nep-exp New Economics Papers
on Experimental Economics
Issue of 2020‒07‒13
34 papers chosen by

  1. Incentivizing public good provision through outsider transfers: experimental evidence on sharing rules and additionality requirements By Esther Blanco; Natalie Struwe; James M. Walker
  2. Coordination and Contagion: Individual Connections and Peer Mechanisms in a Randomized Field Experiment By Philip Babcock; Kelly Bedard; Stefanie Fischer; John Hartman
  3. Single vs. multiple disclosures in an experimental asset market with information acquisition By Ruiz-Buforn, Alba; Alfarano, Simone; Camacho-Cuena, Eva; Morone, Andrea
  4. Gender Gaps in Competition: New Experimental Evidence from UK Professionals By Clot, Sophie; Della Giusta, Marina; Razzu, Giovanni
  5. Do parents invest into voluntary climate action when their children are watching? Evidence from a lab-in-the-field experiment By Helena Fornwagner; Oliver P. Hauser
  6. Lying and Mistrust in the Continuous Deception Game By Tobias Beck
  7. Designing Information Provision Experiments By Ingar Haaland; Christopher Roth; Johannes Wohlfart
  8. Optimal Incentives to Give By Castillo, Marco; Petrie, Ragan
  9. Let’s chat... When communication promotes efficiency in experimental asset markets By Brice Corgnet; Mark DeSantis; David Porter
  10. Trust in the Healthcare System and COVID-19 Treatment in the Developing World. Survey and Experimental Evidence from Armenia By Armenak Antinyan; Thomas Bassetti; Luca Corazzini; Filippo Pavesi
  11. Tail events, emotions and risk taking By Brice Corgnet; Camille Cornand; Nobuyuki Hanaki
  12. Experimental test of the effects of punishment probability and size on the decision to take a bribe By Bahník, Štěpán; Vranka, Marek Albert
  13. Hierarchies and decision-making in groups: Experimental evidence By Donata, Bessey
  14. Performance Feedback and Peer Effects By Marie Claire Villeval
  15. A New Mechanism to Alleviate the Crises of Con?dence in Science With An Application to the Public Goods Game By Luigi Butera; Philip J. Grossman; Daniel Houser; John A. List; Marie Claire Villeval
  16. Moral Transgressions by Groups: What Drives Individual Voting Behavior? By Feess, Eberhard; Kerzenmacher, Florian; Muehlheusser, Gerd
  17. Diagnostic Uncertainty and Insurance in Credence Goods Markets By Loukas Balafoutas; Helena Fornwagner; Rudolf Kerschbamer; Matthias Sutter; Maryna Tverdostup
  18. Future Design: Bequeathing Sustainable Natural Environments and Sustainable Societies to Future Generations By Tatsuyoshi Saijo
  19. Breaking Routine for Energy Savings: An Appliance-level Analysis of Small Business Behavior under Dynamic Prices By Jiyong Eom; Frank A. Wolak
  20. A Systematic Test of the Independence Axiom Near Certainty By Ritesh Jain; Kirby Nielsen
  21. Interacting collective action problems in the commons By Nicolas Querou
  22. Worker reciprocity and the returns to training: evidence from a field experiment By Sauermann, Jan
  23. Are the effects of informational interventions driven by salience? By Eric Bettinger; Nina Cunha; Guilherme Lichand; Ricardo Madeira
  24. Nonverbal content and swift trust: An experiment on digital communication By Zakaria Babutsidze; Nobuyuki Hanaki; Adam Zylbersztejn
  25. Affirmative Action, Shifting Competition, and Human Capital Accumulation: A Comparative Static Analysis of Investment Contests By Christopher Cotton; Brent R. Hickman; Joseph P. Price
  26. How Political Insiders Lose Out When International Aid Underperforms: Evidence from a Participatory Development Experiment in Ghana By Appiah, Ernest; Baldwin, Katharine; Karlan, Dean S.; Udry, Christopher
  27. ANCOVA power calculation in the presence of serial correlation and time shocks: A comment on Burlig et al. (2020) By Ek, Claes
  28. How Important is the Yellow Pages? Experimental Evidence from Tanzania By Aker, Jenny; Blumenstock, Joshua; Dillon, Brian
  29. The psychological effects of poverty on investments in children’s human capital By Guilherme Lichand; Eric Bettinger; Nina Cunha; Ricardo Madeira
  30. How design features affect evaluations of participatory platforms By Christensen, Henrik Serup
  31. How did we do? The impact of relative performance feedback on intergroup hostilities By Bauer, Kevin
  32. Why do people stay poor? By Balboni, Clare; Bandiera, Oriana; Burgess, Robin; Ghatak, Maitreesh; Heil, Anton
  33. Cash transfers and migration: theory and evidence from a randomized controlled trial By Jules Gazeaud; Eric Mvukiyehe; Olivier Sterck
  34. Projection of Private Values in Auctions By Tristan Gagnon-Bartsch; Marco Pagnozzi; Antonio Rosato

  1. By: Esther Blanco; Natalie Struwe; James M. Walker
