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on Experimental Economics |
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Issue of 2019‒10‒28
twenty-one papers chosen by |
| By: | Bharat K. Chandar; Ali Hortaçsu; John A. List; Ian Muir; Jeffrey M. Wooldridge |
| Abstract: | Field experiments conducted with the village, city, state, region, or even country as the unit of randomization are becoming commonplace in the social sciences. While convenient, subsequent data analysis may be complicated by the constraint on the number of clusters in treatment and control. Through a battery of Monte Carlo simulations, we examine best practices for estimating unit-level treatment effects in cluster-randomized field experiments, particularly in settings that generate short panel data. In most settings we consider, unit-level estimation with unit fixed effects and cluster-level estimation weighted by the number of units per cluster tend to be robust to potentially problematic features in the data while giving greater statistical power. Using insights from our analysis, we evaluate the effect of a unique field experiment: a nationwide tipping field experiment across markets on the Uber app. Beyond the import of showing how tipping affects aggregate market outcomes, we provide several insights on aspects of generating and analyzing cluster-randomized experimental data when there are constraints on the number of experimental units in treatment and control. |
| JEL: | C23 C33 C5 C9 C91 C92 C93 D47 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26389&r=all |
| By: | Ai Takeuchi (College of Economics, Ritsumeikan University); Erika Seki (Graduate School of Economics, Osaka University) |
| Abstract: | This article theoretically and experimentally examines the twin problems of free-riding and coordination failure faced by blood banks, by investigating the effects of information provision on the efficiency of blood donation. We augment a standard linear public goods game, incorporating the following features of blood donation: multiplicity of public goods (to reflect intertemporal coordination issues), current and upcoming upper bound demands (to incorporate the perishable nature of blood and the embargo period of consecutive donations), and semi-binary choices (to account for individual options to withhold donations or make donations and when). We analyze whether a provision of deterministic information on the potential blood demand (full information) would improve the efficiency of blood donation when compared to the provision of probabilistic information (partial information). The theory predicts that if each individual maximizes the payoff-sum of all players, then the full information provision would achieve donation efficiency in equilibrium. The results of laboratory experiment show that the full information provision does not improve the efficiency of donation, on an average. We find that full information improves intertemporal coordination, but it worsens the free-riding problem. Although information helps individuals to direct donations in response to the demand, it drives individuals to withhold donations to avoid potential wastage against the risk of donation over the upper bound. When the predicted total demand is relatively small, that is, when strategic uncertainty about others donation matters for achieving efficiency, the provision of information about intertemporal demand in upper bounds tends to lower efficiency because the gdonation withholding h effect becomes dominant. |
| Keywords: | Blood donation, Free-riding, Coordination, Public goods, Laboratory experiment, Information |
| JEL: | C72 C91 C92 H41 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1915&r=all |
| By: | Yoshio Kamijo; Takehito Masuda; Hiroshi Uemura |
| Abstract: | We employed a game-theoretic framework to formulate and analyze a number of tax audit rules, especially the lowest income reporter audited rule. We explicitly considered the auditor’s resource constraint to choose one target from a continuous type of taxpayer. We then tested the theoretical predictions in a laboratory experiment, using three audit rules: the random, cut-off, and lowest income reporter audited rules. While the cut-off rule is known to be optimal in theory, it has not thus far been examined in a controlled laboratory experimental setting. Contrary to the theory, the lowest income reporter audited rule increased average compliance behavior significantly more compared with the optimal cut-off rule and, especially, the random rule. This holds with and without controlling the subjects’ demographics and attitudes regarding tax payment. This finding is practically important because the tax authorities in most countries assign higher priority to enhancing tax compliance. |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1064&r=all |
| By: | Dobbie, Will (Harvard Kennedy School and NBER); Song, Jae (Social Security Administration) |
| Abstract: | We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity constraints and (ii) delayed interest write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and interest write-downs using both the experiment and cross-sectional variation in treatment intensity. We find that the interest write-downs significantly improved both financial and labor market outcomes, despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints. |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp19-030&r=all |
