment and decision making of a non-negligible number of participants, thus at the minimum inducing unnecessary noise in the data and reducing significantly procedural regularity and replicability. Second, we find little evidence for reputational spillover effects hypothesized by a number of authors (e.g., Kelman, 1967; Davis and Holt, 1993). We conjecture that the latter finding may be the result of institutional arrangements that psychologists have evolved in response to the very problem. There is, therefore, no guarantee that reputational spillover effects would not arise if deception were to become an accepted methodological tool in economics. Furthermore, allowing deception would be likely to slow down methodological innovation. We conclude that the prohibition of deception is a sensible convention that economists should not abandon. [Experimental Economics, 5, 2002, pp. 111-131. This is the pen-ultimate draft.] Back to top |
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10. Andreas Ortmann, Ralph Hertwig, "Why Anomalies Cluster In Experimental Tests
of One-shot and/or Finitely Repeated Games: Some Evidence from Psychology"
We conceptualize the decision problem that participants in certain experiments face as a Bayesian updating problem involving the "typical behavior" of a reference group (participants in the particular experiment) as anticipated baseline behavior and the "individuating behavior" that can be inferred from the instructions for members of the same reference group. This framing of the decision problems that participants in experiments typically face allows us to draw on evidence from psychology where the base rate fallacy has been studied widely in various domains. Recently, a consensus is emerging among psychologists that the occurrence of the base rate fallacy is highly contextual and that in many well-defined social circumstances base rates are surprisingly potent and reliable even when determined efforts are undertaken to exorcize them. We mine this evidence to shed light on the occurrence of anomalies in contexts such as social dilemma/public good provision/common pool problems, gift-exchange/principal-agent/one-sided prisoners' dilemma games, ultimatum games, trust games, moonlighting games, etc. [This is a rough draft of a paper presented at the June 2000 New York meeting of the Economic Science Association.] Back to top |
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9. Andreas Ortmann, David Baranowski, "Schumpeter’s Assessment of Adam Smith and The Wealth of Nations:
Why He Got It Wrong"
In his History of Economic Analysis Joseph Schumpeter dismissed Smith’s Nature and Causes of the Wealth of Nations in a rather blunt and ad hominem manner. We argue that Schumpeter’s assessment resulted from his failure to appreciate the rhetorical structure of Smith’s masterpiece, a failure largely due to a key insight denied to Schumpeter - student notes of Smith’s lectures on rhetoric that surfaced only after Schumpeter’s death. [Under revision] Back to top |
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8. Peter Hans Matthews, Andreas Ortmann, "An Austrian (Mis)Reads Adam Smith: A Critique of Rothbard as Intellectual Historian "
Rothbard’s posthumous Economic Thought Before Adam Smith is notable for its villification of ‘the quiet Scottish professor.’ While there is little disagreement that Smith was at best an ambivalent champion of free markets, Rothbard’s indictment of him as a proto-Marxist is less than persuasive. We argue that Rothbard’s book suffers from logical flaws, selective and incomplete textual evidence, a misunderstanding of Das Adam Smith Problem and the relevant literature, and an unawareness of modern incentive-based theories of the firm and state anticipated in Book V of The Wealth of Nations. [Review of Political Economy, 14/3, 2002, pp. 379-392. This is the pen-ultimate draft.] Back to top |
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7. Andreas Blume, Andreas Ortmann, "The Effects of Costless Pre-play Communication:
Experimental Evidence from a Game with Pareto-ranked Equilibria"
When costless messages are added to a game with Pareto-ranked equilibria, efficiency of actual play is significantly increased. Messages facilitate both quick convergence to, and participants' initial coordination on, the Pareto-dominant equilibrium. However, nearly half of our experimental participants initially fail to use costless pre-play communication to coordinate on the Pareto-dominant equilibrium. Our experimental evidence on efficient play after convergence is roughly consistent with theories proposed for cheap-talk games. The evidence on convergence to efficient play is mixed, somewhat favoring theories that permit a role for message profiles which are not themselves equilibria and which change over time. [See #36 above] Back to top |
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6. Andreas Ortmann and Richard Squire, "A
Game-theoretic Explanation of the Administrative Lattice in Institutions of Higher
Learning"
We provide a game-theoretic model of academic organizations, focusing on the strategic interaction of prototypical overseers, administrators, and professors. By identifying key principal-agent games routinely played in colleges and universities, we begin to unpack the black box typacally used to conceptualize these institutions. Our approach suggests an explanation for the seemingly inevitable drift of institutions of higher education into such well-documented phenomena as academic ratchet and administrative lattice and builds an understanding of the organizational conditions in which drift would be restrained. [Journal of Economic Behavior & Organization, 43.3., 2000, pp. 377-392. This is the pen-ultimate draft of that article.] Back to top |
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5. Andreas Ortmann and Richard Squire, "The Internal
Organization of Colleges and Universities: A Game-theoretic Approach"
In this article we propose that "a familiar form of organized anarchy" (Cohen, March, & Olson, 1972), i.e., colleges and universities, can be usefully conceptualized as a cascade of principal-agent games played out between four key players -- Student/Alumnus, Overseer, Administrator, and Professor. By identifying the key principal-agent games routinely played in colleges and universities, we begin to unpack the black box as which these institutions are typically conceptualized. Our approach suggests an explanation for the seemingly inevitable drift of institutions of higher education toward such well-documented phenomena as administrative lattice and academic ratchet and builds an understanding of the organizational conditions in which drift would be restrained. [This is a revised version of the 1996 PONPO working paper and the precursor of the working paper above.] Back to top |
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4. Andreas Ortmann, "Dutch vs. English Auctions: A
Brief Classroom Demonstration"
I present a brief classroom demonstration of the difference between Dutch and English auctions. The classroom demonstration is appropriate for micro principles as well as intermediate and upper classes in micro, Industrial Organization, and Game Theory. Back to top |
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3. Andreas Ortmann, "Bertrand Price Undercutting: A
Brief Classroom Demonstration"
I present a brief classroom demonstration illustrating Bertrand price undercutting. The classroom demonstration is appropriate for Micro Principles, and both intermediate and and upper level undergraduate, as well as graduate classes in micro, Industrial Organization, and Game Theory. [Journal of Economic Education, 34/1, pp. 21-26. This is the pen-ultimate draft of that article.] Back to top |
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2. Andreas Ortmann & Ralph Hertwig,
"Understanding Bayes' Rule: Insights from Psychology"
Drawing on insights from psychology, we propose a way to ease the pain of understanding, and teaching, Bayes’ Rule. [Under revision] Back to top |
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1. Andreas Ortmann, "Capital Romance: Why Gordon Gekko
Fell in Love With Higher Education"
With about two initial public offerings a year, the number of publicly traded degree-granting providers of post-secondary education in the United States has grown steadily ever since the Apollo Group (University of Phoenix, College of Financial Planning, etc.) went public in December 1994. To sell to investors ownership in companies that compete against traditional providers favored by numerous tax and regulatory breaks, investment bankers and market analysts clearly must have "compelling" stories to tell. This paper presents an inventory of the arguments typically employed as well as an attempt to quantify their relative importance through a questionnaire that was sent to analysts following the education industry. I find that the market analysts' arguments are reasonably congruent with modern economic and managerial theories of firms and markets and what I consider the relevant facts. Based on allocation recommendations of my correspondents, I speculate on the likely fate of publicly traded degree-granting providers of higher education. [Education Economics, 9, 2001, pp. 293-311 as "Capital Romance: Why Wall Street Fell in Love With Higher Education" this is an earlier draft. See also #41 above.] Back to top |
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