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on Experimental Economics |
| By: | Coren L. Apicella; Elif E. Demiral; Johanna Mollerstrom |
| Abstract: | We report on two experiments investigating whether there is a gender difference in thewillingness to compete against oneself (self-competition), similar to what is found whencompeting against others (other-competition). In one laboratory and one online marketexperiment, involving a total of 1,200 participants, we replicate the gender-gap inwillingness to other-compete but find no evidence of a gender difference in the willingnessto self-compete. We explore the roles of risk and confidence and suggest that these factorscan account for the different findings. Finally, we document that self-competition does noworse than other-competition in terms of performance boosting. |
| Keywords: | gender, competition, discrimination, experiment |
| JEL: | C90 C91 J16 J71 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1638&r=exp |
| By: | Daniel Muller |
| Abstract: | This paper dissects distributional preferences with group identity in a modified dictator game. I estimate individual-level utility functions with two parameters that govern the trade- offs between equity and efficiency and giving to self and to other. Subjects put on average less weight on income of the out-group, but overall only a minority behaves completely selfishly. Giving to the out-group also renders subjects more accepting of inequality. However, the experiment also uncovers a large heterogeneity of preferences. It seems that those who are social become slightly less social in the presence of the out-group. The number of selfish individuals is instead hardly affected. Moreover, choices in both treatments overwhelmingly stem from well-behaved, yet systematically different underlying social preference functionals. Hence this experiment suggests that the rational choice approach, which is predominantly used in the literature, is a useful tool to understand the effect of group identity on social preferences. Interestingly, I also find that the weight on self, but not the individual equity-efficiency trade-off, predicts political left-right self-assessment as more conservative voters are more selfish. I also document gender differences: females put less weight on self, are more inequality averse and react more strongly to the treatment. |
| Keywords: | Social identity, GARP, distributional preferences |
| JEL: | D30 D63 H50 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2017-02&r=exp |
| By: | Steven Levitt; John List; Sally Sadoff |
| Abstract: | We test the effect of performance-based incentives on educational achievement in a low-performing school district using a randomized field experiment. High school freshmen were provided monthly financial incentives for meeting an achievement standard based on multiple measures of performance including attendance, behavior, grades and standardized test scores. Within the design, we compare the effectiveness of varying the recipient of the reward (students or parents) and the incentive structure (fixed rate or lottery). While the overall effects of the incentives are modest, the program has a large and significant impact among students on the threshold of meeting the achievement standard. These students continue to outperform their control group peers a year after the financial incentives end. However, the program effects fade in longer term follow up, highlighting the importance of longer term tracking of incentive programs. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:framed:00585&r=exp |
| By: | Stefano DellaVigna; John List; Ulrike Malmendier; Gautam Rao |
| Abstract: | We design a model-based field experiment to estimate the nature and magnitude of workers' social preferences towards their employers. We hire 446 workers for a one-time task. Within worker, we vary (i) piece rates; (ii) whether the work has payoffs only for the worker, or also for the employer; and (iii) the return to the employer. We then introduce a surprise increase or decrease in pay ('gifts') from the employer. We find that workers have substantial baseline social preferences towards their employers, even in the absence of repeated-game incentives. Consistent with models of warm glow or social norms, but not of pure altruism, workers exert substantially more effort when their work is consequential to their employer, but are insensitive to the precise return to the employer. Turning to reciprocity, we find little evidence of a response to unexpected positive (or negative) gifts from the employer. Our structural estimates of the social preferences suggest that, if anything, positive reciprocity in response to monetary 'gifts' may be larger than negative reciprocity. We revisit the results of previous field experiments on gift exchange using our model and derive a one-parameter expression for the implied reciprocity in these experiments. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00586&r=exp |
| By: | Riyanto, Yohanes E.; Roy, Nilanjan |
| Abstract: | We report results from experiments designed to investigate the prevalence of turn-taking in three-person finitely repeated threshold public good games without communication. Individuals can each make a discrete contribution. If the number of contributors is at least equal to the threshold, a public benefit accrues to all group members. Players take turns to provide the public good each round when the endowments are homogeneous. When the turn-taking path is at odds with efficiency or under private information of endowments, players seldom engage in taking turns. An endogenous-move protocol limits the frequency of mis-coordinated outcomes every round. |
| Keywords: | Public good provision, Turn-taking, Repeated game, Endogenous move, Experiment |
