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on Experimental Economics |
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Issue of 2016‒07‒09
24 papers chosen by |
| By: | Greer Gosnell; John List; Robert Metcalfe |
| Abstract: | Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to "look under the hood" of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains' performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments-which include performance information, personal targets, and prosocial incentives-induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:framed:00412&r=exp |
| By: | Di Tillio, Alfredo; Ottaviani, Marco; Sørensen, Peter Norman |
| Abstract: | The widespread adoption of randomized controlled experiments owes much to their ability to curtail researchers' conflicts of interest. This paper casts data collection and analysis in a game-theoretic framework. A researcher aims at persuading an evaluator that the causal effect of a treatment outweighs its cost, so as to justify acceptance. The researcher uses private information to (1) sample subjects based on their treatment effect (challenging external validity), (2) assign subjects to treatment based on their baseline outcome (challenging internal validity), or (3) selectively report experimental outcomes (challenging both external and internal validity). The resulting biases have different welfare implications: for sufficiently high acceptance cost, the evaluator loses in cases (1) and (3), but benefits from the researcher's information in case (2). |
| JEL: | C90 D83 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11343&r=exp |
| By: | Lusher, Lester (University of California, Davis); Yasenov, Vasil (University of California, Davis) |
| Abstract: | Sleep studies suggest that girls go to sleep earlier, are more active in the morning, and cope with sleep deprivation better than boys. We provide the first causal evidence on how gender differences in sleep cycles can help explain the gender performance gap. We exploit over 240,000 assignment-level grades from a quasi-experiment with a community of middle and high schools where students' schedules alternated between morning and afternoon start times each month. Relative to girls, we find that boys' achievement benefits from a later start time. For classes taught at the beginning of the school day, our estimates explain up to 16% of the gender performance gap. |
| Keywords: | gender performance gap, gender difference in sleep cycles, school start time |
| JEL: | H52 I20 I21 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10012&r=exp |
| By: | Prasenjit Banerjee (University of Manchester); Rupayan Pal (Indira Gandhi Institute of Development Research); Jason F. Shogren (University of Wyoming) |
| Abstract: | Honor and stigma play a role in environmental protection. Environmental honors are bestowed on people and firms who go out of their way to do right by the environment. Similarly, environmental stigma is put on people or firms who are publicly taken to task for their poor environmental record. We design a voluntary incentive mechanism by incorporating honor and stigma to induce heterogeneous firms to protect the environment at less cost. We encounter a motivational costs incurred by the green firm-it loses its leadership rents. Our result suggests (i) an additional social reward is needed for a green firm; and (ii) the brown firm may sacrifice information rent. |
| Keywords: | Mechanism, reputation, environmental risk, honor, stigma, social norm |
| JEL: | D03 Q52 Q58 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2016-017&r=exp |
| By: | Amanda E. Kowalski |
| Abstract: | I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization. |
| JEL: | C1 C9 H4 I13 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22363&r=exp |
| By: | Gallier, Carlo; Langbein, Jörg; Vance, Colin |
| Abstract: | We conduct a framed field experiment in Indonesian fishing communities with an eye towards evaluating the potential of Territorial Use Rights for Fisheries (TURFs) for preserving coral reef fisheries. Conducted in three culturally distinctive sites, the study assembles groups of five fishers who participate in a common-pool resource game. We implement the game with randomly assigned treatments in all sites to explore whether the extraction decision varies according to three recommended non-binding extraction levels originating from (1) a democratic process, (2) a group leader or (3) an external source that recommends a socially optimal extraction level. In one of the sites - that having the highest levels of ethnic and religious diversity - we find that democratic decision-making as well as information originating from outside the community promotes the cooperative behavior that underpins TURFs, a result that is robust to regressions controlling for individual and community attributes. The absence of treatment effects in the remaining two sites highlights that a set of formal rules may have different consequences in different communities, depending on underlying values and norms. |
| Keywords: | Framed field experiment,Commons dilemmas,Coral reefs,Self-governance |
| JEL: | C93 H43 L31 Q32 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16046&r=exp |
| By: | Alem, Yonas (University of Gothenburg); Behrendt, Hannah (University of Edinburgh); Belot, Michèle (University of Edinburgh); Bíró, Anikó (University of Edinburgh) |
