nep-exp New Economics Papers
on Experimental Economics
Issue of 2019‒06‒10
33 papers chosen by

  1. How related are risk preferences and time preferences? By Holden, Stein T.; Tilahun, Mesfin
  2. Gender Differences in Competitiveness: Experimental Evidence from China By Carlsson, Fredrik; Lampi, Elina; Martinsson, Peter; Yang, Xiaojun
  3. The Perry Preschoolers at Late Midlife: A Study in Design-Specific Inference By James J. Heckman; Ganesh Karapakula
  4. Is social identity belief independent? By Giuseppe Ciccarone; Giovanni Di Bartolomeo; Stefano Papa
  5. The choice of institutions to solve cooperation problems: A survey of experimental research By Dannenberg, Astrid; Gallier, Carlo
  6. The Choice of Institutions to Solve Cooperation Problems: A Survey of Experimental Research By Astrid Dannenberg; Carlo Gallier
  7. Expectations, Wage Hikes, and Worker Voice: Evidence from a Field Experiment By Achyuta Adhvaryu; Teresa Molina; Anant Nyshadham
  8. "Trigger-Happy or Precisionist? On Demand for Monitoring in a Noisy Social Dilemma Game" By Andreas Nicklisch; Louis Putterman; Christian Thöni
  9. Do measures of risk attitude in the laboratory predict behavior under risk in and outside of the laboratory? By Gary Charness; Thomas Garcia; Theo Offerman; Marie Claire Villeval
  10. Experimental Evidence on Cooperation, Political Affiliation, and Group Size By Helénsdotter, Ronja
  11. Motivated by Others’ Preferences? An Experiment on Imperfect Empathy By Jana Hofmeier; Thomas Neuber
  12. (Not) Everyone Can Be a Winner - The Role of Payoff Interdependence for Redistribution By Sebastian Schaube; Louis Strang
  13. How do markets react to (un)expected fundamental value shocks? An experimental analysis By Wael Bousselmi; Patrick Sentis; Marc Willinger
  14. The Persistent Power of Promises By Florian Ederer; Frédéric Schneider
  15. Correcting for Transitory Effects in RCTs: Application to the RAND Health Insurance Experiment By Kevin Devereux; Mona Balesh Abadi; Farah Omran
  16. Predicting free-riding in a public goods game: Analysis of content and dynamic facial expressions in face-to-face communication By Bershadskyy, Dmitri; Othman, Ehsan; Saxen, Frerk
  17. The coevolution of morals under indirect reciprocity By Gaudeul, Alexia; Keser, Claudia; Müller, Stephan
  18. Social Distance and Parochial Altruism: An Experimental Study By Béatrice Boulu-Reshef; Jonah Schulhofer-Wohl
  19. Discrete Choice under Oaths By Nicolas Jacquemet; Stephane Luchini; Jason Shogren; Verity Watson
  20. The Binary Lottery Procedure does not induce risk neutrality in the Holt-Laury and Eckel-Grossman tasks By Oechssler, Jörg; Sofianos, Andis
  21. Passive Choices and Cognitive Spillovers By Altmann, Steffen; Grunewald, Andreas; Radbruch, Jonas
  22. Promises, Expectations & Causation By Giovanni Di Bartolomeo; Martin Dufwenberg; Stefano Papa; Francesco Passarelli
  23. Can crop diversification of perennial crop by smallholder farmers explained by risk attitudes and time preferences? By Wening Sarwosri, Arieska; Mußhoff, Oliver
  24. Anti-Elite Politics and Emotional Reactions to Socio-Economic Problems. Experimental Evidence on 'Pocketbook Anger' from France, Germany, and the United States By Marx, Paul
  25. Reconsidering Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets By Brice Corgnet; Cary Deck; Mark DeSantis; Kyle Hampton; Erik O. Kimbrough
  26. Matching on What Matters: A Pseudo-Metric Learning Approach to Matching Estimation in High Dimensions By Gentry Johnson; Brian Quistorff; Matt Goldman
  27. An Experimental Test of the Under-Annuitization Puzzle with Smooth Ambiguity and Charitable Giving By Hippolyte d'Albis; Giuseppe Attanasi; Emmanuel Thibault
  28. Determinants of Peer Selection By Lukas Kiessling; Jonas Radbruch; Sebastian Schaube
  29. Experiments on matching markets: A survey By Hakimov, Rustamdjan; Kübler, Dorothea
  30. Mission, motivation, and the active decision to work for a social cause By Jeworrek, Sabrina; Mertins, Vanessa
  31. Controlling Tuberculosis? Evidence from the First Community-Wide Health Experiment By Karen Clay; Peter Juul Egedesø; Casper Worm Hansen; Peter Sandholt Jensen; Avery Calkins
  32. Reducing Informality Using Two-Sided Incentives: Theory and Experiment By Francisco B. Galarza; Fernando Requejo
  33. Countering the Winner’s Curse: Optimal Auction Design in a Common Value Model By Dirk Bergemann; Benjamin Brooks; Stephen Morris

