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on Experimental Economics |
| By: | Christoph Kuzmics (University of Graz, Austria); Brian W. Rogers (Washington University in St. Louis, USA); Xiannong Zhang (Washington University in St. Louis, USA) |
| Abstract: | We perform two types of lab experiments to assess the normative and positive appeal of preference models exhibiting ambiguity aversion. Our first experiment is a simple extension of the Ellsberg [1961] two-color urn experiment in which there is an option that hedges ambiguity away completely and that dominates the options that correspond to Ellsberg behavior. 63% of subjects choose the dominated Ellsberg options, which compares similarly to the proportion of subjects choosing the risky urn in the standard two-color experiment. While subjective expected utility cannot explain this choice, also none of the classical models of ambiguity aversion can explain this choice. Our second experiment is also based on the Ellsberg two-color urn experiment. In this experiment, in various treatments, we provide advice in the form of short video clips in favor of, as well as against, the Ellsberg choice. We find suggestive, but not conclusive, evidence that subjects' choices are influenced by advice and, in these cases, mostly in the direction of abandoning the Ellsberg option. |
| Keywords: | Knightian uncertainty; Subjective expected utility; Ambiguity aversion; lab experiment |
| JEL: | C91 D81 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2019-07&r=all |
| By: | Maximilian Kasy; Anja Sautmann |
| Abstract: | The goal of many experiments is to inform the choice between different policies. However, standard experimental designs are geared toward point estimation and hypothesis testing. We consider the problem of treatment assignment in an experiment with several non-overlapping waves, where the goal is to choose among a set of possible policies (treatments) for large-scale implementation. The optimal experimental design learns from earlier waves and assigns more experimental units to the better-performing treatments in later waves. We propose a computationally tractable approximation of the optimal design that we call “exploration sampling,” where assignment probabilities are an increasing concave function of the posterior probabilities that each treatment is optimal. Theoretical results and calibrated simulations demonstrate improvements in welfare, relative to both non-adaptive designs as well as bandit algorithms. An application to selecting between different recruitment strategies for an agricultural extension service in Odisha, India demonstrates practical feasibility. |
| Keywords: | experimental design, field experiments, optimal policy |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7778&r=all |
| By: | Banerjee, Abhijit; La Ferrara, Eliana; Orozco, Victor |
| Abstract: | We test the effectiveness of an entertainment education TV series, MTV Shuga, aimed at providing information and changing attitudes and behaviors related to HIV/AIDS. Using a simple model we show that "edutainment" can work through an `individual' or a `social' channel. We conducted a randomized controlled trial in urban Nigeria where young viewers were exposed to MTV Shuga or to a placebo TV series. Among those exposed to MTV Shuga, we created additional variation in the `social messages' they received and in the people with whom they watched the show. We find significant improvements in knowledge and attitudes towards HIV and risky sexual behavior. Treated subjects are twice as likely to get tested for HIV eight months after the intervention. We also find reductions in STDs among women. These effects are stronger for viewers who report being more involved with the narrative, consistent with the psychological underpinnings of "edutainment". Our experimental manipulations of the social norm component did not produce significantly different results from the main treatment. The `individual' effect of edutainment thus seems to have prevailed in the context of our study. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13892&r=all |
| By: | Mari Rege; Ingunn Størksen; Ingeborg F. Solli; Ariel Kalil; Megan McClelland; Dieuwer ten Braak; Ragnhild Lenes; Svanaug Lunde; Svanhild Breive; Martin Carlsen; Ingvald Erfjord; Per S. Hundeland |
| Abstract: | This study tests an intervention that introduces a structured curriculum for five-year olds into the universal preschool context of Norway. We conduct a field experiment with 691 five-year-olds in 71 preschools and measure treatment impacts on children’s development in mathematics, language and executive functioning. Compared to business as usual, the nine-month curriculum intervention has effects on child development at post-intervention and the effects persist one year following the end of the treatment. The effects are entirely driven by the preschool centers identified as low-quality at baseline, suggesting that a structured curriculum can reduce inequality in early childhood learning environments. |
| Keywords: | universal preschool, intervention, randomized controlled trial, field experiment, child development |
| JEL: | I20 H42 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7775&r=all |
| By: | Sanjit Dhami; Junaid Arshad; Ali al-Nowaihi |
| Abstract: | Microfinance contracts have enormous economic and welfare significance. We study, theoretically and empirically, the problem of effort choice under individual liability (IL) and joint liability (JL) contracts when loan repayments are made either privately, or publicly in front of one’s social group. Our theoretical model identifies guilt from letting down the expectations of partners in a JL contract, and shame from falling short of normatively inadequate effort, under public repayment of loans, as the main psychological drivers of effort choice. Evidence from our lab-in-the-field experiment in Pakistan reveals large treatment effects and confirms the central roles of guilt and shame. Under private repayment, a JL contract increases effort by almost 100% relative to an IL contract. Under public repayment, effort levels are comparable under IL and JL contracts, which is consistent with recent empirical results. This indicates that shame-aversion plays a more important role as compared to guilt-aversion. Under IL, repayment in public relative to private repayment increases effort by 60%, confirming our shame-aversion hypothesis. Under JL, a comparison of private and public repayment shows that shame trumps guilt in explaining effort choices of borrowers. |