| Abstract: | Behavioural attitudes towards risk and time, as well as behavioural biases such as present bias, are thought to be important drivers of unhealthy lifestyle choices. This paper makes the first attempt to explore the possibility of training the mind to alter these attitudes and biases, and health-related behaviours in particular, using a randomized controlled experiment. The training technique we consider is a well-known psychological technique called "mindfulness", which is believed to improve self-control and reduce stress. We conduct the experiment with 139 participants, half of whom receive a four-week mindfulness training, while the other half are asked to watch a four-week series of historical documentaries. We evaluate the impact of our interventions on risk-taking and inter-temporal decisions, as well as on a range of measures of health-related behaviours. We find evidence that mindfulness training reduces perceived stress, but only weak evidence on its impact on behavioural traits and health-related behaviours. Our findings have significant implications for a new domain of research on training the mind to alter behavioural traits and biases that play important roles in lifestyle. |
| Keywords: | health-related behaviours, behavioural traits, present bias, stress, experiment |
| JEL: | C81 C91 D81 I10 I12 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10019&r=exp |
| By: | Helios Herrera (University of Warwick); Aniol Llorente-Saguer (Queen Mary University of London); Joseph C. McMurray (Brigham Young University) |
| Abstract: | This paper proposes a rational model of voter participation by generalizing a common-value model of costless voting to include not just pivotal voting but also marginal voting incentives. A new strategic incentive for abstention arises in that case, to avoid the marginal voter's curse of pushing the policy outcome in the wrong direction. The marginal voter's curse presents a larger disincentive for voting than the swing voter's curse. Moreover, marginal motivations are shown to dominate pivotal motivations in large elections. Model predictions are confirmed in a laboratory experiment and applied in a comparative analysis of electoral rules. |
| Keywords: | Turnout, Information aggregation, Underdog effect, Experiment |
| JEL: | C72 C92 D70 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp798&r=exp |
| By: | Bauer, Michal (Charles University, Prague); Blattman, Christopher J. (Harris School, University of Chicago); Chytilová, Julie (Charles University, Prague); Henrich, Joseph (Harvard University); Miguel, Edward (University of California, Berkeley); Mitts, Tamar (Columbia University) |
| Abstract: | In the past decade, nearly 20 studies have found a strong, persistent pattern in surveys and behavioral experiments from over 40 countries: individual exposure to war violence tends to increase social cooperation at the local level, including community participation and prosocial behavior. Thus while war has many negative legacies for individuals and societies, it appears to leave a positive legacy in terms of local cooperation and civic engagement. We discuss, synthesize and reanalyze the emerging body of evidence, and weigh alternative explanations. There is some indication that war violence especially enhances in-group or "parochial" norms and preferences, a finding that, if true, suggests that the rising social cohesion we document need not promote broader peace. |
| Keywords: | war, cooperation, social preferences, post-conflict development |
| JEL: | C80 D74 H56 O10 O12 O40 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9997&r=exp |
| By: | de Laat, Joost; Jayachandran, Seema; Lambin, Eric F.; Stanton, Charlotte |
| Abstract: | This paper evaluates a Payments for Ecosystem Services (PES) program in western Uganda that offered forest-owning households cash payments if they conserved their forest. The program was implemented as a randomized trial in 121 villages, 60 of which received the program for two years. The PES program reduced deforestation and forest degradation: Tree cover, measured using high-resolution satellite imagery, declined by 2% to 5% in treatment villages compared to 7% to 10% in control villages during the study period. We find no evidence of shifting of tree-cutting to nearby land. We then use the estimated effect size and the social cost of carbon to value the delayed CO2 emissions, and compare this benefit to the program's cost. |
| Keywords: | climate change; conditional cash transfers; deforestation; REDD+ |
| JEL: | O13 Q54 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11349&r=exp |
| By: | Akbas, Merve (Duke University); Ariely, Dan (Duke University); Robalino, David A. (World Bank); Weber, Michael (World Bank) |
| Abstract: | Partnering with a savings product provider in Kenya, we tested the extent to which behavioral interventions and financial incentives can increase the saving rate of individuals with low and irregular income. Our experiment lasted for six months and included a total of twelve conditions. The control condition received weekly reminders and balance reporting via text messages. The treatment conditions received in addition one of the following interventions: (1) reminder text messages framed as if they came from the participant's kid (2) a golden colored coin with numbers for each week of the trial, on which participants were asked to keep track of their weekly deposits (3) a match of weekly savings: The match was either 10% or 20% up to a certain amount per week. The match was either deposited at the end of each week or the highest possible match was deposited at the start of each week and was adjusted at the end. Among these interventions, by far the most effective was the coin: Those in the coin condition saved on average the highest amount and more than twice as those in the control condition. We hypothesize that being a tangible track-keeping object; the coin made subjects remember to save more often. Our results support the line of literature suggesting that saving decisions involve psychological aspects and that policy makers and product designers should take these influences into account. |