| JEL: | C72 C92 D03 D82 H41 |
| Date: | 2017–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76565&r=exp |
| By: | David Fielding (Department of Economics, University of Otago, New Zealand); Stephen Knowles (Department of Economics, University of Otago, New Zealand); Kirsten Robertson (Department of Marketing, University of Otago, New Zealand) |
| Abstract: | In this paper we present results from an experiment that draws on insights from economics on different possible incentives for generosity and insights from social psychology on different possible personality types. Firstly, we test whether the effect of an appeal to a pure altruism motive versus an appeal to a self-interest motive varies across subjects. We find that there is substantial variation, and this variation is strongly correlated with a subject’s level of materialism. Secondly, we test whether spoken appeals and written appeals have different effects. We find no evidence for such a difference. These results have important implications for the fundraising strategies of charities and for experimental design. |
| Keywords: | Altruism, Self-Interest, Dictator Game, Materialism |
| JEL: | D64 M31 C91 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1701&r=exp |
| By: | Kesternich, Martin; Goeschl, Timo; Lohse, Johannes; Römer, Daniel; Reif, Christiane |
| Abstract: | We present experimental evidence that illuminates the trade-off between efficiency considerations and social identity concerns in an inter-city multilevel public goods game. In total, 616 inhabitants of Heidelberg and Mannheim take part in an online experiment in which they can allocate an initial endowment between a private account, an excludable (local) public good, and a non-excludable (regional) public good. We vary the efficiency of the two public goods and find that participants substitute contributions away from the local to the regional public good if the latter is more efficient. To investigate the role of social identity considerations we compare a condition in which the group composition in unknown to a decision in which participants are informed that they share the local public good with three other participants from their own neighborhood. We do not find that a salient common social affiliation affects participants’ behavior per se. If the common local affiliation is revealed through a label, only citizens perceiving a strong local identification adjust their contribution behavior and contribute more to the excludable local public good. Revealing the local affiliation becomes even more effective in a priming condition when participants are remembered of their common local affiliation before they indicate their contribution decision. |
| JEL: | C90 D70 H41 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145848&r=exp |
| By: | Davide Cantoni; David Y. Yang; Noam Yuchtman; Y. Jane Zhang |
| Abstract: | The decision to protest is strategic: an individual's participation is a function of her beliefs about others' turnout. Models of protest often assume strategic complementarity; however, the challenge of collective action suggests strategic substitutability. We conduct the first field experiment directly manipulating individuals' beliefs about others' protest participation, in the context of Hong Kong's pro-democracy movement. We elicit university students' planned participation in an upcoming protest and their prior beliefs about others' participation, in an incentivized manner. One day before the protest, we randomly provide a subset of subjects with truthful information about others' protest plans, and elicit posterior beliefs about protest turnout, again in an incentivized manner. This allows us to identify the causal effects of positively and negatively updated beliefs about others' protest participation on subjects' turnout. We consistently find evidence of strategic substitutes. Analysis of control group subjects and survey evidence reinforce our experimental findings. |
| JEL: | D74 D8 P0 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23110&r=exp |
| By: | Brosig-Koch, Jeannette; Hehenkamp, Burkhard; Kokot, Johanna |
| Abstract: | We explore how competition between physicians affects medical service provision. Previous research has shown that, in the absence of competition, physicians deviate from patient-optimal treatment under payment systems like capitation and fee-for-service. While competition might potentially eliminate or reduce these distortions, physicians usually interact with each other repeatedly over time. This leaves scope for collusive behavior. Moreover, only a fraction of patients switches providers at all. Both patterns might prevent competition to work in the desired direction. To analyze the behavioral effects of competition, we develop a theoretical benchmark which is then tested in a controlled laboratory experiment. Experimental conditions vary regarding physician payment (fee-for-service vs. capitation) and the severity of patients’ illness (low vs. high). In our setting, two physicians repeatedly treat patients from a homogeneous patient population. While half of the patients always attend the physician providing the highest patient benefit, the other ones always visit the same physician. Treatment decisions made in the experiment affect real patients’ health. Our results reveal that, in line with the theoretical prediction, introducing competition can reduce overprovision and underprovision, respectively. The observed effects depend on patient characteristics, though. Compared to related experimental research on price competition, collusive behavior is less frequently observed in our setting of medical service provision. |
| JEL: | I10 C91 C72 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145589&r=exp |
| By: | Reischmann, Andreas |