| By: | Geraldes, Diogo; Heinicke, Franziska; Rosenkranz, Stephanie |
| Abstract: | The expanding literature on lying has exclusively considered lying behavior within a one-dimensional context. While this has been an important first step, many real-world contexts involve the possibility of simultaneously lying in more than one dimension (e.g., reporting one’s income and expenses in a tax declaration). In this paper, we experimentally investigate individual lying behavior in both one- and two-dimensional contexts to understand whether the multi-dimensionality of a decision affects lying behavior. In the one-dimensional treatment, participants are asked to roll two dice in one hand and to report the sum of both dice. In the two-dimensional treatment, participants are asked to roll two dice at the same time, but one in each hand, and to report the two dice separately. Our paper provides the first evidence regarding lying behavior in a multi-dimensional context. Using a two-dimensional die-roll task, we show that participants lie partially between dimensions, which results in greater overreporting of the lower outcome die. These findings suggest a thought-provoking policy to tackle the infamous societal challenge of tax fraud: Tax report checks should focus on the item(s) for which a taxpayer profile hints at higher self-benefits in case of misreporting. |
| Keywords: | lying, honesty, morals, multidimensional, lab experiment, lab-in-the-field experiment |
| JEL: | C91 C93 D82 H26 |
| Date: | 2019–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:96640&r=all |
| By: | James Alm (Tulane University); James C. Cox (Georgia State University); Vjollca Sadiraj (Georgia State University) |
| Abstract: | We develop and analyze a dynamic model of individual taxpayer compliance choice that predicts "audit state dependent taxpayer compliance," by distinguishing between the implications of forward-looking versus myopic versus naïve behavior. We then test experimentally the audit state dependent model by reporting the results from the first tax compliance experiment run in Colombia. Consistent with previous studies as well as theoretical predictions, we find that subjects' compliance rates increase with greater enforcement, especially the audit rate. We also find more novel results, both theoretically and empirically: fine rates should be increased after an audit to discourage otherwise-increased underreporting, and "nudging" myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority. |
| Keywords: | Tax compliance, nudges, laboratory experiments. |
| JEL: | H26 C91 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1907&r=all |
| By: | Jan Priebe (German Institute of Global and Area Studies (GIGA), Hamburg, Germany); Ute Rink (University of Goettingen); Henry Stemmler (University of Goettingen) |
| Abstract: | This paper looks at individual risk behavior and disability in Vietnam, where many households live with a disabled family member. Due to the Vietnam war, disability is a common phenomenon and shapes individuals’ daily life and decision making. Using longitudinal data of 2200 households in Vietnam and an instrumental variable strategy, we show that individuals who live with a disabled family member are more risk averse than others. In addition we employ field experiments and psychological primes to elicit risk and loss behavior of individuals living in the Vietnam province Ha-Thinh. The experimental results, underpin our panel results. We show in addition that a negative recollection of health issues, leads to a lower risk attitude of individuals who do not live with a disabled family member and that individuals who live with a disabled family member are less loss averse. Our findings are causal and contribute to existing studies showing that households who are characterized by higher backward risks are more risk averse than others. |
| Keywords: | risk, disability, Vietnam |
| JEL: | I14 D1 Z1 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:267&r=all |
| By: | Murielle Djiguemde (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); Dimitri Dubois (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); Alexandre Sauquet (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); Mabel Tidball (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: | Economists have been attempting to take on the optimal management of groundwater for many decades, initially through static models, and since the 1970's through a dynamic framework. Since then, several attempts have been made to test dynamic models through laboratory experiments. Yet formulating and testing these models raises several challenges that we attempt to tackle in this study by testing a very simple dynamic groundwater extraction model in a laboratory experiment. We propose a full characterization of the theoretical solutions, taking into account economic constraints. In the experiment we mimic continuous time by allowing subjects to make their extraction decisions whenever they wish, with an actualization and updating the data (resource and payoffs) every second. The infinite horizon is simulated through the computation of payoffs, as if time were endless. To get around the weaknesses of the widely used Mean Squared Deviation (MSD) statistic and classify individual behavior as myopic, feedback or optimal, we combine the MSD with Ordinary Least Squares (OLS) regressions and time series treatments. Results show that a significant percentage of agents are able to adopt an optimal extraction path, that few agents should be considered truly myopic, and that using the MSD alone to classify agents would be misleading for about half of the study participants. |