| Keywords: | savings, field experiment, behavioral economics |
| JEL: | G21 B49 D03 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10024&r=exp |
| By: | Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Eggert, Håkan (Department of Economics, School of Business, Economics and Law, Göteborg University); Kocher, Martin G. (Department of Economics, School of Business, Economics and Law, Göteborg University); Ruhinduka, Remidius D. (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Understanding unethical behavior is essential to many phenomena in the real world. We carry out a field experiment in a unique setting that varies the levels of reciprocity and guilt in an ethical decision. A survey more than one year before the field experiment allows us to compare at the individual level stated unethical behavior with revealed behavior in the same situation in the field. Our results indicate a strong discrepancy between stated and revealed behavior, regardless of the specific treatment in the field experiment. This suggests that, given a natural setting, people may actually behave inconsistently with the way in which they otherwise “brand” themselves. Our findings raise caution about the interpretation of stated behavioral measures commonly used in research on unethical behavior. However, we show that inducing reciprocity and guilt leads to a decrease in unethical behavior |
| Keywords: | Honesty; kindness; guilt; field experiment; behavioral economics |
| JEL: | C93 D01 D03 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0664&r=exp |
| By: | Daniela Grieco; Michela Braga; Francesco Brip |
| Abstract: | The paper presents the results of a lab-in-the-field experiment in three South African townships located in the suburbs of Cape Town. The experimental design consists of a set of decisions on how the members of a naturally occurring group allocate an endowment to a private or to a public account. In our treatments, we first manipulate the degree of participation of group members in the choice of the public good, from involvement of the group leader only, to collective discussion and to private voting. Additionally, we explore the effectiveness of monetary incentives (collective versus individual) set in order to promote participation. The results show that leader guidance and participatory incentives significantly raise cooperation and hold after controlling for a wide set of individual and group characteristics. |
| Keywords: | lab-in-the-field experiment, segregation, cooperation, leadership, participation, township Creation-Date: 2016 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2016-076&r=exp |
| By: | John Duffy (University of California, Irvine); Aikaterini Karadimitropoulou (University of East Anglia); Melanie Parravano (Newcastle University) |
| Abstract: | We design and report on laboratory experiments exploring the role of interbank network structure for the likelihood of a financial contagion. The laboratory provides us with the control necessary to precisely explore the role of different network configurations for the fragility of the financial system. Specifically, we study the likelihood of financial contagion in complete and incomplete networks of banks who are linked in terms of interbank deposits as in the model of Allen and Gale (2000). Subjects play the role of depositors who must decide whether or not to withdraw their funds from their bank. We find that financial contagions are possible under both network structures. While such contagions always occur under an incomplete interbank network structure, they are significantly less likely to occur under a complete interbank network structure where interbank linkages can effectively provide insurance against shocks to the system, and localize damage from the financial shock. |
| Keywords: | contagion, networks, experiments, bank runs, interbank deposits, financial fragility |
| JEL: | C92 E44 G21 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-11&r=exp |
| By: | Abhijit Ramalingam (University of East Anglia); Antonio J. Morales (University of Malaga); James M. Walker (Indiana University) |
| Abstract: | This study brings together two strands of experimental literature, positive versus negative frames of social dilemmas and the effectiveness of peer sanctioning in promoting cooperation. Examining provision and appropriation games that are strategically and payoff isomorphic, we find evidence of less cooperation in the appropriation game. However, we also find that peer sanctioning is able to overcome the decrease in cooperation in the appropriation game, leading to greater relative increases in contributions and earnings in that decision setting. This result appears to be linked to the fact that low contributors are targeted for punishment more frequently in the appropriation game. |
| Keywords: | social dilemma, experiment, provision, appropriation, cooperation, punishment |
| JEL: | C72 C91 C92 D02 H41 |
| Date: | 2016–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-09&r=exp |
| By: | Chemla, Gilles; Hennessy, Christopher |
