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on Experimental Economics |
| By: | Christine L. Exley (Harvard Business School, Negotiation, Organizations & Markets Unit); Ragan Petrie (Department of Economics, George Mason University) |
| Abstract: | A growing body of empirical evidence documents a reluctance to give. Individuals avoid donation asks, and when asked, give less by viewing factors - such as ambiguity or risk - in a self-serving manner. This paper considers an environment where the ask is not avoided and factors that may be viewed self-servingly are neither introduced nor highlighted. Instead, this paper explores whether less prosocial behavior may result from the mere expectation of the ask, or opportunity for individuals to find their own excuses. Our field experiment supports this extension of self-serving or excuse-driven choices: prosocial behavior reduces by 22% when an upcoming ask is expected. Additional results document heterogeneity in such excuse-driven behavior and ways to counter it with information on why to give. |
| Keywords: | charitable giving, prosocial behavior, self-serving biases, excuses |
| JEL: | D64 C93 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:16-101&r=exp |
| By: | John A. List; Azeem M. Shaikh; Yang Xu |
| Abstract: | Empiricism in the sciences allows us to test theories, formulate optimal policies, and learn how the world works. In this manner, it is critical that our empirical work provides accurate conclusions about underlying data patterns. False positives represent an especially important problem, as vast public and private resources can be misguided if we base decisions on false discovery. This study explores one especially pernicious influence on false positives—multiple hypothesis testing (MHT). While MHT potentially affects all types of empirical work, we consider three common scenarios where MHT influences inference within experimental economics: jointly identifying treatment effects for a set of outcomes, estimating heterogeneous treatment effects through subgroup analysis, and conducting hypothesis testing for multiple treatment conditions. Building upon the work of Romano and Wolf (2010), we present a correction procedure that incorporates the three scenarios, and illustrate the improvement in power by comparing our results with those obtained by the classic studies due to Bonferroni (1935) and Holm (1979). Importantly, under weak assumptions, our testing procedure asymptotically controls the familywise error rate – the probability of one false rejection – and is asymptotically balanced. We showcase our approach by revisiting the data reported in Karlan and List (2007), to deepen our understanding of why people give to charitable causes. |
| JEL: | C1 C9 C91 C92 C93 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21875&r=exp |
| By: | Valentina Michelangeli (Bank of Italy); Enrico Sette (Bank of Italy) |
| Abstract: | We study the effect of bank capital on the supply of mortgages. We fully control for endogenous matching between borrowers, loan contracts, and banks by submitting randomized mortgage applications to the major online mortgage broker in Italy. We find that: higher bank capital is associated with a higher likelihood of application acceptance and lower offered interest rates; banks with lower capital reject applications by riskier borrowers and offer lower rates to safer ones. Finally, nonparametric estimates of the probability of acceptance and of the offered rate show that the effect of bank capital is stronger when capital is low. |
| Keywords: | mortgages, banks, household finance, randomized experiment |
| JEL: | G21 D14 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1051_16&r=exp |
| By: | Arthur Alik-Lagrange; Martin Ravallion |
| Abstract: | Does knowledge about antipoverty programs spread quickly within poor communities or are there significant frictions, such as due to social exclusion? We combine longitudinal and intra-household observations in estimating the direct knowledge gain from watching an information movie in rural India, while randomized village assignment identifies knowledge sharing with those in treatment villages who did not watch the movie. Knowledge is found to be shared within villages, but less so among illiterate and lower caste individuals, especially when also poor; these groups relied more on actually seeing the movie. Sizable biases are evident in impact estimators that ignore knowledge spillovers. |
| JEL: | D83 I38 O12 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21877&r=exp |
| By: | Charles Courtemanche; Rusty Tchernis; Benjamin Ukert |
| Abstract: | This paper aims to identify the causal effect of smoking on body mass index (BMI) using data from the Lung Health Study, a randomized trial of smoking cessation treatments. Since nicotine is a metabolic stimulant and appetite suppressant, quitting or reducing smoking could lead to weight gain. Using randomized treatment assignment to instrument for smoking, we estimate that quitting smoking leads to an average long-run weight gain of 1.5-1.7 BMI units, or 11-12 pounds at the average height. These magnitudes are considerably larger than those typically estimated by studies that do not account for the endogeneity of smoking. Our results imply that the drop in smoking in recent decades explains 14% of the concurrent rise in obesity. Semi-parametric models provide evidence of a diminishing marginal effect of smoking on BMI, while subsample regressions show that the impact is largest for younger individuals, females, those with no college degree, and those with healthy baseline BMI levels. |