  1. By: Holden, Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tilahun, Mesfin (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: Risk and time preferences are fundamentally important for financial decisions. We study such preferences for business group members based on field experiments in Ethiopia. The relationship between risk preferences and time preferences has been subject to intensive research and debate among behavioral and experimental economists lately. We aim to contribute to this literature based on a Double Multiple Choice List approach used in an incentivized field experiment. First, we provide strong evidence of diminishing impatience in our data that cannot be explained by present bias. Next, we assess whether measures of diminishing impatience can be associated with measures of risk aversion and probabilistic sensitivity. We also assess whether measurement error in the risk experiment could be the culprit and create spurious correlations between measures of risk aversion and discount rate elasticities with respect to time horizon. Using a random coefficient model, we find strong evidence of diminishing impatience and large and highly significant individual variation in discount rate elasticities with respect to time horizon. We find only weak support for the idea that diminishing impatience is explained by probabilistic sensitivity due to uncertainty about delayed payouts in the discount rate experiments. Risk aversion and optimism/pessimism were unrelated to model noise. More pessimistic and more risk averse respondents had more hyperbolic time preferences and these results were not sensitive to measurement error. Surprisingly, more consistent responses in the risk experiments (lower measurement error) were found for respondents with more hyperbolic time preferences and respondents with higher probabilistic insensitivity.
    Keywords: Time preferences; risk preferences; diminishing impatience; probability weighting
    JEL: C93 D83
    Date: 2019–05–22
  2. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Lampi, Elina (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Yang, Xiaojun (School of Public Policy and Administration, Xi’an Jiaotong University, Xi’an, China)
    Abstract: Experimental evidence from both the lab and the field shows that women on average have a lower propensity to enter a competitive environment. In this paper, we investigate gender differences in competitiveness using a lab-in-the-field experiment and a subject pool consisting of Chinese adults. China provides an interesting environment to study in this regard since the country has promoted gender equality for a long time and the gender gap in earnings is small in a cross-country comparison. However, in many respects, China is still a patriarchal society. Our experimental results show that women perform equally well as men in a piece-rate task and significantly better in a competitive payment environment. Despite this, men are more than twice as likely to voluntarily choose a competitive environment. This gender difference cannot be explained by differences in risk preferences or overconfidence.
    Keywords: Competition; Gender Difference; Experiments; China
    JEL: C91 D03 D10 I31 P30
    Date: 2019–06
  3. By: James J. Heckman (The University of Chicago); Ganesh Karapakula (Center for the Economics of Human Development, University of Chicago)
    Abstract: This paper presents the first analysis of the life course outcomes through late midlife (around age 55) for the participants of the iconic Perry Preschool Project, an experimental high-quality preschool program for disadvantaged African-American children in the 1960s. We discuss the design of the experiment, compromises in and adjustments to the randomization protocol, and the extent of knowledge about departures from the initial random assignment. We account for these factors in developing conservative small-sample hypothesis tests that use approximate worst-case (least favorable) randomization null distributions. We examine how our new methods compare with standard inferential methods, which ignore essential features of the experimental setup. Widely used procedures produce misleading inferences about treatment effects. Our design-specific inferential approach can be applied to analyze a variety of compromised social and economic experiments, including those using re-randomization designs. Despite the conservative nature of our statistical tests, we find long-term treatment effects on crime, employment, health, cognitive and non-cognitive skills, and other outcomes of the Perry participants. Treatment effects are especially strong for males. Improvements in childhood home environments and parental attachment appear to be an important source of the long-term benefits of the program. The appendix to this paper may be found here.