| Abstract: | Many mechanisms have been developed to solve the free-rider problem in private public good provision. Most of these mechanisms were designed to have good static (Nash) equilibrium properties. I present in this paper a new class of mechanisms, the Conditional Contribution Mechanisms (CCM), which are designed to have good dynamic equilibrium properties instead. The CCMs give all agents the possibility to condition their contribution on the total level of contribution provided by all agents. Their dynamic incentive structure makes the CCMs particularly suited for repeated public goods. I prove for a very general class of environments that all equilibria of the CCMs under a new variant of Better Response Dynamics, called Unexploitable Better Response Dynamics (UBRD), are Pareto efficient. I further present a first experimental study of one mechanism's performance compared to the performance of the Voluntary Contribution Mechanism. In an environment with binary contribution and linear valuations, agents play the mechanisms in a repeated setting. I test one case of complete information and homogeneous valuations and a second case with incomplete information and heterogeneous valuations. In both cases a significantly higher contribution rate can be observed when the CCM is used. Furthermore, all stable outcomes of the CCM, which are observed in the experiment, are in line with the prediction of UBRD. |
| JEL: | H41 D82 C92 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145613&r=exp |
| By: | Altmann, Steffen; Falk, Armin; Jäger, Simon; Zimmermann, Florian |
| Abstract: | We conduct a large-scale field experiment in the German labor market to investigate how information provision affects job seekers' employment prospects and labor market outcomes. Individuals assigned to the treatment group of our experiment received a brochure that informed them about job search strategies and the consequences of unemployment, and motivated them to actively look for new employment. We study the causal impact of the brochure by comparing labor market outcomes of treated and untreated job seekers in administrative data containing comprehensive information on individuals' employment status and earnings. While our treatment yields overall positive effects, these tend to be concentrated among job seekers who are at risk of being unemployed for an extended period of time. Specifically, the treatment effects in our overall sample are moderately positive but insignificant. At the same time, we do observe pronounced and statistically significant effects for individuals who exhibit an increased risk of long-term unemployment. For this group, the brochure increases employment and earnings in the year after the intervention by roughly 4%. Given the low cost of the intervention, our findings indicate that targeted information provision can be a highly effective policy tool in the labor market. |
| JEL: | C93 D03 J64 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145877&r=exp |
| By: | Andreas D. Huesler (ETH Zürich); Didier Sornette (ETH Zürich and Swiss Finance Institute); C. H. Hommes (University of Amsterdam, CeNDEF, and Tinbergen Institute) |
| Abstract: | We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster than exponential due to positive feedback. We show that the positive feedback operates by traders continuously upgrading their over-optimistic expectations of future returns based on past prices rather than on realized returns. |
| Keywords: | rational expectations, financial bubbles, speculation, anchoring, laboratory experiments, behavioral model, super-exponential growth, positive feedback, behavioral expectations |
| JEL: | C92 D84 G12 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1220&r=exp |
| By: | Wulf Gaertner; Lars Schwettmann; Yongsheng Xu |
| Abstract: | We conduct a lab-experimental study of bargaining over the distribution of monetary losses. Groups of four differently endowed participants must agree, as a group, on the contribution each participant will make to cover a financial loss imposed on the group. The study sheds light on burden sharing and what loss allocation rules groups adopt. Furthermore, we characterize a new theoretical model which contains the proportional rule and equality of losses as special cases but collides with the constrained equal awards rule. The combination of our model and the constrained equal awards rule can explain the majority of proposals made in our experiment. |
| Keywords: | loss sharing, axiomatic characterization of allocation rules, experimental bargaining |
| JEL: | C91 D31 D63 D71 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2017-01&r=exp |
| By: | James C. Cox; John A. List; Michael Price; Vjollca Sadiraj; Anya Samek |
| Abstract: | The literature exploring other regarding behavior sheds important light on interesting social phenomena, yet less attention has been given to how the received results speak to foundational assumptions within economics. Our study synthesizes the empirical evidence, showing that recent work challenges convex preference theory but is largely consistent with rational choice theory. Guided by this understanding, we design a new, more demanding test of a central tenet of economics—the contraction axiom—within a sharing framework. Making use of more than 325 dictators participating in a series of allocation games, we show that sharing choices violate the contraction axiom. We advance a new theory that augments standard models with moral reference points to explain our experimental data. Our theory also organizes the broader sharing patterns in the received literature. |
| Keywords: | experiment, giving, taking, altruism, moral cost |
| JEL: | C93 D03 D64 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2016-02&r=exp |