    Abstract: This study presents experimental evidence on the effectiveness of alternative institutional arrangements designed to allow providers of public good services to be subsidized by non-providers. The decision setting is a repeated linear public good game with two groups, insiders and outsiders. Insiders make contributions to a public good that benefits both insiders and outsiders. Outsiders, unable to provide the public good, can send transfers to compensate insiders. The institutions under consideration are motivated primarily by payments for ecosystem services (PES), such as payments for climate protection. The decision settings, however, capture attributes of many forms of charitable giving. Results are resented from two studies. Study 1, based on a 2x2 design, considers two sharing rules for group payments and whether an additionality criterion is present or not. With the equal sharing rule, insiders receive an equal share of transfers. With the proportional rule, insiders receive a share of transfers proportional to their relative contributions in their group. When the additionality criterion is present, transfers are received contingent on insiders providing the public good at a level higher than in initial decision periods, where a transfer option is not present. Study 2 examines a setting where individual outsiders are able to target transfers to individual insiders, allowing outsiders to endogenously choose the specific distribution of transfers among the insiders. The sharing rules studied result in significant differences in cooperation levels. Both the proportional share and targeted-transfers rules lead to greater public good provision relative to the equal share rule. Contrary to its alleged relevance to PES programs, additionality does not lead to sustained increases in public good provision. On the other hand, additionality may improve the cost-effectiveness of transfer programs by precluding transfer payments when subsidies do not increase public good provision.
    Keywords: Public good, Institution, Externality, Laboratory Experiment
    JEL: D70 H41 C92
    Date: 2020
  2. By: Philip Babcock (Department of Economics, University of California, Santa Barbara); Kelly Bedard (Department of Economics, University of California, Santa Barbara); Stefanie Fischer (Department of Economics, California Polytechnic State University); John Hartman (Department of Economics, University of California, Santa Barbara)
    Abstract: This paper investigates peer effects at the level of individual connections, leveraging the approach to shed light on peer mechanisms. In a field experiment using college freshmen, we elicited best friends and offered monetary incentives for gym visits to a treated subset. We find large spillovers from treated subjects to treated best friends but none from treated subjects to control best friends. We also find evidence of a mechanism: Subjects coordinate by visiting the gym with best friends, indicating that the intervention harnesses complementarities in utility or commitment mechanisms. Results highlight subtle peer effects and mechanisms that often go undetected.
    Date: 2019
  3. By: Ruiz-Buforn, Alba; Alfarano, Simone; Camacho-Cuena, Eva; Morone, Andrea
    Abstract: We conduct laboratory experiments to study whether increasing the number of independent public signals in an economy with endogenous private information is an effective measure to promote the acquisition of information and to enhance price efficiency. We observe that the release of public information crowds out the traders' demand for private information under a single disclosure while favoring private information acquisition under multiple disclosures. The latter measure improves price accuracy in forecasting the asset fundamental value. However, multiple disclosures do not eliminate the adverse effect of market overreaction to public information, becoming a potential source of fragility for the financial system.
    Keywords: Experiments; Financial markets; Public information; Information acquisition; Multiple disclosures
    JEL: C92 D82 G14
    Date: 2020–05
  4. By: Clot, Sophie (University of Reading); Della Giusta, Marina (University of Reading); Razzu, Giovanni (University of Reading)
    Abstract: We use a controlled experiment widely adopted in the literature to assess the extent of gender differences in attitudes towards competition in a sample of UK professionals working in two different companies. We find no gender differences in attitudes towards competition nor in performance under a competitive reward scheme. This results qualifies the findings of a large number of experimental studies that show that women are more likely than men to shy away from competition. We also find that, in our sample of professionals, women's performance under competitive schemes does not decline. We conclude that it is important to avoid generalisations on the presence of gender gaps in attitudes towards competition. This being the first field study with professional workers in relatively competitive sectors, we think more needs to be carried out.