    Keywords: randomized controlled trial, early childhood intervention, life cycle treatment effects, randomization tests, re-randomization, worst-case inference, least favorable null distributions, partial identification, small-sample hypothesis testing
    JEL: C40 I21 C10
    Date: 2019–05
  4. By: Giuseppe Ciccarone; Giovanni Di Bartolomeo; Stefano Papa
    Abstract: In this paper we aim to disentangle the effects on in-group favoritism driven by beliefs from those stemming from group identity, with the final goal of testing the relative power of three potential explanations of this bias: The Beliefs Driven Explanation (BDE), the Group Identity Explanation (GIE) and the Belief-mediated Group Identity Explanation (BGE). The BDE suggests that in-group favoritism is only driven by the desire not to let others’ expectations down. The GIE claims that people have a preference, per se, for members of their group. According to the BGE, people also have a preference for members of their group, but this is mediated by their second-order beliefs. To this aim, we built an experimental design able to produce exogenous variations in both group membership and expectations, hence providing a genuine test for the rationale of in-group bias. The results of our experiment suggest that beliefs per se are not a significant explanation of in-group favoritism and hence do not provide support to the BDE. Our experimental evidence does not provide support also to the BGE. We conclude that our experiment suggests to single out the GIE as the most powerful explanation of social identity.
    Keywords: Social identity; Second-order beliefs; Guilt aversion; Causation
    JEL: A13 C91 D03 D64
    Date: 2018–07
  5. By: Dannenberg, Astrid; Gallier, Carlo
    Abstract: A growing experimental literature studies the endogenous choice of institutions to solve cooperation problems arising in prisoners' dilemmas, public goods games, and common pool resource games. Participants in these experiments have the opportunity to influence the rules of the game before they play the game. In this paper, we review the experimental literature of the last 20 years on the choice of institutions and describe what has been learned about the quality and the determinants of institutional choice. Almost all institutions improve cooperation if they are implemented, but they are not always implemented by the players. Institutional costs, remaining free-riding incentives, and a lack of learning opportunities are the most important barriers. At the individual level, own cooperativeness and beliefs about other players' behavior can be identified as important determinants of institutional choice. Cooperation tends to be higher under endogenously chosen institutions than exogenously imposed institutions. However, a significant share of players fails to implement the institution and they often perform poorly, which is why we cannot conclude that letting people choose is better than enforcing institutions from outside.
    Keywords: literature review,experiments,cooperation,public goods,endogenous institutional choice,voting
    JEL: C71 C91 C92 D02 D70 H41
    Date: 2019
  6. By: Astrid Dannenberg (University of Kassel); Carlo Gallier (Leibniz Centre for European Economic Research)
    Abstract: A growing experimental literature studies the endogenous choice of institutions to solve cooperation problems arising in prisoners’ dilemmas, public goods games, and common pool resource games. Participants in these experiments have the opportunity to influence the rules of the game before they play the game. In this paper, we review the experimental literature of the last 20 years on the choice of institutions and describe what has been learned about the quality and the determinants of institutional choice. Almost all institutions improve cooperation if they are implemented, but they are not always implemented by the players. Institutional costs, remaining free-riding incentives, and a lack of learning opportunities are the most important barriers. At the individual level, own cooperativeness and beliefs about other players’ behavior can be identified as important determinants of institutional choice. Cooperation tends to be higher under endogenously chosen institutions than exogenously imposed institutions. However, a significant share of players fails to implement the institution and they often perform poorly, which is why we cannot conclude that letting people choose is better than enforcing institutions from outside.
    Keywords: Literature review; experiments; cooperation; public goods; endogenous institutional choice; voting
    JEL: C71 C91 C92 D02 D70 H41
    Date: 2019
  7. By: Achyuta Adhvaryu; Teresa Molina; Anant Nyshadham
    Abstract: Hirschman's (1970) seminal thesis that enabling worker “voice” prevents exit from the employment relationship has played a foundational role in labor economics. We provide the first experimental test of this hypothesis in a real-world setting via a randomized controlled trial in Indian garment factories. Just after what proved to be a disappointing wage hike, workers were chosen at random to participate in an anonymous survey in which they were asked for feedback on job conditions, supervisor performance, and overall job satisfaction. Enabling voice in this manner reduced turnover and absenteeism after the hike, particularly for the most disappointed workers.
    JEL: C93 J20 J30 M50
    Date: 2019–05
  8. By: Andreas Nicklisch; Louis Putterman; Christian Thöni
    Abstract: Recent experimental studies question whether societies can selfgovern social dilemmas with the help of decentralized punishment opportunities. One important challenge for the mechanism is imperfect information about cooperative behavior. It has been shown that imperfect information increases misdirected punishment and thereby hampers the efficacy of the punishment mechanism. We study an environment with monitoring opportunities, in which subjects can improve the quality of their information at a cost. We find experimentally that the majority of subjects are willing to pay a modest cost to improve their information. The demand for monitoring is price sensitive, but does not systematically depend on whether other subjects are informed about the monitoring decision. Almost no subjects take up the chance to monitor partially at a lower price. Rather subjects choose to monitor either perfectly or not at all. Little punishment takes place with imperfect information. The large majority of those subjects who monitor subsequently punish non-cooperative behavior, leading to a substantial and significant improvement in efficiency.