| By: | Antonio A. Arechar (Department of Psychology, Yale University,); Simon Gaechter (School of Economics, University of Nottingham); Lucas Molleman (School of Economics, University of Nottingham; Max Planck Institute for Human Development) |
| Abstract: | Online labor markets provide new opportunities for behavioral research, but conducting economic experiments online raises important methodological challenges. This particularly holds for interactive designs. In this paper, we provide a methodological discussion of the similarities and differences between interactive experiments conducted in the laboratory and online. To this end, we conduct a repeated public goods experiment with and without punishment using samples from the laboratory and the online platform Amazon Mechanical Turk. We chose to replicate this experiment because it is long and logistically complex. It therefore provides a good case study for discussing the methodological and practical challenges of online interactive experimentation. We find that basic behavioral patterns of cooperation and punishment in the laboratory are replicable online. The most important challenge of online interactive experiments is participant dropout. We discuss measures for reducing dropout and show that, for our case study, dropouts are exogenous to the experiment. We conclude that data quality for interactive experiments via the Internet is adequate and reliable, making online interactive experimentation a valuable complement to laboratory studies. |
| Keywords: | Experimental methodology, Behavioral research, Internet experiments, Amazon Mechanical Turk, Public goods game, Punishment |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2017-02&r=exp |
| By: | Hennig-Schmidt, Heike; Bosman, Ronald; van Winden, Frans |
| Abstract: | This paper experimentally investigates how monetary incentives and emotions influence behaviour in a two-player power-to-take game. In this game, one player can claim any part of the other's endowment (take rate), and the second player can respond by destroying his or her own endowment. We focus on how stake size (endowment) and emotions influence responses in China. Our main findings are the following. First, average (median) take and destruction rates are not influenced by a large or small stake size. Second, emotions related to anger and joy mediate the impact of the take rate on destruction. Third, monetary incentives matter for the reaction function of the responder regarding the take rate: when stakes are low there is more destruction for low and intermediate take rates (smaller than 80%), while, when stakes are high, there is more destruction for high take rates (larger than 80%). This result is explained in terms of the amount of behavioural control that the responder has over his or her actions via emotion regulation. Finally, comparing our data with existing data for countries in Europe, it turns out that average (median) take and destruction rates are similar, while a similar set of emotions mediates destruction in both regions. |
| JEL: | C91 O53 O52 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145592&r=exp |
| By: | Tebbe, Eva; von Blanckenburg, Korbinian |
| Abstract: | The environmental need for and economic opportunities provided by sustainability in food production are becoming increasingly popular in both society and research. Interacting with this, labels signaling sustainable product attributes are gaining importance, although uncertainty concerning the environmental, micro- and macroeconomic benefits of such labels persist. One of the questions still incompletely answered is whether consumers are willing to pay more for labeled than for unlabeled products and whether this willingness increases with the number of labels on a food product. To tackle this question, we conduct a laboratory experiment, testing consumer valuations of different labeling strategies. Using the Becker-deGroot-Marschak mechanism, consumer willingness to pay (WTP) for 15 food products is measured. The products were endowed with up to six different sustainability labels, such that each grocery item was available in eight product versions. 191 respondents were allocated to groups, of which each was confronted with a different set of product versions. In order to compare labeling schemes across all products, we calculated an aggregated standardized relativized WTP. The results indicate that participants are prone to allocating WTP premiums to labeled products, more than to unlabeled products. However, the premiums do not vary with an increasing number of labels, independent of whether the labels signal substitute or complementary sustainability information. Thus, the results are not entirely in line with normative notions of magnitude variation, but rather with behavioral economic concepts. |
| JEL: | L15 D12 D44 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145556&r=exp |
| By: | Gravert, Christina (Department of Economics, School of Business, Economics and Law, Göteborg University); Kurz, Verena (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | We test the effect of framing of a menu on the choice of ordering climate friendly dishes in a randomized controlled experiment. Rearranging the menu in favor of vegetarian food has a large and significant effect on the willingness to order a vegetarian dish instead of meat. We show that there exists a considerable marginal group willing to change meat consumption behavior at least in the short term. Our results demonstrate both to policy makers and to actors in the food service sector that small, cheap interventions can significantly decrease carbon emissions from food consumption. |
| Keywords: | Nudging; Field experiment; default; food choice |
| JEL: | C93 D12 Q50 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0690&r=exp |