| JEL: | I12 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21937&r=exp |
| By: | Davide Dragone (UNIBO - Università di Bologna [Bologna]); Fabio Galeotti (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Raimondello Orsini (UNIBO - Università di Bologna [Bologna]) |
| Abstract: | We conduct an artefactual field experiment to study and compare the behavior of workers and students in a linear voluntary contribution mechanism in which subjects can assign immaterial sanctions or rewards to the other group members. We find that both students and workers sanction group members who contribute less than the group average, and reward those who contribute more. In both subject samples, the use of non-monetary sanctions and rewards induces more cooperation. The magnitude of the effect, however, is heterogeneous, as feedback has more impact among students who, contrary to workers, respond positively to sanctions. Students also tend to use sanctions more than workers. We discuss the implications of these findings for social cohesion, cooperative spirit and organizational efficiency in the workplace. |
| Keywords: | public good, field experiment, non - monetary sanctions and rewards, communication, external validity |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01282844&r=exp |
| By: | Radu Vranceanu (Thema, Université de Cergy-Pontoise - THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique, ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School); Angela Sutan (GESC Dijon - Groupe Ecole Supérieure de Commerce Dijon - Bourgogne); Delphine Dubart (ESSEC Business School - Essec Business School) |
| Abstract: | This paper reports results from a linear sanction cost variant of the power-to-take game, with implications for tax policies. We compare a pay-as-you-earn (PAYE) system with an ex-post taxation system in which payroll taxes are collected at the end of the fiscal year. Dissatisfaction with taxation, as proxied by the sanction in the power-to-take game, is significantly higher in an ex-post taxation system compared with the PAYE system. However, in anticipation of the higher sanction, the "tax authority" will not apply lower taxes in the former system. Communication does not decrease dissatisfaction in a significant manner, and it is not used extensively by participants. |
| Keywords: | Power-to-take game,Experiments, Tax systems, Dissatisfaction with taxes |
| Date: | 2016–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01282724&r=exp |
| By: | Nobuyuki Hanaki (GREDEG CNRS; Université Nice Sophia Antipolis; Skema Business School; IUF); Angela Sutan (Univ. Bourgogne Franche-Comte; ESC Dijon-CEREN; LAMETA); Marc Willinger (Université de Montpellier; LAMETA) |
| Abstract: | Recent experimental studies have shown that observed outcomes deviate significantly more from the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This "strategic environment effect" offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect. We show theoretically that the effect operates for interactions among three or more agents. Our experimental results partially support this theory, showing a statistically significant strategic environment effect for groups of five or more agents. Our findings establish that experiments involving a small number of interacting agents can provide major insights into macro phenomena and bolster previous work done on such issues as price dynamics. |
| Keywords: | beauty contest games, iterative reasoning, strategic substitutability, strategic complementarity |
| JEL: | C72 C91 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2016-05&r=exp |
| By: | Joppe de Ree; Karthik Muralidharan; Menno Pradhan; Halsey Rogers |
| Abstract: | How does a large unconditional increase in salary affect employee performance in the public sector? We present the first experimental evidence on this question to date in the context of a unique policy change in Indonesia that led to a permanent doubling of base teacher salaries. Using a large-scale randomized experiment across a representative sample of Indonesian schools that affected more than 3,000 teachers and 80,000 students, we find that the doubling of pay significantly improved teacher satisfaction with their income, reduced the incidence of teachers holding outside jobs, and reduced self-reported financial stress. Nevertheless, after two and three years, the doubling in pay led to no improvements in measures of teacher effort or student learning outcomes, suggesting that the salary increase was a transfer to teachers with no discernible impact on student outcomes. Thus, contrary to the predictions of various efficiency wage models of employee behavior (including gift-exchange, reciprocity, and reduced shirking), as well as those of a model where effort on pro-social tasks is a normal good with a positive income elasticity, we find that unconditional increases in salaries of incumbent teachers had no meaningful positive impact on student learning. |
| JEL: | C93 I21 J31 J45 O15 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21806&r=exp |
| By: | Sibilla Di Guida; The Anh T.A.H. Han; Georg Kirchsteiger; Tom Lenaerts; Ioannis Zisis |