    Keywords: gender, competition, field experiment
    JEL: C93 J16 J71
    Date: 2020–06
  5. By: Helena Fornwagner; Oliver P. Hauser
    Abstract: Would parents do anything to enable a better future for their children - or only when they are seen to do so? Here we study voluntary climate action (VCA), which are costly to today's decision makers but essential to enable sustainable living for future generations. We hypothesise that parents will be most likely to invest in VCA when their own offspring observes their decision, whereas when adults or genetically unrelated children observe them, the effect will be smaller. In a large lab-in-the-field experiment, we observe a remarkable magnitude of VCA across conditions: parents invest 82% of their Euro 69 endowment into VCA, resulting in almost 14,000 real trees being planted. Parents' VCA varies across conditions, with larger treatment effects occurring when a parent's own child is the observer. In subgroup analyses, we find that larger treatment effects occur among higher educated parents. Our findings have implications for researchers and policy-makers interested in understanding voluntary climate action and designing programmes to encourage it.
    Keywords: voluntary climate action, intergenerational cooperation, parents, children, observability, lab-in-the-field experiment
    JEL: C99 Q51 Q54 H49 D19
    Date: 2020
  6. By: Tobias Beck (University of Kassel)
    Abstract: I present a novel experimental design to measure lying and mistrust as continuous variables on an individual level. My experiment is a sender-receiver game framed as an investment game. It features two players: firstly, an advisor with complete information (i.e., the sender) who is incentivized to lie about the true value of an optimal investment and, secondly, an investor with incomplete information (i.e., the receiver) who is incentivized to invest optimally and therefore must rely on the alleged optimum reported by the advisor. The extents of lying and mistrust are both measured on continuous scales. This allows observing more differentiated behavior and therefore enables testing of more sophisticated theoretical predictions. I find that the senders lie by overstating the true value of the optimum to an average extent of about 148%, while the receivers suspect them to do so by only 56%. The senders seldomly lie to the fullest possible extent as they correctly expect the receivers to disproportionally mistrust lies of such a high extent. This indicates that people make strategic considerations about their potential to manipulate others when lying. In line with this, I discover that lying and mistrusting behavior can be predicted by first-order beliefs about the other player. Consistent with previous studies, my findings support the conjecture that lying costs increase with the extent of lying. In addition, I provide evidence for some endogenous preference for trust. Both players’ behaviors and beliefs are consistent over time. Moreover, my ex ante classification of both players’ strategy sets is consistent with their ex post self-assessment of their own behavior within the experiment.
    Keywords: Lies, Honesty, Mistrust, Deception Game, Investments, Asymmetric information, Experimental Design
    JEL: C91 D01 D82
    Date: 2020
  7. By: Ingar Haaland (University of Bergen and CESifo); Christopher Roth (University of Warwick, briq, CESifo, CEPR, CAGE Warwick); Johannes Wohlfart (CEBI, Department of Economics, University of Copenhagen, CESifo, Danish Finance Institute)
    Abstract: We review methodological questions relevant for the design of information provision experiments. We first provide a literature review of major areas in which information provision experiments are applied. We then outline key measurement challenges and design recommendations that may be of help for practitioners planning to conduct an information experiment. We discuss the measurement of subjective beliefs, including the role of incentives and ways to reduce measurement error. We also discuss the design of the information intervention, as well as the measurement of belief updating. Moreover, we describe ways to mitigate potential experimenter demand effects and numerical anchoring arising from the information treatment. Finally, we discuss typical effect sizes in information experiments.
    Keywords: Experimental Design, Beliefs, Information, Obfuscation
    JEL: C90 D83 D91 L82
    Date: 2020–06–30
  8. By: Castillo, Marco (Texas A&M University); Petrie, Ragan (Texas A&M University)
    Abstract: We examine optimal incentives for charitable giving with a large-scale field experiment involving 26 charities and over 112,000 unique individuals. The price of giving is varied by offering a fixed match if the donation meets a threshold amount (e.g. "give at least $25 and the charity receives a $25 match"). Responses are used to structurally estimate a model of charitable giving. The model estimates are employed to evaluate the effectiveness of various counterfactual match incentive schemes, taking into account the goals of the charity and donor preferences. Two of these optimal incentives were subsequently implemented in a follow-up field study. They were found to be effective at implementing the desired goals, as predicted by theory and our simulations. Our findings highlight the pitfalls of relying on a particular parameterization of a policy to evaluate effectiveness. The best-guess incentives in our initial field experiment turned out to be ineffective at increasing donations because optimal incentives should have been set higher.
    Keywords: charitable giving, mechanism design, field experiment
    JEL: D64 H41 C93 D91
    Date: 2020–06
  9. By: Brice Corgnet (Univ Lyon, emlyon business school, GATE UMR 5824, F-69130 Ecully, France); Mark DeSantis (Argyros School of Business and Economics & Economic Science Institute, Chapman University, Orange, CA, 92866); David Porter (Argyros School of Business and Economics & Economic Science Institute, Chapman University, Orange, CA, 92866)
    Abstract: The growing prevalence of stock market chat rooms and social media suggests communication between traders may affect market outcomes. Using data from a series of laboratory experiments, we study the causal effect of trader communication on the price efficiency of markets. We show that communication allows markets to convey private information more effectively. This effect is most pronounced when the communication platform publicizes a reputation score that might identify a person as not being truthful. This illustrates the need for market designers to consider social interactions when designing market institutions to leverage the social motives that foster information aggregation.