| Keywords: | Experimental Economics,Renewable Resources,Continuous Time,Dynamic Optimization,Differential Games,Applied Econometrics. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-02316729&r=all |
| By: | Niall O’Higgins; Marco Stimolo |
| Abstract: | In this experiment, we study whether individuals’ labour market state (i.e. employed, student or NEET) affect their trusting and trustworthy behavior. To identify both the effect of labour market state and the effect of information on others’ labour market state over one’s behavior, we implement an experiment with two one-shot trust games with random and anonymous matching: in the first game, subjects receive no information on the counterpart; in the second one, the labour market state of both players is common knowledge. We find that, amongst the different sub-categories of NEETs, the status of unemployed has a markedly negative effect on trust and trustworthiness. Furthermore, precariousness in the labour market results to be as damaging as unemployment for trust and trustworthiness. |
| Keywords: | Trust game, reciprocity, youth labor market. |
| JEL: | C91 D31 D90 |
| Date: | 2019–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2019_13&r=all |
| By: | Timothy Shields (Economic Science Institute, Chapman University; Argyros School of Business and Economics, Chapman University); Eric Schniter (Economic Science Institute, Chapman University; Argyros School of Business and Economics, Chapman University); Daniel Sznycer (Department of Psychology, University of Montreal) |
| Abstract: | Trust-based interactions with robots are increasingly common in the marketplace, workplace, on the road, and in the home. However, a looming concern is that people may not trust robots as they do humans. While trust in fellow humans has been studied extensively, little is known about how people extend trust to robots. Here we compare trust-based investments and emotions from across three nearly identical economic games: human-human trust games, human-robot trust games, and human-robot trust games where the robot decision impacts another human. Robots in our experiment mimic humans: they are programmed to make reciprocity decisions based on previously observed behaviors by humans in analogous situations. We find that people invest similarly in humans and robots. By contrast, the social emotions elicited by the interactions (but not non-social emotions) differed across human and robot trust games, and did so lawfully. Emotional reactions depended on how one’s trust game decision interacted with the partnered agent’s decision, and whether another person was affected economically and emotionally. |
| Keywords: | Trust; Robots; Artificial Intellgience; Emotion; Experiment |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:18-22&r=all |
| By: | Bnaya Dreyfuss; Ori Heffetz; Matthew Rabin |
| Abstract: | Deferred Acceptance (DA), a widely implemented algorithm, is meant to improve allocations: under classical preferences, it induces preference-concordant rankings. However, recent evidence shows that—in both real, large-stakes applications and experiments—participants frequently play seemingly dominated, significantly costly, strategies that avoid small chances of good outcomes. We show theoretically why, with expectations-based loss aversion, this behavior may be partly intentional. Reanalyzing existing experimental data on random serial dictatorship (a restriction of DA), we show that such reference-dependent preferences, with a degree and distribution of loss aversion that explain common levels of risk aversion elsewhere, fit the data better than no-loss-aversion preferences. |
| JEL: | B49 D47 D82 D84 D91 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26394&r=all |
| By: | Bharat Chandar; Uri Gneezy; John A. List; Ian Muir |
| Abstract: | Even though social preferences affect nearly every facet of life, there exist many open questions on the economics of social preferences in markets. We leverage a unique opportunity to generate a large data set to inform the who’s, what’s, where’s, and when’s of social preferences through the lens of a nationwide tipping field experiment on the Uber platform. Our field experiment generates data from more than 40 million trips, allowing an exploration of social preferences in the ride sharing market using big data. Combining experimental and natural variation in the data, we are able to establish tipping facts as well as provide insights into the underlying motives for tipping. Interestingly, even though tips are made privately, and without external social benefits or pressure, more than 15% of trips are tipped. Yet, nearly 60% of people never tip, and only 1% of people always tip. Overall, the demand-side explains much more of the observed tipping variation than the supply-side. |
| JEL: | C93 D63 D64 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26380&r=all |
| By: | James Alm (Tulane University); Laura Rosales Cifuentes (Gandour Consultores); Carlos Mauricio Ortiz Niño (Gandour Consultores); Diana Rocha (Gandour Consultores) |