    Date: 2019
  9. By: Gary Charness (Department of Economics, University of California at Santa Barbara); Thomas Garcia (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France; QuBE - School of Economics and Finance, QUT, Brisbane, Australia); Theo Offerman (CREED and Tinbergen Institute, University of Amsterdam, Amsterdam, Netherlands); Marie Claire Villeval (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France; IZA, Bonn, Germany)
    Abstract: We consider the external validity of laboratory measures of risk attitude. Based on a large-scale experiment using a representative panel of the Dutch population, we test if these measures can explain two different types of behavior: (i) behavior in laboratory risky financial decisions, and (ii) behavior in naturally-occurring field behavior under risk (financial, health and employment decisions). We find that measures of risk attitude are related to behavior in laboratory financial decisions and the most complex measures are outperformed by simpler measures. However, measures of risk attitude are not related to risk-taking in the field, calling into question the methods currently used for the purpose of measuring actual risk preferences. We conclude that while the external validity of measures of risk attitude holds in closely related frameworks, this validity is compromised in more remote settings.
    Keywords: Risk preferences, elicitation methods, lab-in-the-field experiment
    JEL: C91 C93 D81
    Date: 2019
  10. By: Helénsdotter, Ronja (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The main objective of this paper is to strengthen the knowledge about the relationship be-tween cooperation and political affiliation. For this purpose, I carry out an incentivized N-person prisoner’s dilemma experiment. I find that left-wing voters cooperate more than right-wing voters in 3-person prisoner’s dilemmas. However, this difference in cooperation tapers off with group size due to a heterogeneous response to larger decision groups. While leftists cooperate less as the group size increases, I find no significant group size effect for rightists. These findings can partly be explained by differences in beliefs about the cooperativeness of others, but a substantial part remains unexplained.
    Keywords: Cooperation; Social dilemma; Political ideology; Group size; Experiment
    JEL: C71 C90 D70 D84
    Date: 2019–05
  11. By: Jana Hofmeier; Thomas Neuber
    Abstract: People care about others. But how do they assess the utility of others when making other-regarding decisions? Do they apply their own preferences or do they adopt the preferences of the other person? We study this question in a laboratory experiment where subjects in the role of senders can pay money to avoid harm arising to receivers. In a first step, we elicit all subjects’ willingness to pay (WTP) for not having to eat food items containing dried insects. We then show senders the WTPs of receivers and repeat the elicitation procedure, but now with receivers having to eat the food items and senders stating their WTPs to spare the receivers from having to eat them. We find that not only receivers’ preferences matter for decisions but also senders’ own preferences, a phenomenon for which we use the term imperfect empathy. In motivating prosocial transfers, senders’ and receivers’ WTPs act as complements by reinforcing each other. Conversely, pairs of sender and receiver who are dissimilar generate lower transfers than others. Since transfers usually benefit receivers more than they cost senders, we also find that dissimilarity within pairs reduces welfare. Our results complement the extensive literature on prosocial preferences, which so far abstracts from heterogeneous valuations. The implications might be far-reaching. For public welfare systems, e.g., systematic differences in consumption preferences between net payers and recipients could undermine public support.
    Keywords: altruism, empathy, prosocial giving
    JEL: D64 D90 D91
    Date: 2019–05
  12. By: Sebastian Schaube; Louis Strang
    Abstract: How does payoff interdependence affect preferences for redistribution? We experimentally implement a zero-sum setting and one in which everyone can be simultaneously successful. Across these, we compare redistribution given an identical level of inequality. First, two subjects’ performances in a real-effort task translate into chances of winning a prize. Across treatments, we vary the interdependence of payoffs: either there is only a single prize or both subjects can potentially win a prize at the same time. Afterwards, a spectator can redistribute the prize money. If payoffs are not directly interdependent, the average amount redistributed decreases by 14-22%. In additional treatments, solely performance determines the prize allocation. Nevertheless, the impact of payoff interdependence remains unchanged. Comparing the settings with and without randomness, we find that its mere presence increases redistribution, even though there is no uncertainty about the (relative) performance of the two subjects.