    Keywords: Information aggregation, market efficiency, communication, experimental asset markets, social market design
    JEL: C92 G02 G14
    Date: 2020
  10. By: Armenak Antinyan (Wenlan School of Business, Zhongnan University of Economics and Law; National Research University Higher School of Economics, Moscow); Thomas Bassetti (Department of Economics ‘Marco Fanno’, University of Padua); Luca Corazzini (Department of Economics, University Of Venice Cà Foscari; Center for Experimental Research in Management and Economics (CERME)); Filippo Pavesi (School of Economics and Management, LIUC (Carlo Cattaneo University); Stevens Institute of Technology)
    Abstract: Concerns are looming that the healthcare systems in low- and middle-income countries (LMICs) are mostly unprepared to combat COVID-19 because of limited resources. The problems in LMICs are exacerbated by the fact that citizens in these countries generally exhibit low trust in the healthcare system, which could trigger a number of uncooperative behaviors. In this paper, we focus on one such behavior and investigate the relationship between trust in the healthcare system and the likelihood of potential treatment-seeking behavior upon the appearance of the first symptoms of COVID-19. First, we provide motivating evidence from a unique national on-line survey administered in Armenia — a post-Soviet LMIC country. We then present results from a large-scale survey experiment in Armenia that provides causal evidence in support of the investigated relationship. Our main finding is that a more trustworthy healthcare system enhances the likelihood of potential treatment-seeking behavior when observing the initial symptoms.
    Keywords: COVID-19, Epidemic, Healthcare system, Trust, Survey experiment
    JEL: C9 I12 I15
    Date: 2020
  11. By: Brice Corgnet (Univ Lyon, emlyon business school, GATE UMR 5824, F-69130 Ecully, France); Camille Cornand (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France); Nobuyuki Hanaki (Institute for Social and Economic Research, Osaka University)
    Abstract: Recent works have shown how tail events could account for ?nancial anomalies such as the equity premiumpuzzle. These models do not explore, however, why investors would discount tail risk so heavily. We take on this challenge by designing a novel tail-event experiment to assess both investors’ behavioral and physiological reactions. We show that investors who observe the tail event without su?ering losses tend to decrease their pricing of the asset subsequently. By contrast, loss-averse investors who su?er tail losses tend to increase their bids. This response is especially pronounced for those who exhibit a strong emotional response to tail losses. This demonstrates the key role played by emotions in in?uencing investors’ response to tail events. Finally, investors who exhibit high anticipatory arousal, as measured with electrodermal activity, posted lower bids and were less likely to su?er tail losses and go bankrupt. They also achieved higher earnings when tail events occurred frequently. This ?nding contrasts with the common view that investors should silence their emotions.
    Keywords: tail events, emotions and risk
    JEL: C91 D87 D91
    Date: 2020
  12. By: Bahník, Štěpán (University of Economics, Prague); Vranka, Marek Albert (University of Economics)
    Abstract: Punishment is one of the main methods for preventing corruption. However, studies on the effect of size and probability of punishment on bribe-taking have not yielded conclusive results. We introduce a punishment by a fine or termination of the task, both with varying probabilities, in a laboratory task modeling the decision to take a bribe. The punishment decreased the probability of taking higher bribes, even though the probability of taking lower bribes was unaffected. Participants took fewer bribes when the fine was larger and more probable. We did not observe any clear negative effects of small punishment crowding out intrinsic motivation to behave honestly. However, we found that effects of punishment differ based on emotionality and honesty-humility of participants. The study shows that the prospect of punishment may deter dishonest behavior; however, personality characteristics should be taken into account when devising an effective deterrence policy.
    Date: 2020–06–10
  13. By: Donata, Bessey
    Abstract: In this study, I investigate differences in decision-making outcomes for groups under different hierarchies using an experimental approach. Many decisions in firms, households, and other contexts are not taken by individuals, but by groups. In addition, most groups, especially in firms, are characterized by hierarchical organization structures. While research in management, sociology and psychology has been investigating the role of hierarchies for a long time, there is a lack of experimental economic research on the effect of various group structures or hierarchies on decision-making and its quality. I compare the choices of groups in Holt and Laury (2002) type lottery choices and in intellective tasks in five different group types: a group without hierarchy, a hierarchy by age (where the oldest group member decides), by merit (where the winner in a financial literacy quiz decides), by chance (where a randomly determined leader decides) and by election (where an elected leader decides). Experimental results suggest that there are no differences in the number of safe choices between the different hierarchy types. However, groups with a leader assigned on the basis of merit perform better in intellective tasks.
