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on Experimental Economics |
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Issue of 2017‒06‒18
fifteen papers chosen by |
| By: | Biddle, Nicholas; Fels, Katja; Sinning, Mathias |
| Abstract: | This paper presents the findings of two Randomized Controlled Trials (RCTs) that were conducted in collaboration with the Australian Taxation Office (ATO). The first trial tests the effect of changes to letters (timing, social norms, color, and provision of information about charitable donations) on response rates of businesses, the timing of payments and the amount of tax debt payments. The second trial consists of two parts. The first part aims to raise awareness of the relevance of tax debt payment by changing internal guidelines used by field auditors. The second part focuses on studying the effect of changing the phone script used by desk auditors to offer assistance with payment arrangements and simplifying a follow-up letter. The findings of the first trial indicate that none of the treatments had a significant effect on any of the outcome measures considered. In contrast, the results of the second trial indicate that changing the phone script of desk auditors and simplifying the follow-up letter reduced the proportion of default assessments raised by the ATO significantly, suggesting that businesses are responsive to certain types of nudges. |
| Keywords: | tax compliance,business taxation,behavioral insights,nudging |
| JEL: | C93 H25 H26 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:698&r=exp |
| By: | Jeremy Clark; David L. Dickinson |
| Abstract: | We implement a one-week partial sleep restriction protocol to investigate the effect of sleep deprivation on joint production in a standard voluntary contributions mechanism (VCM) experiment. Additionally, the effect of sleep restriction on an individual’s likelihood of sending costly peer punishment is examined. Actigraphy sleep monitoring watches are used to validate that our random assignment to sleep restricted (SR) and well-rested (WR) conditions generates significant differences in both objective nightly sleep duration and subject sleepiness. Using multiple measures of sleep restriction, and non-parametric as well as regression analysis, we find that when punishment is not available, sleep restriction does not affect the contributions made to joint production. When punishment is available, we find weak evidence that SR subjects contribute more than WR subjects, but there is no evidence that SR and WR subjects differ in the amount they punish others. However, we also find that SR subject contributions are significantly more sensitive to the introduction of peer punishment. SR subject punishment decisions may also be more sensitive to the deviation of their contributions from other group members’ contributions and more sensitive to having received punishment themselves. Our results have implications for understanding how the norm enforcement availability may differentially impact individuals depending on their current sleep state. Key Words: sleep restriction; sleep deprivation; social dilemma; VCM; punishment; experiment |
| JEL: | C92 D03 H40 I12 J24 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:17-04&r=exp |
| By: | Adena, Maja; Huck, Steffen |
| Abstract: | Do donors examine a single ask to donate in isolation or do they consider that other and future asks may come along? In the first year of our field experiment, we vary whether or not potential donors are informed that the ask will be repeated in the following year. This information has dramatic effects on the amount given: if present, donations fall by around 40%. This indicates strong support for the prevalence of narrow framing which benefits the fundraiser. In the second year of our experiment we show that previous non-donors behave as if expecting future calls, regardless of whether they have been explicitly told or have simply observed two subsequent asks, that is, they are de-biased through learning. Finally, we document that donors from year 1 tend to give the same amount again in year 2 which generates a long-run effect of initial narrow framing on donation amounts. |
| Keywords: | Charitable giving,natural field experiment,decision framing |
| JEL: | C93 D64 D12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2017305&r=exp |
| By: | Armin Falk (briq) |
| Abstract: | Numerous signaling models in economics assume image concerns. These take two forms, as relating either to social image or self-image. While empirical work has identified the behavioral importance of the former, less is known about the role of enhanced self-image concerns. In this paper, we exogenously vary self-image concerns in manipulating self-directed attention and study the impact on moral behavior. The choice context in the experiment is whether subjects inflict a painful electric shock on another subject to receive a monetary payment. Three between-subjects conditions are studied. In the main treatment, subjects see their own face on the decision screen in a real-time video feed. In the two control conditions, subjects see either no video at all or a neutral video. We find that the exogenous increase in self-image concerns significantly reduces the fraction of subjects inflicting pain. The finding suggests the importance of self-awareness for moral decision making with implications for theory as well as practical applications to promote socially desirable outcomes. |
| Keywords: | self-image, moral behavior |
| JEL: | D64 C91 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-048&r=exp |
| By: | Susan Athey; Christian Catalini; Catherine Tucker |