| Abstract: | This paper investigates experimentally how the endogenous group formation combined with the possibility of repeated interaction impacts cooperation levels and surplus distribution. We developed a Surplus Production Distribution Game where the cooperation of four agents is needed to produce a surplus. In case of cooperation, two of the four subjects, the distributors, decided how much of surplus each of them wanted to give to the two other agents, the receivers. This game was played repeatedly with different matching procedures. In the Re-match Treatment (RT) the subjects got randomly re-matched every round, while in the Endogenous-match Treatment (ET) a group was maintained as long as its members cooperated. There was also a Base treatment (BT) where cooperation was exogenously enforced. We found that the distributor's contributions were higher in the ET and the RT than in the BT - unsurprisingly, receivers' possibility to refuse cooperation led to more equal surplus distributions. But contrary to commonly hold beliefs, the possibility of repeated interaction did not lead to higher cooperation levels and more equal allocations of the surplus. Instead, endogenous group formation combined with the possibility of repeated interaction led to self-selection of the subjects in the ET. The endogenous group duration varied drastically between different groups in the ET, with long-lived groups exhibiting contributions and cooperation levels higher than in the RT, while short-lived groups showed contributions and cooperation levels lower than in the RT. Furthermore, for given contribution levels, receivers were more likely to refuse cooperation when their average relationship length was short. This shows that long-lived groups consisted of generous distributors and not so demanding receivers, while ungenerous distributors and demanding receivers formed short-lived groups. Hence, the possibility of repeated interaction does not necessarily increase cooperation and efficiency levels when combined with endogenous group formation. Rather, such a situation might lead to self-selection of agents. |
| Keywords: | repeated cooperation; surplus distribution; group formation |
| JEL: | C92 D30 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/228058&r=exp |
| By: | Sebastian Galiani; Cheryl Long; Camila Navajas; Gustavo Torrens |
| Abstract: | Two types of political conflicts of interest pervade many of the world’s societies. A horizontal conflict of interest arises when different constituencies support different policies, while a vertical conflict of interest emerges when those in charge of running the government acquire and retain rents in the process of doing so. We experimentally explore the connections between the two. We identify two sets of models that incorporate both types of conflicts: electoral models with endogenous rents, and common-agency models. We adapt these models to a laboratory setting and test their main theoretical predictions using two experiments. In both cases we find support for the proposition that more intense horizontal conflict leads to higher rents, which is one of the theoretical predictions of the parametrized electoral and common-agency models that we have used. |
| JEL: | D72 D74 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21857&r=exp |
| By: | Julija Michailova (Kozminski University); Christoph Bühren (University of Kassel) |
| Abstract: | We examine the effects of money priming and solidarity on individual behavior in three simple experiments: dictator game, ultimatum game, and prisoner’s dilemma. Our study comprises two money treatments and two neutral (control) treatments. Additionally, we control for the strength of social ties between experimental participants. Although our priming procedure is sufficient to remind people of the concept of money, it is not sufficient to induce systematically different behavior of the treatment groups compared to the control groups. Moreover, we do not find any significant differences between groups with strong vs. weak social ties. Since our findings contradict previous research, it calls for further investigation on the topic of how money priming influences economic behavior. |
| Keywords: | money priming; bargaining; dilemma; social behavior; natural groups; economic experiment |
| JEL: | C78 C9 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201530&r=exp |
| By: | Anthony Heyes; John A. List |
| Abstract: | There is a large and diverse body of evidence that people condition their behavior on the characteristics of others. If type is visible then one agent seeing another with whom they are interacting, or observing some other close proxy for type, can affect outcomes. We explore the economics of revealing type in a simple laboratory experiment to learn about the underlying motivations for discrimination. |
| JEL: | C9 C91 D03 J71 J78 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21953&r=exp |
| By: | Paloyo, Alfredo R.; Rogan, Sally; Siminski, Peter |