    Keywords: hierarchies; group decision-making; lottery choice; risk attitude; intellective tasks
    JEL: C92
    Date: 2020–05–31
  14. By: Marie Claire Villeval (Univ Lyon, Centre National de la Recherche Scientifique (CNRS), GATE UMR 5824, 93 Chemin des Mouilles, F-69130, Ecully, France. IZA, Bonn, Germany)
    Abstract: This paper reviews studies conducted in naturally-occurring work environments or in the laboratory on the impact of performance feedback provision and peer effects on individuals’ performance. First, it discusses to which extent feedback on absolute performance affects individuals’ effort for cognitive or motivational reasons, and how evaluations can be distorted strategically. Second, this paper highlights the positive and negative effects of feedback on relative performance and rank on individuals’ productivity and persistence, but also on the occurrence of anti-social behavior. Relative feedback stimulates effort by informing on the marginal return or the marginal cost of effort, and by activating behavioral forces even in the absence of monetary incentives. These behavioral mechanisms relate to self-esteem, status concerns, competitive preferences and social learning. Relative feedback sometimes discourages or distorts effort, notably if people collude or are disappointment averse. In addition to incentive schemes and social preferences, the management of self-confidence affects the way relative feedback impacts productivity. Third, the paper addresses the question of the identification of peer effects on employees’ performance, their size, their direction and their heterogeneity along the hierarchy. The mechanisms behind peer effects include conformism, social pressure, rivalry, social learning and distributional preferences, depending on the presence of payoff externalities or technological and organizational externalities.
    Keywords: Feedback, performance, peer effects
    JEL: C9 D91 J3 M5
    Date: 2020
  15. By: Luigi Butera (Copenhagen Business School); Philip J. Grossman (Monash University); Daniel Houser (George Mason University); John A. List (University of Chicago and NBER); Marie Claire Villeval (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France; IZA, Bonn)
    Abstract: Recently a credibility crisis has taken hold across the social sciences, arguing that a component of Fischer (1935)’s tripod has not been fully embraced: replication. The importance of replications is not debatable scienti?cally, but researchers’ incentives are not su?cient to encourage replications. We analyze a novel mechanism promoting replications through bene?cial gains between scholars and editors. We highlight the tradeo?s involved in seeking independent replications before submission to journals, and demonstrate the operation of this method via an investigation of the e?ects of Knightian uncertainty on cooperation in public goods games, a pervasive but largely unexplored feature in the literature.
    Keywords: Replication, science, public goods, uncertainty, experiment
    JEL: A11 C18 C92 D82
    Date: 2020
  16. By: Feess, Eberhard (Victoria University of Wellington); Kerzenmacher, Florian (University of Innsbruck); Muehlheusser, Gerd (University of Hamburg)
    Abstract: We conduct an experiment where subjects are matched in groups of three and vote on a moral transgression. Analyzing different voting rules, the frequency of votes for the moral transgression increases with the number of votes required for it. This effect persists when considering pivotal votes only, which eliminates opportunities to save on own moral costs and to rely instead on sufficiently many votes for the transgression by other group members. A series of novel treatments allows us to identify guilt sharing and preferences for consensual voting as empirically relevant and independent drivers of voting behavior.
    Keywords: group decisions, unethical behavior, experiment, voting, diffusion of responsibility, guilt sharing, donations
    JEL: C92 D02 D63 D71
    Date: 2020–06
  17. By: Loukas Balafoutas; Helena Fornwagner; Rudolf Kerschbamer; Matthias Sutter; Maryna Tverdostup
    Abstract: Credence goods markets - like health care or repair services - with their informational asymmetries between expert sellers and uninformed customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. Only little is known so far about how diagnostic uncertainty of sellers affects market outcomes, and how one widespread feature of such markets, insurance on the customer side, interacts with the degree of diagnostic uncertainty. We present a model that analyzes the effects of both diagnostic uncertainty and insurance in a unified framework and we test the model's predictions in lab experiments. Both in theory and in the experiment diagnostic uncertainty increases the rate of incorrect service provision and leads to less trade, thus reducing efficiency. In theory, insurance also increases the provision of incorrect services, but at the same time it also increases the volume of trade leading to an ambiguous net effect on welfare. In the experiments the net effect of insurance coverage on efficiency turns out to be negative. We also find an important interaction effect: if consumers are insured, experts invest less in diagnostic precision.