| Abstract: | According to conventional wisdom, RCTs and natural experiments represent especially credible bases for econometric inference, facilitating evidence-based policymaking. We assess credibility in dynamic settings, examining robustness of evidence derived from an exogenous first-stage randomization applied to measure zero subjects. If government is able (unable) to alter policy in response, experimental evidence is contaminated (uncontaminated) by ex post policy endogeneity: Measured responses depend upon the government objective function into which the evidence will be fed. Similarly, if government perceives experimental evidence as credible (non-credible), the very act of observation changes (does not change) agent behavior. Thus, paradoxically, the experimental evidence is contaminated if and only if government is willing and able to use it. Ex post endogeneity causes measured responses to hinge upon (unknown) parameters of the governmental objective function, as well as a priori beliefs regarding the causal parameters to be estimated. Moreover, heterogeneous causal effect parameters induce endogenous belief heterogeneity. This link between beliefs and causal effect parameters makes it difficult, and potentially impossible, to isolate the latter using experimental evidence. Finally, we show treatment-control differences in RCTs are contaminated unless stock variable accumulation cost functions satisfy strong functional form assumptions: zero fixed costs, equality of buy and sell prices, and quadratic adjustment costs. |
| Keywords: | firms; government; investment; natural policy experiments; pollution; randomized controlled trials |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11361&r=exp |
| By: | Battaglini, Marco; Nunnari, Salvatore; Palfrey, Thomas R |
| Abstract: | This paper reports the results from a laboratory experiment designed to study political distortions in the accumulation of public debt. A legislature bargains over the levels of a public good and of district specific transfers in two periods. The legislature can issue or purchase risk-free bonds in the first period and the level of public debt creates a dynamic linkage across policymaking periods. In line with the theoretical predictions, we find that public policies are inefficient and efficiency is increasing in the size of the majority requirement, with higher investment in public goods and lower debt associated with larger majority requirements. Also in line with the theory, we find that debt is lower when the probability of a negative shock to the economy in the second period is higher, evidence that debt is used to smooth consumption. |
| Keywords: | laboratory experiment; public debt |
| JEL: | H63 H72 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11357&r=exp |
| By: | Silvia Dominguez Martinez (University of Amsterdam, The Netherlands); Randolph Sloof (University of Amsterdam, The Netherlands) |
| Abstract: | This paper reports the results from a laboratory experiment investigating a manager's decision whether or not to delegate authority to a better informed worker whose interests are often, but not always, congruent. Keeping authority implies a loss of information, as the worker communicates his information strategically. Delegating authority leads to a loss of control. A key aspect of our design is that the manager can restrict the worker's choice set when delegating authority. We find that, in case of delegation, managers (as predicted) put tighter restrictions when interests are less aligned. Workers send more informative messages under communication than predicted by the pure strategy equilibria. This finding neither appears to be driven by lying aversion of workers nor by credulity of managers. Qualitatively, our results are in line with a mixed strategy equilibrium under communication, which strictly outperforms optimal restricted delegation and is relatively close to the optimal stochastic mechanism in our setting. |
| Keywords: | Delegation; Communication; Laboratory Experiment; Organizational Economics |
| JEL: | C90 D80 M20 |
| Date: | 2016–07–05 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160050&r=exp |
| By: | Valerio Capraro (Department of Economics, Middlesex University Business School); Brice Corgnet (Economic Science Institute, Argyros School of Business and Economics); Antonio M. Espin (Department of Economics, Middlesex University Business School); Roberto Hernan-Gonzalez (Business School, University of Nottingham) |
| Abstract: | Groups make decisions on both the production and the distribution of resources. These decisions typically involve a tension between increasing the total level of group resources (i.e. social efficiency) and distributing these resources among group members (i.e. individuals’ relative shares). This is the case because the redistribution process may destroy part of the resources, thus resulting in socially inefficient allocations. Here we apply a dualprocess approach to understand the cognitive underpinnings of this fundamental tension. We conducted a set of experiments to examine the extent to which different allocation decisions respond to intuition or deliberation. In a newly developed approach, we assess intuition and deliberation at both the trait level (using the Cognitive Reflection Test, henceforth CRT) and the state level (through the experimental manipulation of response times). To test for robustness, experiments were conducted in two countries: the US and India. Despite aggregate differences across countries, in both locations and at both levels of analysis, we show that: (i) time pressure and low CRT scores are associated with individuals’ concerns for their relative shares; (ii) time delay and high CRT scores are associated with individuals’ concerns for social efficiency. These findings demonstrate that deliberation favors social efficiency by overriding individuals’ intuitive tendency to focus on relative shares. |
| Keywords: | efficiency, equality, dual process models, intuition, deliberation |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-06&r=exp |
| By: | Kosuke Imai; Gary King; Carlos Velasco Rivera |