    Keywords: Redistribution, Social preferences, Fairness, Lab experiment
    JEL: C91 D31 D63 H23
    Date: 2019–06
  13. By: Wael Bousselmi (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz]); Patrick Sentis (GESEM - GESEM - Finance - UM1 - Université Montpellier 1); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: We study experimentally the reaction of asset markets to fundamental value (FV) shocks. The pre-shock and post-shock FV are both constant, but after the shock the FV is either higher or lower than before. We compare treatments with expected shocks (the date and the magnitude are known in advance, but not the direction) to treatments with unexpected shocks (subjects only know that a shock may occur but are unaware of the date and the magnitude). We observe mispricing in markets without shocks and in markets with shocks. Shocks tend to reduce the post-shock price deviation and to increase the difference of opinions (DO), whatever the type of the shock (expected or unexpected) and its direction (upwards or downwards). In contrast to standard predictions, the larger DO after a shock is not accompanied by an increase in transaction volumes, but by sharp depression of share turnover.
    Keywords: Experimental asset market,Shocks,Price bubble,Difference of opinions
    Date: 2019
  14. By: Florian Ederer (Cowles Foundation, Yale University); Frédéric Schneider (Yale School of Management)
    Abstract: Using a large-scale hybrid laboratory and online trust experiment with pre-play communication this paper investigates how the passage of time affects trust, trustworthiness, and cooperation. We provide evidence for the persistent power of communication. Even when three weeks pass between messages and actual choices and even when these choices are made outside of the lab, communication (predominantly through the use of promises) raises cooperation, trust, and trustworthiness by about 50 percent. Delays between the beginning of the interaction and the time to reciprocate neither substantially alter trust or trustworthiness nor affect how subjects choose to communicate.
    Keywords: Trust, Promises, Persistence, Trustworthiness, Delay
    JEL: C91 C72 D83
    Date: 2018–04
  15. By: Kevin Devereux; Mona Balesh Abadi; Farah Omran
    Abstract: The long run price elasticity of healthcare spending is critically important to estimating the cost of provision. However, temporary randomized controlled trials may be confounded by transitory effects. This paper shows evidence of a 'deadline effect' – a spike in spending in the final year of the program – among participants of the RAND Health Insurance Experiment, long considered the definitive RCT in the field. The deadline effect is economically and statistically significant, with power to identify coming from random allocation to three- or five-year enrolment terms. The deadline effect interacts with the price elasticity: participants who face lower coinsurance rates show larger spending spikes. Crucially, controlling for the price-deadline interaction yields significantly smaller estimates of the price elasticity in non-deadline years, which we argue is a better approximation for the long run elasticity. This has important implications for public finance and the design of private/temporary subsidy programs.
    Keywords: Health insurance; Moral hazard; Public health; RCTs
    JEL: C93 D91 H31 H42 H51 I12 I13
    Date: 2019–04
  16. By: Bershadskyy, Dmitri; Othman, Ehsan; Saxen, Frerk
    Abstract: This paper illustrates how audio-visual data from pre-play face-to-face communication can be used to identify groups which contain free-riders in a public goods experiment. It focuses on two channels over which face-to-face communication influences contributions to a public good. Firstly, the contents of the face-to-face communication are investigated by categorising specific strategic information and using simple meta-data. Secondly, a machine-learning approach to analyse facial expressions of the subjects during their communications is implemented. These approaches constitute the first of their kind, analysing content and facial expressions in face-to-face communication aiming to predict the behaviour of the subjects in a public goods game. The analysis shows that verbally mentioning to fully contribute to the public good until the very end and communicating through facial clues reduce the commonly observed end-game behaviour. The length of the face-to-face communication quantified in number of words is further a good measure to predict cooperation behaviour towards the end of the game. The obtained findings provide first insights how a priori available information can be utilised to predict free-riding behaviour in public goods games.
    Keywords: automatic facial expressions recognition,content analysis,public goods experiment,face-to-face communication
    JEL: C80 C92 D91
    Date: 2019
  17. By: Gaudeul, Alexia; Keser, Claudia; Müller, Stephan
    Abstract: We study the coexistence of strategies in the indirect reciprocity game where agents have access to second-order information. We fully characterize the evolutionary stable equilibria and analyze their comparative statics with respect to the cost-benefit ratio (CBR). There are indeed only two stable sets of equilibria enabling cooperation, one for low CBRs involving two strategies and one for higher CBR's which involves two additional strategies. We thereby offer an explanation for the coexistence of different moral judgments among humans. Both equilibria require the presence of second-order discriminators which highlights the necessity for higher-order information to sustain cooperation through indirect reciprocity. In a laboratory experiment, we find that more than 75% of subjects play strategies that belong to the predicted equilibrium set. Furthermore, varying the CBR across treatments leads to changes in the distribution of strategies that are in line with theoretical predictions.