| Keywords: | microfinance, joint/individual liability, public/private repayment, belief-dependent motivations, guilt, shame, peer pressure, social capital, lab-in-the-field experiment |
| JEL: | C91 C92 D82 D91 G21 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7773&r=all |
| By: | Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter |
| Abstract: | Many important intertemporal decisions, such as investments of firms or households, are made by groups rather than individuals. Little is known what happens to such collective decisions when group members have different incentives for waiting, because the economics literature on group decision making has, so far, assumed homogeneity within groups. In a lab experiment, we study the causal effect of group members’ heterogeneous payoffs from waiting on intertemporal choices. We find that three-person groups behave more patiently than individuals and that this effect is driven by the presence of at least one group member with a high payoff from waiting. We present group chat content, survey data, and additional treatments to uncover the mechanism through which heterogeneity in groups increases patience. |
| Keywords: | patience, time preferences, group decisions, payoff heterogeneity, experiment |
| JEL: | C91 C92 D03 D90 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7716&r=all |
| By: | Peter Bergman; Raj Chetty; Stefanie DeLuca; Nathaniel Hendren; Lawrence F. Katz; Christopher Palmer |
| Abstract: | Low-income families in the United States tend to live in neighborhoods that offer limited opportunities for upward income mobility. One potential explanation for this pattern is that families prefer such neighborhoods for other reasons, such as affordability or proximity to family and jobs. An alternative explanation is that they do not move to high-opportunity areas because of barriers that prevent them from making such moves. We test between these two explanations using a randomized controlled trial with housing voucher recipients in Seattle and King County. We provided services to reduce barriers to moving to high-upward-mobility neighborhoods: customized search assistance, landlord engagement, and short-term financial assistance. The intervention increased the fraction of families who moved to high-upward-mobility areas from 14% in the control group to 54% in the treatment group. Families induced to move to higher opportunity areas by the treatment do not make sacrifices on other dimensions of neighborhood quality and report much higher levels of neighborhood satisfaction. These findings imply that most low-income families do not have a strong preference to stay in low-opportunity areas; instead, barriers in the housing search process are a central driver of residential segregation by income. Interviews with families reveal that the capacity to address each family's needs in a specific manner – from emotional support to brokering with landlords to financial assistance – was critical to the program's success. Using quasi-experimental analyses and comparisons to other studies, we show that more standardized policies – increasing voucher payment standards in high-opportunity areas or informational interventions – have much smaller impacts. We conclude that redesigning affordable housing policies to provide customized assistance in housing search could reduce residential segregation and increase upward mobility substantially. |
| JEL: | H0 J0 R0 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26164&r=all |
| By: | Cristina Bicchieri, Eugen Dimant and Silvia Sonderegger (University of Pennsylvania); Eugen Dimant and Silvia Sonderegger (University of Pennsylvania); Silvia Sonderegger (University of Nottingham) |
| Abstract: | variant of the \dice under the cup" paradigm, in which subjects' beliefs are elicited in stage 1 before performing the dice task in stage 2. In stage 1, we elicit the subjects' beliefs about (i) majoritarian behavior or (ii) majoritarian normative beliefs in a previous session, and, in order to identify self-serving belief distortion, we vary whether participants are aware or unaware of the upcoming opportunity to lie in the dice task. We find that belief distortion occurs, but only with a specific kind of beliefs. When subjects are aware of the dice task ahead, they convince themselves that lying behavior is widespread in order to justify their lying. In contrast with beliefs about majority behavior, we find that beliefs about the extent to which lying is disapproved of are not distorted. Believing that the majority disapproves of lying does not inhibit own lying. These findings are consistent with a model where agents are conditional norm-followers, and where honest behavior is a strong indicator of disapproval of lying, but disapproval of lying is not a strong indicator of honest behavior. |
| Keywords: | Cheating, Experiment, Lying, Social Norms, Uncertainty |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2019-07&r=all |
| By: | Burke, Jeremy; Jamison, Julian C.; Karlan, Dean S.; Mihaly, Kata; Zinman, Jonathan |