| Abstract: | A vast literature demonstrates that voters around the world who benefit from their governments' discretionary spending cast ballots for the incumbent party in larger proportions than those not receiving funds. But surprisingly, and contrary to most theories of political accountability, the evidence seems to indicate that voters also reward incumbent parties for implementing ``programmatic'' spending legislation, passed with support from all major parties, and over which incumbents have no discretion. Why voters would attribute responsibility when none exists is unclear, as is why minority party legislators would approve of legislation that will cost them votes. We address this puzzle with one of the largest randomized social experiments ever, resulting in clear rejection of the claim that programmatic policies greatly increase voter support for incumbents. We also reanalyze the study cited as claiming the strongest support for the electoral effects of programmatic policies, which is also a very large scale randomized experiment. We show that its key results vanish after correcting either a simple coding error affecting only two observations or highly unconventional data analysis procedures (or both). We also discuss how these consistent empirical results from the only two probative experiments on this question may be reconciled with several observational and theoretical studies touching on similar questions in other contexts. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:366526&r=exp |
| By: | Shaun P. Hargreaves Heap (King's College London); Abhijit Ramalingam (University of East Anglia); Brock V. Stoddard (University of South Dakota) |
| Abstract: | We present a clean test of whether inequality in endowments affects contributions to a public good. It is a clean test because, to our knowledge, it is the first to control for possible endowment effects. We find that inequality only has an adverse effect because the rich reduce their contributions when there is inequality. |
| Keywords: | public goods, experiment, inequality, wealth, cooperation |
| JEL: | C91 C92 D31 D63 H41 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-10&r=exp |
| By: | Biener, Christian; Eling, Martin; Pradhan, Shailee |
| Abstract: | Incentivizing unobservable effort in risky environments, such as in insurance, credit, and labor markets, is vital as moral hazard may otherwise cause significant welfare losses including the outright failure of markets. Ensuring incentive-compatibility through partial risk-sharing between principal and agent, however, is undesirable for risk-averse agents. We provide theoretical intuition on how joint liability in groups of agents can ensure incentive-compatibility when agents share pro-social concerns. Two independent behavioral experiments framed in an insurance context support the hypotheses derived from our theory. In particular, effort decreases when making payoffs of agents less state-dependent, but this effect is mitigated with joint liability in a group scheme where agents are additionally motivated by pro-social concerns. Activating strategic motives slightly increases effort further; particularly in non-anonymous groups with high network strength. The results suggest that joint liability within groups of pro-social agents is a promising policy under risk and asymmetric information and may improve efficiency. |
| Keywords: | Moral hazard, Group joint liability, Pro-social preferences, Experiments |
| JEL: | D03 D81 D82 G22 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2016:10&r=exp |
| By: | Bradler, Christiane; Neckermann, Susanne |
| Abstract: | This paper makes use of two field experiments to explore individual effort responses to gifts. We extend the literature by looking at nonfinancial gifts and gifts that combine financial and nonfinancial elements with or without adding a 'personal touch.' We find that non-pecuniary gifts that signal worker appreciation induce reciprocity. Most importantly, we find that there are interaction effects between money and appreciation. While money and appreciation are individually effective, they only work well together when they are combined with a personal touch. This points to the importance of interpersonal elements in gift giving and has important implications for how to effectively elicit worker effort. |
| Keywords: | gift exchange,reciprocity,employee performance,pro-social behavior,gratitude,personal touch,field experiment |
| JEL: | C93 M52 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:16043&r=exp |
| By: | Fehrler, Sebastian (University of Konstanz); Przepiorka, Wojtek (Utrecht University) |
| Abstract: | People benefit from being perceived as trustworthy. Examples include sellers trying to attract buyers, or candidates in elections trying to attract voters. In a laboratory experiment using exchange games, in which the trustor can choose the trustee, we study whether trustees can signal their trustworthiness by giving to charity. Our results show that donors are indeed perceived as more trustworthy and they are selected significantly more often as interaction partners. As a consequence of this sorting pattern, relative payoffs to donors and non-donors differ substantially with and without partner choice. However, we do not find donors to be significantly more trustworthy than non-donors. Our findings suggest that publicly observable generosity, such as investments in corporate social responsibility or donations to charity during a political campaign, can induce perceptions of trustworthiness and trust. |
| Keywords: | costly signaling, social preferences, trust, trustworthiness, partner choice, corporate social responsibility, electoral competition |
| JEL: | C92 H41 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9998&r=exp |