    Keywords: Indirect reciprocity,Cooperation,Evolution,Experiment
    JEL: C73 C91 D83
    Date: 2019
  18. By: Béatrice Boulu-Reshef (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Jonah Schulhofer-Wohl (University of Virginia, The Department of Politics)
    Abstract: Parochial altruism-individual sacrifice to benefit the in-group and harm an out-group-undermines inter-group cooperation and is implicated in a plethora of politically-significant behaviors. We report new experimental findings about the impact of variation in social distance within the in-group together with variation in social distance between the in-and out-groups on parochial altruism. Building from a minimal group paradigm setup , we find that differential social distance has a systematic effect on individual choice in a setting of potential inter-group conflict. In particular, parochial altruism is stimulated when individuals' distance to both their in-and out-group is high. A long-standing finding about behavior in contexts of inter-group conflict is that low social distance facilitates collective action. Our results suggest that the effects of high social distance may create a potential additional pathway to group-based individual action. Research on inter-group conflict and collective action can be advanced by investigating such effects.
    Date: 2019–05–21
  19. By: Nicolas Jacquemet (PSE - Paris School of Economics, UP1 - Université Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stephane Luchini (Aix-Marseille School of Economics [Aix-Marseille Université] - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - Centre de la Vieille Charité [Aix-Marseille Université]); Jason Shogren (UW - University of Wyoming); Verity Watson (Health Economics Research Unit - University of Aberdeen)
    Abstract: Using discrete choices to elicit preferences is a major tool to help guide public policy. Although Discrete Choice Experiment (DCE) remains by far the most popular mechanism used to elicit preferences, its reliability still is questionable. Using an induced value experimental design, we show that standard benchmarks achieve no more than 56% (hypothetical answers with no monetary incentives) to 60% (real monetary incentives) of payoff maximizing choices. Herein we demonstrate that having respondents sign a the truth-telling oath reduces non-payoff maximizing choices by nearly 50% relative to these benchmarks. The explicit and voluntary commitment to honesty improved decisions. Further, we show that it is the explicit commitment to honesty induced by the truth-telling oath improves choices, not just any oath mechanism, i.e., an oath to task or to duty did not improve choices.
    Keywords: Discrete Choice Experiments,Stated Preferences,Oath,Truth-telling,External validity,Welfare
    Date: 2019–05
  20. By: Oechssler, Jörg; Sofianos, Andis
    Abstract: We test whether the binary lottery procedure makes subjects behave as if they are risk neutral in the Holt-Laury and Eckel-Grossman tasks. Depending on the task we find that at most a third of subjects behave as if risk neutral. In fact, when we compare the distribution of choices we find no significant difference to earlier experiments in the same lab that did not use the binary lottery procedure.
    Keywords: risk elicitation; binary lottery procedure; experimental economics
    Date: 2019–05–17
  21. By: Altmann, Steffen (IZA and University of Copenhagen); Grunewald, Andreas (Goethe University Frankfurt); Radbruch, Jonas (IZA)
    Abstract: Passive behavior is ubiquitous - even when facing various alternatives to choose from, people commonly fail to take decisions. This paper provides evidence on the cognitive foundations of such "passive choices" and studies implications for policies that encourage active decision-making. In an experiment designed to study passive behavior, we document three main results. First, we demonstrate that scarcity of cognitive resources leads to passive behavior. Second, policies that encourage active choice succeed in reducing passivity and improve decisions in the targeted domain. Third, however, these benefits of choice-promoting policies come at the cost of negative cognitive spillovers to other domains.
    Keywords: passivity, cognitive resources, scarcity, spillover effects, active decision-making, default options
    JEL: D91 D01 D04 C91
    Date: 2019–05
  22. By: Giovanni Di Bartolomeo; Martin Dufwenberg; Stefano Papa; Francesco Passarelli
    Abstract: Why do people keep their promises? Vanberg (2008) and Ederer & Stremitzer (2017) provide causal evidence in favor of, respectively, an intrinsic preference for keeping one’s word and Charness & Dufwenberg’s (2006) expectations-based account based on guilt aversion. The overall picture is incomplete though, as no study disentangles effects in a design that provides exogenous variation of both (the key features of) promises and beliefs. We present an experimental design that does so.
    Keywords: Promises; Expectations; Guilt aversion; Moral commitment; Causation
    JEL: A13 C91 D03 D64
    Date: 2018–12
  23. By: Wening Sarwosri, Arieska; Mußhoff, Oliver
    Abstract: This study examines whether the decision of crop diversification for perennial crops is based on underlying risk attitudes and time preferences. We conducted incentivised field experiments on Sumatra Island, Indonesia, involving farmers who cultivate rubber and farmers who cultivated rubber and oil palm trees, i.e., undertook crop diversification. We estimated risk attitudes and time preferences jointly. The results indicated that farmers who undertook crop diversification were statistically significantly more risk-averse than rubber farmers. However, the time preferences between the two groups were not statistically significantly different.