    Keywords: Credence goods, experiment, diagnostic uncertainty, insurance coverage, welfare
    JEL: C91 C72 D82 G22
    Date: 2020
  18. By: Tatsuyoshi Saijo (Research Institute for Future Design, Kochi University of Technology)
    Abstract: "Future Design," a new movement among Japanese researchers and stakeholders, asks the following question: what types of social systems are necessary if we are to leave future generations sustainable environments and societies? After reviewing the human activity impact on the global environment and society, I ask why we live in a society producing a series of future failures that will cost future generations so much. I then argue that liberalism could be the source of such a society and that market and democracy derived from it will not be able to avoid these future failures. Therefore, one must design social systems to activate a human nature called futurability when he/she experiences an increase in happiness as a result of deciding and acting toward foregoing current benefits to enrich future generations. One method to study those is using "imaginary future generations." Here, I present an overview of the theoretical background of this method, the results of relevant laboratory and field experiments, and the nature of some relevant practical applications implemented in cooperation with several local governments.
    Keywords: Future design, imaginary future generation, futurability, intergenerational sustainability dilemma, time inconsistency problem
    Date: 2020–06
  19. By: Jiyong Eom; Frank A. Wolak
    Abstract: Small businesses are typically committed to providing a positive customer experience and therefore may exhibit a response to dynamic electricity prices different from residential or industrial customers. We conduct a field experiment to determine the extent to which small businesses respond through re-configuration of typical routines throughout the experiment period versus through adjustments to specific dynamic pricing events. Using a customer-level survey of appliance ownership, we estimate the hourly response patterns of individual appliances to participation in the experiment versus individual dynamic pricing events. Consistent with our re-configuration hypothesis, small businesses primarily curtail electricity usage throughout the experiment period, although we also find a small imprecisely estimated response to dynamic pricing events on top of the re-configuration effect. Appliances not critical to a positive customer experience such as dish dryers, food storage units, lights, electric motors & pumps, and industrial heaters are the major sources of the energy savings from the re-configuration actions of these small businesses.
    JEL: Q4 Q41
    Date: 2020–05
  20. By: Ritesh Jain (Institute of Economics, Academia Sinica, Taipei, Taiwan); Kirby Nielsen (Department of Economics, Stanford University)
    Abstract: A large literature has documented violations of expected utility consistent with a preference for certainty (the “certainty effect”). We design a laboratory experiment to investigate the role of the certainty effect in explaining violations of the independence axiom. We use lotteries spanning over the entire probability simplex to detect violations systematically. We find that violations of independence consistent with the reverse certainty effect are much more common than violations consistent with the certainty effect. Results hold as we test robustness along two dimensions: varying the mixing lottery and moving slightly away from certainty.
    Keywords: : independence axiom, expected utility theory, certainty effect, Allais Paradox
    JEL: C79 D82
    Date: 2020–06
  21. By: Nicolas Querou (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, CNRS - Centre National de la Recherche Scientifique)
    Abstract: We consider a setting where agents are subject to two types of collective action problems, any group user's individual extraction inducing an externality on others in the same group (intra-group problem), while aggregate extraction in one group induces an externality on each agent in other groups (intergroup problem). One illustrative example of such a setting corresponds to a case where a common-pool resource is jointly extracted in local areas, which are managed by separate groups of individuals extracting the resource in their respective location. The interplay between both types of externality is shown to affect the results obtained in classical models of common-pool resources. We show how the fundamentals affect the individual strategies and welfare compared to the benchmark commons problems. Finally, different initiatives (local cooperation, inter-area agreements) are analyzed to assess whether they may alleviate the problems, and to understand the conditions under which they do so.
    Keywords: common-pool resource,collective action,externalities
    Date: 2020–06–05
  22. By: Sauermann, Jan (Swedish Institute for Social Research, Stockholm University)
    Abstract: Do reciprocal workers have higher returns to employer-sponsored training? Using a field experiment with random assignment to training combined with survey information on workers’ reciprocal inclinations, the results show that reciprocal workers reciprocate employers’ training investments by higher post-training performance. This result, which is robust to controlling for observed personality traits and worker fixed effects, suggests that individuals reciprocate the firm’s human capital investment with higher effort, in line with theoretical models on gift exchange in the workplace. This finding provides an alternative rationale to explain firm training investments even with risk of poaching.