| By: | Kamei, Kenju |
| Abstract: | Past research has shown that people often take punitive actions towards norm violators even when they are not directly involved in transactions. However, it at the same time suggests that such third-party punishment may not be strong enough to enforce cooperation norms in dilemma situations. This paper experimentally compares the effectiveness of third-party punishment between different enforcement formats. Consistent with past studies, our data shows that having an individual third-party punisher in a group does not make one’s defection materially unbeneficial because of the weak punishment intensity. It also shows that third-party punishment is not effective when two individuals form a pair as a punisher and jointly decide how strong third-party punishment they impose. However, third-party punishment can be sufficiently strong to enforce cooperation norms when a third-party punisher’s action choice is made known to another individual third-party punisher in a different group, or when there are two independent individual third-party players in a group. |
| Keywords: | experiment, cooperation, dilemma, third-party punishment, social norms |
| JEL: | C92 D79 H41 |
| Date: | 2017–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76641&r=exp |
| By: | Alexander Cappelen; John List; Anya Samek; Bertil Tungodden |
| Abstract: | We present results from the first study to examine the causal impact of early childhood education on social preferences of children. We compare children who, at 3-4 years old, were randomized into either a full-time preschool, a parenting program with incentives, or to a control group. We returned to the same children when they reach 7-8 years old a conducted a series of incentivized experiments to elicit there social preferences. We find that early childhood education has a strong causal impact on social preferences several years after the intervention: attending preschool makes children more egalitarian in their fairness view and the parenting program enhances the importance children place on efficiency relative to fairness. Our findings highlight the importance of taking a broad perspective when designing and evaluating early childhood education programs, and provide evidence how differences in institutional exposure may contribute to explaining heterogeneity in social preferences in society. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:feb:framed:00584&r=exp |
| By: | Jeremy Clark (University of Canterbury); Arlene Garces-Ozanne (University of Otago); Stephen Knowles (University of Otago) |
| Abstract: | We conduct a laboratory experiment to test the effect on charitable donations to international development NGOs (INGOs) of emphasising current deprivation in a developing country, versus emphasising the potential good a donation can achieve. Using a double-blind dictator experiment with earned endowments, we find that varying the information/emphasis has no significant effect on total donations, or on the probability of donating. An emphasis on current deprivation does, however, significantly raise the variance of donations, so that conditional on donating, it significantly raises donations compared to emphasising potential gains from the charity’s work. |
| Keywords: | charitable giving, dictator game, message strategy |
| JEL: | C91 D64 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1608&r=exp |
| By: | Jakob, Michael; Kübler, Dorothea; Steckel, Jan Christoph; van Velduizen, Roel |
| Abstract: | Although market-based environmental policy instruments feature prominently in economic theory and are widely employed, they often meet with public resistance. We argue that such resistance may be driven by a feeling of moral responsibility where citizens prefer to tackle environmental problems themselves, rather than delegating the task to others by means of a market mechanism. Using a laboratory experiment that isolates moral responsibility from alternative explanations, we show that moral responsibility induces participants to incur a sizable cost on themselves as well as on other participants. We discuss the implications of this finding for the design and implementation of environmental policies. |
| Keywords: | Laboratory Experiment,Moral Responsibility,Environmental Policy,Market Mechanism,Climate Change |
| JEL: | C90 H23 Q53 Q54 Q58 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2016215&r=exp |
| By: | Mecheva, M. |
| Abstract: | During his sixteen years in power Vladimir Putin has enjoyed high approval ratings. Despite a recent deterioration of Russia’s economy the President remains very popular. The research paper studies the possible effect of allegedly threatening media content on the support for Putin using survey experiments conducted on the streets of Moscow. The study explores whether experimentally induced anxiety may influence citizens’ support for a controversial internet censorship policy, and that, in turn, can help to understand whether people may alter their attitudes based on the frightening signals from media. The experimental evidence suggests that priming may induce confusion-anxiety emotions. The threatening effect of media content elicited by priming was not detected. The framing of internet censorship policy has merely a moderate effect on tested attitudes, suggesting that the level of Putin’s public support may not be that high. |
| Keywords: | Putin, survey experiment, media effects, terror management theory |
| Date: | 2016–12–29 |
| URL: | http://d.repec.org/n?u=RePEc:ems:euriss:95660&r=exp |
| By: | Stephen Knowles (Department of Economics, University of Otago, New Zealand); Trudy Sullivan (Department of Preventive and Social Medicine, University of Otago, New Zealand) |