| Abstract: | 'Notice and Choice' has been a mainstay of policies designed to safeguard consumer privacy. This paper investigates distortions in consumer behavior when faced with notice and choice which may limit the ability of consumers to safeguard their privacy using field experiment data from the MIT digital currency experiment. There are three findings. First, the effect small incentives have on disclosure may explain the privacy paradox: Whereas people say they care about privacy, they are willing to relinquish private data quite easily when incentivized to do so. Second, small navigation costs have a tangible effect on how privacy-protective consumers' choices are, often in sharp contrast with individual stated preferences about privacy. Third, the introduction of irrelevant, but reassuring information about privacy protection makes consumers less likely to avoid surveillance, regardless of their stated preferences towards privacy. |
| JEL: | C93 D62 D8 K10 O3 O31 O38 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23488&r=exp |
| By: | Alexander Cappelen (Norwegian School of Economics); Karl Ove Moene (University of Oslo); Siv-Elisabeth Skjelbred (University of Oslo); Bertil Tungodden (Norwegian School of Economics) |
| Abstract: | Do people give primacy to merit when luck partly determines earnings? This paper reports from a novel experiment where third-party spectators have to decide whether to redistribute from a high-earner to a low-earner in cases where earnings are determined by luck and merit. Our main finding is that the spectators assign strong primacy to merit in such situations, and as a result violate basic fairness conditions. We believe that the results shed new light on inequality acceptance in society, in particular by showing how just a little bit of merit can make people significantly more inequality accepting. |
| Keywords: | luck, experimental economics, Inequality, fairness |
| JEL: | C93 D31 D63 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-047&r=exp |
| By: | Kaiser, Tim (DIW Berlin and University of Kiel); Menkhoff, Lukas (DIW Berlin and Humboldt University Berlin) |
| Abstract: | In a meta-analysis of 126 impact evaluation studies, we find that financial education significantly impacts financial behavior and, to an even larger extent, financial literacy. These results also hold for the subsample of randomized experiments (RCTs). However, intervention impacts are highly heterogeneous: Financial education is less effective for low-income clients as well as in low and lower-middle income economies. Specific behaviors, such as the handling of debt, are more difficult to influence and mandatory financial education tentatively appears to be less effective. Thus, intervention success depends crucially on increasing education intensity and offering financial education at a \'teachable moment\'. |
| Keywords: | financial education; financial literacy; financial behavior; meta-analysis; meta-regression; impact evaluation; |
| JEL: | D14 I21 |
| Date: | 2017–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:37&r=exp |
| By: | Defago, Daniel; Geng, José F.; Molina, Oswaldo; Santa María, Diego |
| Abstract: | Bad dietary habits are among the main causes of increasing obesity and other health problems. According to the literature, information asymmetry and cognitive biases may lead to suboptimal decisions by individuals regarding food consumption. Many countries have implemented different forms of nutritional labelling in order to provide individuals with better information when making choices. We assess the Multiple Traffic Light (MTL) system, an alternative and simplified labelling format implemented in the UK. Although this system has been found to significantly improve consumer’s understanding of nutritional quality, evidence regarding its effect on actual choices is scarce and uncertain. In order to evaluate this format’s effectiveness on consumer decisions, we conduct a selection experiment with a particular sample: university students in a developing country. Our results show that the proposed nutritional labeling system has a significant positive effect on the nutritional quality of consumers’ decisions regarding snacks and beverages. These findings contribute to the existing literature in two ways. First, we prove that MTL labels can in fact modify real consumer behavior towards healthier nutritional habits, despite the difficulties faced by previous work in identifying such an effect. Second, we provide new insights on how to assess the increasing problem of bad nutrition in emerging economies. |
| Keywords: | Nutritional labeling, Developing Countries, Experiment |
| JEL: | C91 I12 I18 |
| Date: | 2017–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79678&r=exp |
| By: | Breitmoser, Yves (Humboldt University Berlin) |
| Abstract: | Overbidding in auctions has been attributed to e.g. risk aversion, loser regret, level-k, and cursedness, relying on varying identifying assumptions. I argue that \"type projection\'\" organizes these findings and largely captures observed behavior. Type projection formally models that people tend to believe others have object values similar to their own - a robust psychological phenomenon that naturally applies to auctions. First, I show that type projection generates the main behavioral phenomena observed in auctions, including increased sense of competition (\"loser regret\") and broken Bayesian updating (\"cursedness\"). Second, re-analyzing data from seven experiments, I show that type projection explains the stylized facts of behavior across private and common value auctions. Third, in a structural analysis relaxing the identifying assumptions made in earlier studies, type projection consistently captures behavior best, in-sample and out-of-sample. The results reconcile bidding patterns across conditions and have implications for behavioral and empirical analyses as well as policy. |
| Keywords: | auctions; overbidding; projection; risk aversion; cursed equilibrium; depth of reasoning; |
| JEL: | C72 C91 D44 |
| Date: | 2017–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:36&r=exp |
| By: | Jan U. Auerbach (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter) |