    Keywords: on-the-job training; reciprocity; worker performance; field experiment
    JEL: D03 J24 M53
    Date: 2020–06–23
  23. By: Eric Bettinger; Nina Cunha; Guilherme Lichand; Ricardo Madeira
    Abstract: Informational interventions have been shown to significantly change behavior across a variety of settings. Is that because they lead subjects to merely update beliefs in the right direction? Or, alternatively, is it to a large extent because they increase the salience of the decision they target, affecting behavior even in the absence of inputs for belief updating? We study this question in the context of an informational intervention with school parents in Brazil. We randomly assign parents to either an information group, who receives text messages with weekly data on their child’s attendance and school effort, or a salience group, who receives messages that try to redirect their attention without child-specific information. While information has large impacts on attendance, test scores and grade promotion relative to the control group, outcomes in the salience group improve by at least as much, and to a greater extent among students with lower attendance at baseline. Our results suggest that alternative interventions that manipulate attention can generate larger impacts at lower costs, and have implications for the design of informational interventions across a range of domains.
    Keywords: Information, salience, inattention
    JEL: C93 D83 D91 I25 I31
    Date: 2020–06
  24. By: Zakaria Babutsidze (SKEMA Business School, Université Côte d’Azur (GREDEG) and OFCE, Sciences Po Paris); Nobuyuki Hanaki (Université Côte d’Azur, CNRS, GREDEG); Adam Zylbersztejn (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France)
    Abstract: We experimentally study the effect of the mode of digital communication on the emergence of swift trust in a principal-agent relationship. We consider three modes of communication that differ in the capacity to transmit nonverbal content: plain text, audio, and video. Communication is pre-play, one-way, and unrestricted, but its verbal content is homogenized across treatments. Overall, both audio and video messages have a positive (and similar) effect on trust as compared to plain text; however, the magnitude of these effects depends on the verbal content of agent's message (promise to act trustworthily vs. no such promise). In all conditions, we observe a positive effect of the agent's promise on the principal's trust. We also report that trust in female principals is sensitive to the availability of nonverbal cues about interaction partners.
    Keywords: Digital communication, Trust, Hidden action, Nonverbal content, Principal-agent relationship, Promises
    JEL: C72 D83
    Date: 2020
  25. By: Christopher Cotton (Queen's University); Brent R. Hickman (Olin Business School, University of Washington); Joseph P. Price (Brigham Young University)
    Abstract: We develop a model in which many heterogeneous agents invest in human capital as they compete for better college admission slots or employment opportunities. The model provides theoretical predictions about how affirmative action or preferential treatment policies change the distribution of effort, human capital accumulation, and job/college slot allocations across different population groups. Our findings deliver two key insights. First, incentives to invest in human capital depends substantially on the strength of one's competition. Second, we find evidence of a counter-intuitive role for preferential treatment in promoting overall human capital development.
    Keywords: large contest, all-pay contest, all-pay auction, affirmative action, college admissions, field experiment, human capital
    JEL: J15 J24 C93 D82 D44
    Date: 2020–06
  26. By: Appiah, Ernest; Baldwin, Katharine; Karlan, Dean S.; Udry, Christopher
    Abstract: Participatory development is designed to mitigate problems of political bias in pre-existing local government but also interacts with it in complex ways. Using a five-year randomized controlled study in 97 clusters of villages (194 villages) in Ghana, we analyze the effects of a major participatory development program on participation in, leadership of and investment by preexisting political institutions, and on households' overall socioeconomic well-being. Applying theoretical insights on political participation and redistributive politics, we consider the possibility of both cross-institutional mobilization and displacement, and heterogeneous effects by partisanship. We find the government and its political supporters acted with high expectations for the participatory approach: treatment led to increased participation in local governance and reallocation of resources. But the results did not meet expectations, resulting in a worsening of socioeconomic wellbeing in treatment versus control villages for government supporters. This demonstrates international aid's complex distributional consequences.
    Keywords: distributive politics; international aid; participatory development; political economy
    JEL: H4 H7 O12 O17 O19
    Date: 2020–03
  27. By: Ek, Claes (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Recent research by Burlig et al. (2020) has produced a useful formula for performing difference-in-differences power calculation in the presence of serially correlated errors. A similar formula for the ANCOVA estimator is shown by the authors to yield incorrect power in real data where time shocks are present. This note demonstrates that the serial-correlation-robust ANCOVA formula is in fact correct under time shocks as well. The reason that errors arise in Burlig et al. (2020) is because time shocks remain unaccounted for in the intermediate step where residual-based variance parameters are estimated from pre-existing data. When that procedure is adjusted accordingly, the serial-correlation-robust ANCOVA formula of Burlig et al. (2020) can be accurately used for power calculation.