| Abstract: | While randomized controlled trials (RCTs) are the 'gold standard' for impact evaluation, they face numerous practical barriers to implementation. In some circumstances, a randomized-encouragement design (RED) is a viable alternative, but applications are surprisingly rare. We discuss the strengths and challenges of RED and apply it to evaluate a mature Supplemental Instruction (SI) or PASS (Peer Assisted Study Session) program at an Australian university. A randomly selected subgroup of students from first-year courses (N = 6954) was offered large incentives (worth AUD 55,000) to attend PASS, which increased attendance by an estimated 0.47 hours each. This first-stage (inducement) effect did not vary with the size of the incentive and was larger (0.89) for students from disadvantaged backgrounds. Instrumental variable estimates suggest that one hour of PASS improved grades by 0.065 standard deviations, which is consistent with the non-experimental literature. However, this estimate is not statistically significant, reflecting limited statistical power. The estimated effect is largest for students in their first semester at university. |
| Keywords: | Australia,randomized-encouragement design,student outcomes,peerassisted study session,supplemental instruction,selection bias |
| JEL: | C93 I21 I23 I24 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:603&r=exp |
| By: | John Cawley; Andrew S. Hanks; David R. Just; Brian Wansink |
| Abstract: | This paper examines how consumers respond to price incentives for nutritious relative to less-nutritious foods, and whether the framing of the price incentive as a subsidy for nutritious food or a tax on non-nutritious food influences consumers’ responses. Analyzing transaction data from an 8-month randomized controlled field experiment involving 208 households, we find that a 10% relative price difference between nutritious and less nutritious food does not significantly affect overall purchases, although low-income households respond to the subsidy frame by buying more of both nutritious and less-nutritious food. |
| JEL: | D04 D12 H0 H2 H3 I1 I12 I18 Q18 Z18 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21929&r=exp |
| By: | di Guida, Sibilla; Han, The Anh; Kirchsteiger, Georg; Lenaerts, Tom; Zisis, Ioannis |
| Abstract: | This paper investigates experimentally how the endogenous group formation combined with the possibility of repeated interaction impacts cooperation levels and surplus distribution. We developed a Surplus Production Distribution Game where the cooperation of four agents is needed to produce a surplus. In case of cooperation, two of the four subjects, the distributors, decided how much of surplus each of them wanted to give to the two other agents, the receivers. This game was played repeatedly with different matching procedures. In the Re-match Treatment (RT) the subjects got randomly re-matched every round, while in the Endogenous-match Treatment (ET) a group was maintained as long as its members cooperated. There was also a Base treatment (BT) where cooperation was exogenously enforced. We found that the distributor's contributions were higher in the ET and the RT than in the BT - unsurprisingly, receivers' possibility to refuse cooperation led to more equal surplus distributions. But contrary to commonly hold beliefs, the possibility of repeated interaction did not lead to higher cooperation levels and more equal allocations of the surplus. Instead, endogenous group formation combined with the possibility of repeated interaction led to self-selection of the subjects in the ET. The endogenous group duration varied drastically between different groups in the ET, with long-lived groups exhibiting contributions and cooperation levels higher than in the RT, while short-lived groups showed contributions and cooperation levels lower than in the RT. Furthermore, for given contribution levels, receivers were more likely to refuse cooperation when their average relationship length was short. This shows that long-lived groups consisted of generous distributors and not so demanding receivers, while ungenerous distributors and demanding receivers formed short-lived groups. Hence, the possibility of repeated interaction does not necessarily increase cooperation and efficiency levels when combined with endogenous group formation. Rather, such a situation might lead to self-selection of agents. |
| Keywords: | group formation; repeated cooperation; surplus distribution |
| JEL: | C92 D03 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11157&r=exp |
| By: | Sakha, Sahra; Grohmann, Antonia |
| Abstract: | This paper investigates the impact of peer observation on the consumption decisions of rural households in Thailand using a lab-in-the-field experiment. We find that those groups that observe each other show lower within group standard deviation in their decisions. Thus, we find evidence for conformity. Further, we find that individual's consumption choice is influenced by the group choice controlling for large number of individual, household, and village characteristics. We find that unfamiliarity of the product is counteracted by peer effects. Finally, we find evidence of treatment heterogeneity with regards to cognitive ability and village size. |
| Keywords: | Consumption,Peer Effects,Conformity |
| JEL: | D12 C21 C92 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:012016&r=exp |
| By: | Joël Berger; Debra Hevenstone |