| Abstract: | We conduct a field experiment to analyse whether a representative sample of the population has a preference for giving money to an international development charity or to a charity helping families in need in the home country. The majority of participants reveal a preference for giving to the local charity, rather than the international development charity. Participants were given the option of commenting on why they chose the charity they did, and we conduct a qualitative analysis of these responses. We also analyse quantitatively whether participants’ individual characteristics are correlated with the choice of charity. |
| Keywords: | charitable giving, field experiment, local v international giving |
| JEL: | C93 D64 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1504&r=exp |
| By: | Julian Runge, (School of Business and Economics, Humboldt University Berlin); Stefan Wagner (ESMT European School of Management and Technology); Jörg Claussen (School of Business Administration, Ludwig-Maximilians-University Munich); Daniel Klapper (School of Business and Economics, Humboldt University Berlin) |
| Abstract: | Firms commonly run field experiments to improve their freemium pricing schemes. However, they often lack a framework for analysis that goes beyond directly measurable outcomes and focuses on longer term profit. We aim to fill this gap by structuring existing knowledge on freemium pricing into a stylized framework. We apply the proposed framework in the analysis of a field experiment that contrasts three variations of a freemium pricing scheme and comprises about 300,000 users of a software application. Our findings indicate that a reduction of free product features increases conversion as well as viral activity, but reduces usage – which is in line with the framework’s predictions. Additional back-of-the-envelope profit estimations suggest that managers were overly optimistic about positive externalities from usage and viral activity in their choice of pricing scheme, leading them to give too much of their product away for free. Our framework and its exemplary application can be a remedy. |
| Keywords: | freemium, pricing, digitization, field experimentation |
| Date: | 2016–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-16-06&r=exp |
| By: | Biener, Christian; Landmann, Andreas; Santana, Maria Isabel |
| Abstract: | Insurance contracts may fail to perform, leading to a total or partial default on valid claims. We extend models of such probabilistic insurance to allow for ambiguity in contract nonperformance risk, and to derive formally that mean-preserving ambiguity reduces demand. The results of a field lab experiment are consistent with this logic. In particular, we find that a 10 percent contract non-performance risk reduces insurance demand by 17.1 percentage points even when premiums are adjusted accordingly. Ambiguity about this contract nonperformance probability further decreases demand by 14.5 percentage points. While the demand-reducing effect of ambiguity is more pronounced for high-numeracy and ambiguity-averse individuals, it appears to be little affected by experience. The cause of an insurance contract failing to perform does not significantly influence the strength of these effects, but independently affects demand of lownumeracy and ambiguity-averse individuals. |
| JEL: | D03 D81 D83 G22 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2017:01&r=exp |
| By: | Andor, Mark; Gerster, Andreas; Sommer, Stephan |
| Abstract: | Energy labels have been introduced in many countries to increase consumers' attention to energy use in purchase decisions of durables. In a discrete-choice experiment among about 5,000 households, we implement randomized information treatments to explore how energy labels influence purchasing decisions. Our results show that adding annual operating cost information to the EU energy label promotes the choice of energy-efficient durables. In addition, we find that a majority of participants value efficiency classes beyond the economic value of the underlying energy use differences. Our results further indicate that displaying operating cost affects choices through two distinct channels: it increases the attention to operating cost and reduces the valuation of efficiency class differences. |
| Keywords: | environmental certification,discrete choice experiment,energy efficiency,energy-using durables |
| JEL: | D03 D12 D83 Q48 Q50 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:671&r=exp |
| By: | Janzen, Matthew; Coatney, Kalyn; Rivera, Daniel; Harri, Ardian; Busby, Darrell; Groves, Matt |
| Abstract: | To improve meat quality and consistency, cattle feeders have moved towards implementing marketing strategies based on visual estimates of physiological characteristics (e.g. 0.5 inches backfat). Recognizing that physiological targets will not necessarily result in profit maximization; this research aims to develop a market timing method accounting for animal growth, output price and cost dynamics to enhance the likelihood of maximizing profit on an individual basis. A natural field experiment in Iowa is utilized to evaluate the potential for the new methodology. One hundred twenty three cattle are randomly assigned into each treatment. The first treatment consists of marketing an individual when it attains a visual estimate of 0.5 inches of backfat (EPM). The second treatment consists of marketing an individual when its value of the marginal product equals marginal factor costs (PMR). Profit between treatments is compared utilizing three methods: realized, uniform carcass base price, and uniform cash prices. |
| Keywords: | Fed Cattle, Dynamic Growth, Marketing, Experiment, Agribusiness, D24, C44, C99, |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea17:252844&r=exp |