| Abstract: | We propose a procedural rule that we refer to as preordered service to replace sequential service of civil cases for breach of contract. The judiciary preannounces a list that ranks all entities that may enter contracts by some uniquely identifying information, such as taxpayer numbers. Courts use this list to enforce the contracts of the highest ranked entities that file a contract case. In theory, unlike sequential service, preordered service ensures efficiency in a population of investment games. Results from a laboratory experiment suggest that it may substantially reduce the caseload at courts and mitigate payoff inequality. |
| Keywords: | Judicial system, courts, judiciary performance, legal procedure, civil cases, caseload, contract enforcement, population of investment games, experiments. |
| JEL: | K00 K12 K40 O17 C92 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1704&r=exp |
| By: | Terzi, Ayse (Tilburg University, School of Economics and Management) |
| Abstract: | This thesis deals with a range of topics in experimental and behavioral finance. The first part investigates the role of personal inclination in reference point employment by individuals. The second part extends this questions by focusing on the role of personality traits and demographic factors in driving reference point exhibition in decision making under risk. The third part documents the role of ambiguity in the dissemination of private information in asset markets. Finally, the last part explores differences in time discounting under risk and ambiguity. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:54b3a2b4-75f9-4d58-b4ce-34530ddd1ea8&r=exp |
| By: | Gietzen, Thomas |
| Abstract: | Developing financial markets experience a swift increase in the availability of borrower-information from credit information sharing systems. I study whether banks can use this information to automate credit decisions. In the wake of a randomized controlled trial, a bank in Africa introduced an automated credit decision-process based on a credit scoring technology at half of its branches, while the other half kept applying an extensive screening procedure as a base for a loan officer's expert judgment. Results show that the quality of the loan Portfolio in the treatment branches did not decrease significantly, at the cost of rejecting only a 6 percentage points higher share of applications, using a much simpler procedure. An analysis of the costs and benefits of the credit scoring system strongly suggests that the bank's cost of lending decreased substantially. |
| Keywords: | Credit Scoring, Credit Information Sharing, Credit Bureaus, Loan Officer, Automation |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2017:09&r=exp |
| By: | Breitmoser, Yves (Humboldt University Berlin) |
| Abstract: | Experimenters have to make theoretically irrelevant decisions concerning user interfaces and ordering or labeling of options. Such presentation decisions affect behavior and cause results to appear contradictory across experiments, obstructing utility estimation and policy recommendations. The present paper derives a model of choice allowing analysts to control for both presentation effects and stochastic errors in econometric analyses. I test the model in a comprehensive re-analysis of dictator game experiments. Controlling for presentation effects, preference estimates are consistent across experiments and predictive out-of-sample, highlighting the fundamental role of presentation for choice, and this notwithstanding the possibility of reliable estimation and prediction. |
| Keywords: | discrete choice; presentation effects; utility estimation; counterfactual predictions; laboratory experiment; |
| JEL: | C10 C90 |
| Date: | 2017–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:35&r=exp |
| By: | Simon Gaechter (School of Economics, University of Nottingham); Chris Starmer (School of Economics, University of Nottingham); Fabio Tufano (School of Economics, University of Nottingham) |
| Abstract: | We introduce the concept of “group cohesion†to capture the economic consequences of ubiquitous social relationships in group production. We measure group cohesion, adapting the “oneness scale†from psychology. A comprehensive program of new experiments reveals the considerable economic impact of cohesion: higher cohesion groups are significantly more likely to achieve Pareto-superior outcomes in classic weak-link coordination games. We show that effects of cohesion are economically large, robust, and portable. We identify social preferences as a primary mechanism explaining the effects of cohesion. Our results provide proof of concept for group cohesion as a productive new tool of economic research. |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2017-09&r=exp |
| By: | Gisèle Umbhauer |
| Abstract: | The paper studies second price all-pay auctions - wars of attrition - in a new way, based on class room experiments and Kosfeld, Droste and Voorneveld’s (2002) best reply matching equilibrium. Two players fight over a prize of value V, have a budget M, submit bids lower or equal to M; both pay the lowest bid and the prize goes to the highest bidder. The behaviour probability distributions in the class room experiments are strikingly different from the mixed Nash equilibrium. They fit with best reply matching or generalized best reply matching, an ordinal logic according to which, if bid A is the best response to bid B, and if B is played with probability p, then A is also played with probability p. In the mixed Nash equilibrium, the expected payoff is never negative and close to 0. In the best reply and generalized best reply matching equilibria, players may lose money, up to 1/12th of the budget when M is large in comparison to V, but they can also get a lot of money, especially if V is large. The study leads to examine possible bifurcations in the bidding behaviour and gives some insights into how to regulate games to avoid pathological gambling with a huge waste of money. |
| Keywords: | second price all-pay auction, war of attrition, best reply matching, Nash equilibrium, classroom experiment. |
| JEL: | C72 D44 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2017-16&r=exp |