| Abstract: | There is little evidence on how the large market for credit score improvement products affects consumers or credit market efficiency. A randomized encouragement design on a standard credit builder loan (CBL) identifies null average effects on whether consumers have a credit score and the score itself, with important heterogeneity: those with loans outstanding at baseline fare worse, those without fare better. Selection, treatment effect, and prediction models indicate the CBL reveals valuable information to markets, inducing positive selection and making credit histories more precise, while keeping credit scores' predictive power intact. With modest targeting changes, CBLs could work as intended. |
| Keywords: | consumer finance; credit invisibles; credit scoring; household finance; screening; subprime; thin file |
| JEL: | D12 G14 G21 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13884&r=all |
| By: | Ariel Soto-Caro; Feng Wu; Zhengfei Guan |
| Abstract: | Farmers use pesticides to reduce yield losses. The efficacies of pesticide treatments are often evaluated by analyzing the average treatment effects and risks. The stochastic efficiency with respect to a function is often employed in such evaluations through ranking the certainty equivalents of each treatment. The main challenge of using this method is gathering an adequate number of observations to produce results with statistical power. However, in many cases, only a limited number of trials are replicated in field experiments, leaving an inadequate number of observations. In addition, this method focuses only on the farmer's profit without incorporating the impact of disease pressure on yield and profit. The objective of our study is to propose a methodology to address the issue of an insufficient number of observations using simulations and take into account the effect of disease pressure on yield through a quantile regression model. We apply this method to the case of strawberry disease management in Florida. |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1908.01808&r=all |
| By: | Matilde Giaccherini; David H. Herberich; David Jimenez-Gomez; John A. List; Giovanni Ponti; Michael K. Price |
| Abstract: | This paper uses a field experiment to estimate behavioral parameters from a structural model of residential adoption of technology. As our model includes both economic and psychological factors, we are able to identify the role of prices, social norms, social pressure, and curiosity on the adoption decision. We find that prices and social norms influence the adoption decision along different margins, opening up the opportunity for economics and psychology to be strong complements in the diffusion process. In addition, welfare estimates from our structural model point to important household heterogeneities: whereas some consumers welcome the opportunity to purchase and learn about the new technology, for others the inconvenience and social pressure of the ask results in negative welfare. As a whole, our findings highlight that the design of optimal technological diffusion policies will require multiple instruments and a recognition of individual household heterogeneities. |
| JEL: | D9 D91 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26173&r=all |
| By: | Francesco Burchi (IPC-IG); Christoph Strupat (IPC-IG) |
| Abstract: | "Since the beginning of the 21st century we have witnessed a proliferation of social protection schemes in several countries in sub-Saharan Africa. Recent empirical evidence points to the effectiveness of these policies?in particular, cash transfers?in improving the ability of beneficiaries to meet their basic needs. However, it seems that cash transfers alone do not reduce poverty in a sustainable manner, and this is usually not even their explicit aim. Cash transfer beneficiaries do not manage to exit poverty by their own means; therefore, they remain dependent on social assistance". (...) |
| Keywords: | economic empowerment, programmes, successful, experimental, evidence, Malawi |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opager:423&r=all |
| By: | Sandro Ambuehl; B. Douglas Bernheim; Axel Ockenfels |
| Abstract: | We study experimentally when, why, and how people intervene in others’ choices. Choice Architects (CAs) construct opportunity sets containing bundles of time-indexed payments for Choosers. CAs frequently prevent impatient choices despite opportunities to provide advice, believing Choosers benefit. We consider several hypotheses concerning CAs’ motives. A conventional behavioral welfarist acts as a correctly informed social planner; a mistakes-projective paternalist removes options she wishes she could reject when choosing for herself; an ideals-projective paternalist seeks to align others’ choices with her own aspirations. Ideals-projective paternalism provides the best explanation for interventions in the laboratory and rationalizes support for actual paternalistic policies. |
| Keywords: | paternalism, libertarianism, welfare economics, experiment, false consensus bias |
| JEL: | D03 D04 H00 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7762&r=all |
| By: | Hirshleifer, Sarojini; Ortiz Becerra, Karen; Ghanem, Dalia |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2019–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea19:291215&r=all |
| By: | Austin Nichols (Abt Associates) |
| Abstract: | A well-known result is that exactly identified IV has no moments, including in the ideal case of an experimental design (i.e. a randomized control trial with imperfect compliance. This result no longer holds when the sign of the first stage is known, however. I describe a Stata implementation of an unbiased estimator for instrumental variables models with a single endogenous regressor where the sign of one or more first‐stage coefficients is known (due to Andrews and Armstrong 2017) and its finite sample properties under alternative error structures. |
| Date: | 2019–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:boc:scon19:44&r=all |
| By: | Ruiz-Buforn, Alba; Alfarano, Simone; Morone, Andrea |