| Abstract: | In laboratory experiments people are willing to sanction norms at a cost – a behavioral tendency called altruistic punishment. However, the degree to which these findings can be generalized to real-world interactions is still debated. Only a small number of field experiments have been conducted and initial results suggest that punishment is less frequent outside of the lab. This study replicates one of the first field experiments on altruistic punishment and builds ties to research on norm compliance and the broken windows theory. The original study addressed the enforcement of the anti-littering norm in Athens. We replicate this study in Bern, Zurich, and New York City. As an extension, we investigate how the experimental context (clean vs. littered) impacts social norm enforcement. As a second extension, we investigate how opportunity structure impacts the maintenance of the anti-littering norm. Findings indicate that norms are universally enforced, although significantly less than in the standard laboratory experiment, and that enforcement is significantly more common in Switzerland than in New York. Moreover, individuals prefer more subtle forms of enforcement to direct punishment. We also find that enforcement is less frequent in littered than in clean contexts, suggesting that broken windows might not only foster deviant behavior but also weaken informal social control. Finally, we find that opportunity structure can encourage people to maintain norms, as indicated by the fact that people are more likely to voluntarily pick up litter when it is closer to a trash bin. |
| Keywords: | broken windows, field experiment, norm enforcement, punishment, social control |
| JEL: | H41 |
| Date: | 2016–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:ets:wpaper:11&r=exp |
| By: | Davide Dragone (University of Bologna, Department of Economics, Piazza Scaravilli 2, 40126 Bologna, Italy); Fabio Galeotti (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Raimondello Orsini (University of Bologna, Department of Economics, Strada Maggiore 45, 40125 Bologna, Italy) |
| Abstract: | We conduct an artefactual field experiment to study and compare the behavior of workers and students in a linear voluntary contribution mechanism in which subjects can assign immaterial sanctions or rewards to the other group members. We find that both students and workers sanction group members who contribute less than the group average, and reward those who contribute more. In both subject samples, the use of non-monetary sanctions and rewards induces more cooperation. The magnitude of the effect, however, is heterogeneous, as feedback has more impact among students who, contrary to workers, respond positively to sanctions. Students also tend to use sanctions more than workers. We discuss the implications of these findings for social cohesion, cooperative spirit and organizational efficiency in the workplace. |
| Keywords: | public good, field experiment, non-monetary sanctions and rewards, communication, external validity |
| JEL: | C92 C93 H41 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1612&r=exp |
| By: | François Pannequin; Anne Corcos; Claude Montmarquette |
| Abstract: | In this experimental study, the analysis on two levels of substitution between insurance and self-insurance shows that a higher unit price results in a quantity-based substitution and a between-tools substitution while the only effect of a higher fixed cost is to reduce the insurance market. The optimality of the coverage demands associated with the equalization of marginal returns is not achieved. Instead, individuals chose a stable global amount of coverage. These behavioral insights have a potential impact on public policies related to insurance and self-insurance. |
| Keywords: | insurance, self-insurance, substitutability, lab experiment, risk-aversion, |
| Date: | 2016–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2016s-12&r=exp |
| By: | Bolhaar, Jonneke (Netherlands Bureau for Economic Policy Analysis (CPB), VU University Amsterdam); Ketel, Nadine (Department of Economics, School of Business, Economics and Law, Göteborg University); van der Klaauw, Bas (VU University Amsterdam; Tinbergen Institute; CEPR; IZA) |
| Abstract: | This paper studies mandatory job-search periods for welfare applicants. During this period the benefits application is put on hold and the applicant is obliged to make job applications. We combine a randomized experiment with detailed administrative data to investigate the effects of imposing a job-search period. We find strong and persistent effects on the probability to collect welfare benefits. The reduced benefits are fully compensated by increased earnings from work. Furthermore, we do not find evidence of adverse consequences for the most vulnerable applicants. Our results therefore suggest that a job-search period is an effective instrument for targeting welfare-benefits applicants. |
| Keywords: | job search; welfare-to-work; active labor-market policies; randomized experiment |
| JEL: | C21 C93 I38 J08 J64 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0648&r=exp |
| By: | Laurent Bouton; Aniol Llorente-Saguer; Frédéric Malherbe |
| Abstract: | We study the information aggregation properties of unanimous voting rules in the laboratory. In line with theoretical predictions, we find that majority rule with veto power dominates unanimity rule. We also find that the strategic voting model is a fairly good predictor of observed subject behavior. There are, however, cases where organizing the data seems to require a mix of strategic and sincere voting. This pattern of behavior would imply that the way majority rule with veto power is framed may significantly affect the outcome of the vote. Our data strongly supports such an hypothesis. |
| JEL: | C92 D70 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21943&r=exp |