    Keywords: crop diversification,oil palms,risk attitudes,rubber,time preference
    Date: 2019
  24. By: Marx, Paul (University of Duisburg-Essen)
    Abstract: Many observers have noticed the importance of anger in contemporary politics, particularly with reference to populism. This article addresses the question under which conditions people become angry about a specific aspect of their lives: their personal financial situation. Specifically, it asks if populist anti-elite rhetoric has a causal influence on anger and if this influence differs across socio-economic groups. The theoretical expectation is that populist rhetoric allows people to externalize responsibility for an unfavorable financial situation and thereby to turn negative self-conscious emotions into anger. The argument is tested with original survey data from France, Germany, and the United States. The empirical analysis yields three main insights. First, negative emotional reactions to respondents' personal finances (and anger in particular) are surprisingly widespread in all three countries. Second, there is a pronounced socio-economic gradient in anger and other negative emotions. Third, and most importantly, randomly exposing participants to (mildly) populist anti-elite rhetoric causes considerably higher expressed anger about one's financial situation in France and Germany, but less so in the United States. This suggests a causal role of populist rhetoric in stirring 'pocketbook anger'. This is true in particular in the middle classes. The notion that populist rhetoric reduces negative self-conscious emotions, such as shame, is not supported by the data.
    Keywords: populism, anger, socio-economic problems, middle class, survey experiments
    JEL: D72 D74 P16
    Date: 2019–05
  25. By: Brice Corgnet (Univ Lyon, EM Lyon, GATE UMR 5824, F-69130 Ecully, France); Cary Deck (University of Alabama & Chapman University); Mark DeSantis (Chapman University); Kyle Hampton (Chapman University); Erik O. Kimbrough (Chapman University)
    Abstract: The ability of markets to aggregate diverse information is a cornerstone of economics and finance, and empirical evidence for such aggregation has been demonstrated in previous laboratory experiments. Most notably Plott and Sunder (1988) find clear support for the rational expectations hypothesis in their Series B and C markets. However, recent studies have called into question the robustness of these findings. In this paper, we report the result of a direct replication of the key information aggregation results presented in Plott and Sunder. We do not find the same strong evidence in support of rational expectations that Plott and Sunder report suggesting information aggregation is a fragile property of markets.
    Keywords: Aggregation, Efficient Markets, Rational Expectations, Experiments, Replication
    JEL: D92 G14
    Date: 2019
  26. By: Gentry Johnson; Brian Quistorff; Matt Goldman
    Abstract: When pre-processing observational data via matching, we seek to approximate each unit with maximally similar peers that had an alternative treatment status--essentially replicating a randomized block design. However, as one considers a growing number of continuous features, a curse of dimensionality applies making asymptotically valid inference impossible (Abadie and Imbens, 2006). The alternative of ignoring plausibly relevant features is certainly no better, and the resulting trade-off substantially limits the application of matching methods to "wide" datasets. Instead, Li and Fu (2017) recasts the problem of matching in a metric learning framework that maps features to a low-dimensional space that facilitates "closer matches" while still capturing important aspects of unit-level heterogeneity. However, that method lacks key theoretical guarantees and can produce inconsistent estimates in cases of heterogeneous treatment effects. Motivated by straightforward extension of existing results in the matching literature, we present alternative techniques that learn latent matching features through either MLPs or through siamese neural networks trained on a carefully selected loss function. We benchmark the resulting alternative methods in simulations as well as against two experimental data sets--including the canonical NSW worker training program data set--and find superior performance of the neural-net-based methods.
    Date: 2019–05
  27. By: Hippolyte d'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Giuseppe Attanasi (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Emmanuel Thibault (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales)
    Keywords: Self-insurance,annuity,uncertain survival probabilities,smooth ambiguity aversion,charity,experiment
    Date: 2019–05
  28. By: Lukas Kiessling; Jonas Radbruch; Sebastian Schaube
    Abstract: Peers influence behavior in many domains. We study whom individuals choose as peers and explore individual determinants of peer selection. Using data from a framed field experiment at secondary schools, we analyze how peer choices depend on relative performance, personality differences, and the presence of friendship ties. Our results document systematic patterns of peer choice: friendship is the most important determinant, albeit not the only one. Individuals exhibit homophily in personality, and prefer on average similar but slightly stronger performing peers. Our results help to rationalize models of differential and non-linear peer effects and to understand reference group formation.