| Abstract: | This paper addresses the question of how public announcements can affect social welfare in an experimental asset market with costly private information acquisition. More specifically, we analyze how public information affects (i) the aggregate profits and (ii) the level of inequality in the distribution of profits across subjects. Using the data of Ruiz-Buforn et al. (2018), we show that public information disclosure always increases aggregate profits, since it crowds out private information reducing the informational costs. Nevertheless, the effects on the level of wealth inequality are ambiguous. They depend on the relative precision of public and private information and, interestingly, on the realization of the public signal. Thus, public information disclosure leads to a trade-off between increasing aggregate profits and reducing the inequality level. |
| Keywords: | Public information; Asset market experiment; Inequality; Crowding-out |
| JEL: | D63 D82 D83 G1 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95424&r=all |
| By: | Mariana Carrera; Heather Royer; Mark Stehr; Justin Sydnor; Dmitry Taubinsky |
| Abstract: | A large literature treats take-up of commitment contracts, in the form of choice-set restrictions or penalties, as a smoking gun for (awareness of) self-control problems. This paper provides new techniques for examining the validity of this assumption, as well as a new approach for detecting (awareness of) self-control problems. Theoretically, we show that with some uncertainty about the future, demand for commitment contracts is closer to a special case than to a robust implication of models of limited self-control. In a field experiment with 1292 members of a fitness facility, we find that many participants take up commitment contracts both for going to the gym more and for going to the gym less, and there is a significant positive correlation in demand for these two types of contracts. This suggests that commitment contract take-up reflects, at least in part, something other than the desire to change own future behavior, such as demand effects or "noisy valuation." Moreover, we find that commitment contract take-up is negatively related to awareness of self-control problems: a novel information treatment that increased awareness of self-control problems reduced demand for commitment contracts. We address the limitations of using commitment contracts as a measurement tool by showing that a combination of belief forecasts and willingness to pay for linear incentives provides more robust identification of limited self-control and people's awareness of it. We use the methodology to obtain some of the first parameter estimates of partially-sophisticated quasi-hyperbolic discounting in the field. |
| JEL: | C9 D9 I12 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26161&r=all |
| By: | Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Maarten van Rooij |
| Abstract: | We implement a survey of Dutch households in which random subsets of respondents receive information about inflation. The resulting exogenously generated variation in inflation expectations is used to assess how expectations affect subsequent monthly consumption decisions relative to those in a control group. The causal effects of elevated inflation expectations on non-durable spending are imprecisely estimated but there is a sharp negative effect on durable spending. We provide evidence that this is likely driven by the fact that Dutch households seem to become more pessimistic about their real income as well as aggregate spending when they increase their inflation expectations. There is little evidence to support the idea that the degree to which respondents change their beliefs or their spending in response to information treatments depends on their level of cognitive or financial constraints. |
| JEL: | C83 D84 E31 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26106&r=all |
| By: | Rodrigo A. Velez; Alexander L. Brown |
| Abstract: | We study the plausibility of sub-optimal Nash equilibria of the direct revelation mechanism associated with a strategy-proof social choice function. By using the recently introduced empirical equilibrium analysis (Velez and Brown, 2019, arXiv:1804.07986) we determine that this behavior is plausible only when the social choice function violates a non-bossiness condition and information is not interior. Analysis of the accumulated experimental and empirical evidence on these games supports our findings. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1907.12408&r=all |
| By: | Amanda Kowalski |
| Abstract: | I develop a model of a randomized experiment with a binary intervention and a binary outcome. Potential outcomes in the intervention and control groups give rise to four types of participants. Fixing ideas such that the outcome is mortality, some participants would live regardless, others would be saved, others would be killed, and others would die regardless. These potential outcome types are not observable. However, I use the model to develop estimators of the number of participants of each type. The model relies on the randomization within the experiment and on deductive reasoning. I apply the model to an important clinical trial, the PROWESS trial, and I perform a Monte Carlo simulation calibrated to estimates from the trial. The reduced form from the trial shows a reduction in mortality, which provided a rationale for FDA approval. However, I find that the intervention killed two participants for every three it saved. |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1908.05810&r=all |
| By: | Tatsuhiro Shichijo |
| Abstract: | We theoretically study the effect of a third person enforcement on a one-shot prisoner's dilemma game played by two persons, with whom the third person plays repeated prisoner's dilemma games. We find that the possibility of the third person's future punishment causes them to cooperate in the one-shot game. |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1908.04971&r=all |