| Abstract: | The Government of Colombia imposes a variety of taxes that must be paid by individual wage earners, called in their entirety "social protection contributions". Since 2007 individual payments have been collected using an on-line mechanism. In order to improve compliance, the Government used a controlled field experiment in which various "pop-up messages" were sent to individuals when making their on-line payments, as behavioral "nudges". We examine the impact of these nudges on individual reporting behavior. We find mixed evidence that these messages increased compliance rates relative to a control group that received a so-called "neutral" message. However, we also demonstrate that the use as the control group of individuals receiving a so-called "neutral" message creates considerable bias; that is, the receipt of any message of any type clearly influences behavior. Instead, we show that the appropriate control group should be individuals who receive no message at all. |
| Keywords: | tax compliance; behavioral economics; nudges; controlled field experiments. |
| JEL: | H2 H26 C9 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1908&r=all |
| By: | Natalia Jiménez Jiménez (Departamento de Economía, Métodos Cuantitativos e Historia Económica, University Pablo de Olavide.); Elena Molis (Department of Economic Theory and Economic History, University of Granada.); Ángel Solano García (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | The main purpose of this paper is to shed some light on the voting behavior of low-income voters over income redistribution. To this end, we test a model based on Meltzer and Richard’s (1981) framework through a lab experiment in which individuals vote over two exogenous tax rates and their pre-tax income is determined according to their performance in a real-effort task. We classify individuals into highskilled and low-skilled participants according to their performance in a tournament at the beginning of the experiment. We find that a large proportion of low-skilled workers vote for the lowest tax rate (the one that gives them the lowest payoff), especially when the alternative tax rate is very high. However, this proportion is significantly reduced in treatments in which the subjects are given extra information about how the tax operates in redistributing income. This result suggests that the lack of information about the role of taxes in income redistribution may be an important factor in explaining the counter-intuitive voting behavior of low-income voters over income redistribution. We also find that both the prospect of upward mobility and the belief in the negative effect of taxes on productivity make low-income voters support low tax rates, especially when the alternative tax rate is very high. |
| Keywords: | income inequality, income redistribution, voting, taxation, real-effort task. |
| JEL: | C92 D72 H30 J41 |
| Date: | 2019–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:19/11&r=all |
| By: | Oechssler, Jörg; Roomets, Alex |
| Abstract: | The Savage and the Anscombe-Aumann frameworks are the two most popular approaches used when modeling ambiguity. The former is more flexible, but the latter is often preferred for its simplicity. We conduct an experiment where subjects place bets on the joint outcome of an ambiguous urn and a fair coin. We document that more than a third of our subjects make choices that are incompatible with Anscombe-Aumann for any preferences, while the Savage framework is flexible enough to accountfor subjects' behaviors. |
| Keywords: | Ellsberg paradox; ambiguity; experiment |
| Date: | 2019–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0672&r=all |
| By: | Janina Enachescu (University of Vienna); Žiga Puklavec (University of Vienna); Christian Martin Bauer (University of Vienna); Jerome Olsen (University of Vienna); Erich Kirchler (University of Vienna); James Alm (Tulane University) |
| Abstract: | In this paper we present initial investigations of the role of emotions on tax compliance decisions. We first introduce selected emotion theories, and we also present different paths by which emotions can possibly affect tax decisions, namely indirectly via mood and emotions unrelated to the tax decision itself (or "incidental emotions") and directly via emotions that are elicited in the taxation context itself (or "integral emotions"). We then present and discuss an experimental study investigating the first path suggested above, the influence of positive versus negative mood on tax compliance. Further, we also present and analyze a study exploring emotions elicited by the taxation context. Finally, we suggest that a fruitful path for future research is the integration of emotions into the slippery slope framework of tax compliance. |
| Keywords: | Tax compliance, incidental emotions, integral emotions, behavioal economics, nudges, laboratory experiments. |
| JEL: | H26 C91 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1909&r=all |
| By: | Aguiar-Conraria, Luís; Magalhães, Pedro C.; Vanberg, Christoph A. |
| Abstract: | Many political systems with direct democracy mechanisms have adopted rules preventing decisions from being made by simple majority rule. The device most commonly added to majority rule in national is a quorum requirement. The two most common are the participation and the approval quora. Such rules are a response to three major concerns: the legitimacy of the referendum outcome, its representativeness (the concern with the outcome representing the will of the whole electorate), and protection of minorities regarding issues that should demand a broad consensus. Guided by a pivotal voter model, we conduct a laboratory experiment to investigate the performance of different quora in reaching such goals. We introduce two main innovations in relation to previous work on the topic. First, part of the electorate goes to the polls out of a sense of civic duty. Second, we test the performance of a different quorum, the rejection quorum, recently proposed in the literature. We conclude that, depending on the preferred criterion, either the approval or the rejection quorum is to be preferred. |