    Keywords: Peer Effects, Peer Selection, Social Comparison, Reference Points
    JEL: C93 D01 D03 J24 L23
    Date: 2019–05
  29. By: Hakimov, Rustamdjan; Kübler, Dorothea
    Abstract: The paper surveys the experimental literature on matching markets. It covers house allocation, school choice, and two-sided matching markets such as college admissions. The main focus of the survey is on truth-telling and strategic manipulations by the agents, on the stability and efficiency of the matching outcome, as well as on the distribution of utility.
    Keywords: experiments,matching markets,survey
    JEL: C92 D83
    Date: 2019
  30. By: Jeworrek, Sabrina; Mertins, Vanessa
    Abstract: The mission of a job does not only affect the type of worker attracted to an organisation, but may also provide incentives to an existing workforce. We conducted a natural field experiment with 267 short-time workers and randomly allocated them to either a prosocial or a commercial job. Our data suggest that the mission of a job itself has a performance enhancing motivational impact on particular individuals only, i.e., workers with a prosocial attitude. However, the mission is very important if it has been actively selected. Those workers who have chosen to contribute to a social cause outperform the ones randomly assigned to the same job by about 15 percent. This effect seems to be a universal phenomenon which is not driven by information about the alternative job, the choice itself or a particular subgroup.
    Keywords: active decision,cognitive dissonance theory,field experiment,mission,performance,prosocial work
    JEL: C93 D64 J33 M52 M55
    Date: 2019
  31. By: Karen Clay; Peter Juul Egedesø; Casper Worm Hansen; Peter Sandholt Jensen; Avery Calkins
    Abstract: This paper studies the immediate and long-run mortality effects of the first community-based health intervention in the world – the Framingham Health and Tuberculosis Demonstration, 1917-1923. The official evaluation committee and the historical narrative suggest that the demonstration was highly successful in controlling tuberculosis and reducing mortality. Using newly digitized annual cause-of-death data for municipalities in Massachusetts, 1901-1934, and different empirical strategies, we find little evidence to support this positive assessment. In fact, we find that the demonstration did not reduce tuberculosis mortality, all-age mortality, nor infant mortality. These findings contribute to the ongoing debate on whether public-health interventions mattered for the decline in (tuberculosis) mortality prior to modern medicine. At a more fundamental level, our study questions this particular type of community-based setup with non-random treatment assignment as a method of evaluating policy interventions.
    JEL: I15 I18 N32
    Date: 2019–05
  32. By: Francisco B. Galarza (Universidad del Pacífico); Fernando Requejo (Universidad del Pacífico)
    Abstract: We study the impact of two-sided incentives on the reduction of informality. We model those incentives using the notion of network externalities, which link the (formal or informal) merchant’s profits to the type of customers they serve (formal or informal). Our theoretical framework yields two straightforward testable implications: the merchant will find more profitable to become formal (or informal), as long as more of their customers are formal (or informal); and, formal and informal commercial sectors may coexist in equilibrium. We test these hypotheses using data from a field experiment, conducted with micro and small enterprises in Lima, Peru. Our subjects had to choose, in a repeated fashion, among three ‘platforms’, which proxy for being formal, informal, or performing a reservation activity. We then changed the relative size of the network of formal vis-á-vis informal customers, in order to calculate the consumer’s network externality. We find that the network externality is relatively large, a result that opens up the possibility to reduce commercial informality using two-sided incentives. Moreover, the platform choice between the formal and informal sectors is sensitive to risk preferences.
    Keywords: Network externality, informality, two-sided incentives, experiments
    JEL: C93 E26 O17
    Date: 2019–06
  33. By: Dirk Bergemann (Cowles Foundation, Yale University); Benjamin Brooks (Dept. of Economics, University of Chicago); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders’ independent signals. If the object is optimally sold with probability one, then the optimal mechanism is simply a posted price, with the highest price such that every type of every bidder is willing to buy the object. A sufficient condition for the posted price to be optimal among all mechanisms is that there is at least one potential bidder who is omitted from the auction. If the object is optimally sold with probability less than one, then optimal mechanisms skew the allocation towards bidders with lower signals. This can be implemented via a modi?ed Vickrey auction, where there is a random reserve price for just the high bidder. The resulting allocation induces a “winner’s blessing,” whereby the expected value conditional on winning is higher than the unconditional expectation. By contrast, standard auctions that allocate to the bidder with the highest signal (e.g., the ?rst-price, second-price or English auctions) deliver lower revenue because of the winner’s curse generated by the allocation rule. Our qualitative results extend to more general common value environments where the winner’s curse is large.
    Keywords: Optimal auction, Common values, Maximum game, Posted price, Reserve price, Revenue equivalence
    JEL: C72 D44 D82 D83
    Date: 2018–11

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.