| Keywords: | election design; participation quorum; approval quorum; laboratory experiment |
| Date: | 2019–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0671&r=all |
| By: | Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Nyreröd, Theo (Stockholm Institute of Transition Economics) |
| Abstract: | Whistleblower reward programs, or “bounty regimes”, are increasingly used in the United States. The effectiveness of these programs have been questioned, and empirical evidence on their effectiveness have been scarce likely due to their relatively recent introduction. In recent years, however, empirical and experimental evidence on their effectiveness have become more available and robust. We review the (rather encouraging) evidence on whistleblower reward programs, in terms of amount of additional information generated, deterrence effects, and administration costs, and consider the possibility of extending them to accomplice-witnesses in antitrust. |
| Keywords: | whistleblowers; economy |
| JEL: | B26 |
| Date: | 2019–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hasite:0050&r=all |
| By: | Henning Hermes (NHH Norwegian School of Economics); Martin Huschens (Johannes Gutenberg University Mainz); Franz Rothlauf (Johannes Gutenberg University Mainz); Daniel Schunk (Johannes Gutenberg University Mainz) |
| Abstract: | Relative performance feedback ( RPF ) has often been shown to improve effort and performance in the workplace and educational settings. Yet, many studies also document substantial negative effects of RPF, in particular for low-achievers. We study a novel type of RPF designed to overcome these negative effects of RPF on low-achievers by scoring individual performance improvements. With a sample of about 400 children, we conduct a class-wise randomized-controlled trial in regular teaching lessons in primary schools. We demonstrate that this type of RPF significantly increases motivation, effort, and performance in math for low-achieving children, without hurting high-achieving children. Among low-achievers, those receiving more points and moving up in the ranking improved strongest on motivation and math performance. In addition, we document substantial gender differences in response to this type of RPF: improvements in motivation and learning are much stronger for girls. We argue that using this novel type of RPF could potentially reduce inequalities, especially in educational settings. |
| Keywords: | relative performance feedback, rankings, randomized-controlled trial, education, gender differences, inequality |
| Date: | 2019–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:1908&r=all |
| By: | Yasuyuki Sawada (Faculty of Economics, The University of Tokyo); Minhaj Mahmud (Bangladesh Institute of Development Studies); Mai Seki (College of Economics, Department of Economics, Ritsumeikan University); An Le (Le: NextGeM Inc.); Hikaru Kawarazaki (Graduate School of Economics, The University of Tokyo) |
| Abstract: | This paper investigates the effectiveness of a globally popularmethod of self-learning at the right level in improving the cognitiveand non-cognitive abilities of disadvantaged pupils in a developing country, Bangladesh. Using a randomized control trial design,we find substantial improvement in cognitive ability measured bymathematics test scores and catch-up effects on non-cognitive ability measured by a pupil self-esteem measure. These findings areconsistent with a longer-term impact found in take-up rates andscores on a national-level primary school completion exam. Moreover, the teachers' ability to assess student performance substantially improves. Based on our estimates, program benefit exceedscost in a plausible way. Above findings suggest that self-learning atright level can effectively address the learning crisis by improvingthe quality of primary education in developing countries. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2019cf1127&r=all |
| By: | Alessandro Carraro; Lucia Ferrone |
| Abstract: | Economic development in Sub Saharan African countries is strongly tied to households’ ability to cope with exogenous events affecting their well-being. Using data from the Lesotho Child Grant Program dataset we provide evidence on whether households’ food security and nutrition are influenced by the presence of a particular network structure, and if there is any spill-over effect of the program on ineligible households living in treated villages. We take advantage of information on money and in-kind transfers to build a set of indicators representing quantitatively and qualitatively the network architecture of each household. We find relevant spill-over effects of the CGP on the food security and nutrition of ineligible households living in treated villages and embedded in a social network. |
| Keywords: | Cash Transfers, Informal Networks, Randomized Control Trial Experiment, Food and Nutrition Security, Lesotho |
| JEL: | I31 O12 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2019_21.rdf&r=all |