    Keywords: power calculation; randomized experiments; experimental design; panel data; ANCOVA
    JEL: C23 C93
    Date: 2020–06
  28. By: Aker, Jenny; Blumenstock, Joshua; Dillon, Brian
    Abstract: Mobile phones reduce the cost of communicating with existing social contacts, but do not eliminate frictions in forming new relationships. We report the findings of a two-sided randomized control trial in central Tanzania, centered on the production and distribution of a "Yellow Pages" phone directory with contact information for local enterprises. Enterprises randomly assigned to be listed in the directory receive more business calls, make greater use of mobile money, and are more likely to employ workers. There is evidence of positive spillovers, as both listed and unlisted enterprises in treatment villages experience significant increases in sales relative to a pure control group. Households randomly assigned to receive copies of the directory make greater use their phones for farming, are more likely to rent land and hire labor, have lower rates of crop failure, and sell crops for weakly higher prices. Willingness-to-pay to be listed in future directories is significantly higher for treated enterprises.
    Keywords: agriculture; mobile phones; Search costs; Small and medium enterprises; Tanzania; telephone directories
    JEL: D83 M37 O13 Q13
    Date: 2020–03
  29. By: Guilherme Lichand; Eric Bettinger; Nina Cunha; Ricardo Madeira
    Abstract: Poverty focuses attention on present needs. Does that mean that poor parents respond inefficiently to future returns on investments in their children's human capital - even when they would have the financial means to invest optimally? We study this question in the context of an educational program in Brazil whose predicted child-specific returns are known to the researchers, allowing us to compute optimal decisions. Using a lab-in-the-field experiment to make some parents worry more than others about pressing financial needs, we find that those in the treatment condition offered the opportunity to invest in that program misallocate resources relative to the control group: they not only invest significantly less when the program has high returns, but also, significantly more when predicted returns are low. We show that such inefficient responses are driven by poverty-induced attention misa/Jocation, since (1) parents in the treatment condition perform better in cognitive tests that yield small but immediate returns, and (2) increasing the salience of returns before the experiment eliminates differential responses by those parents. Our results suggest that poiicy instruments to boost human capital investments among the poor, such as credit lines earmarked for education, may be insufficient to spark such investments when returns are high, and even lead to over-investment by those not expected to benefit from it.
    Keywords: Psychology of poverty, attention misallocation, human capital, poverty trap
    JEL: C93 D91 E24 I25 I26
    Date: 2020–06
  30. By: Christensen, Henrik Serup
    Abstract: Online participatory platforms are introduced to boost citizen involvement in political decision-making. However, the design features of these platforms vary considerably, and these are likely to affect how prospective users evaluate the usefulness of these platforms. Previous studies explored how prevalent different design features are and how they affect the success of platforms in terms of impact, but the attitudes of prospective users remain unclear. Since these evaluations affect the prospects for launching successful participatory platforms, it is imperative to assess what citizens want from such digital possibilities for participation. This study uses a conjoint experiment (n=1048) conducted in Finland that explore the impact of seven design features: Discussion possibilities; Interaction with politicians and experts; Information availability, Aim of participation; Identity verification; Anonymous participation and Accessibility. Furthermore, it is examined whether the effects differ across use of ICTs measured by generation, time online and prior use of participatory platforms. The results suggest that most design features have clear effects on evaluations, and that deliberative features have the strongest effects. Furthermore, the effects are relatively stable across prior use although the less experienced put a stronger emphasis on verification.
    Date: 2020–05–22
  31. By: Bauer, Kevin
    Abstract: Using a novel experimental design, I test how the exposure to information about a group's relative performance causally affects the members' level of identification and thereby their propensity to harm aliates of comparison groups. I find that both, being informed about a high and poor relative performance of the ingroup similarly fosters identification. Stronger ingroup identification creates increased hostility against the group of comparison. In cases where participants learn about poor relative performance, there appears to be a direct level effect additionally elevating hostile discrimination. My findings shed light on a specific channel through which social media may contribute to intergroup fragmentation and polarization.
    Keywords: social identity,relative performance feedback,discrimination,outgroup derogation
    Date: 2020
  32. By: Balboni, Clare; Bandiera, Oriana; Burgess, Robin; Ghatak, Maitreesh; Heil, Anton
    Abstract: There are two broad views as to why people stay poor. One emphasizes the role of economic fundamentals - for example, differences in individual traits like talent or motivation make the poor choose low productivity jobs. The other, the poverty traps view, emphasizes that access to opportunities depends on initial wealth and hence poor people have no choice but to work in low productivity jobs. We test the two views using the random allocation of an asset transfer program that gave some of the poorest women in Bangladesh access to the same job opportunities as their wealthier counterparts in the same villages. The data rejects the null of equal opportunities. Exploiting small variation in initial endowments, we estimate the transition equation and find that, if the program pushes individuals above a threshold level of initial assets, then they escape poverty, but, if it does not, they slide back into poverty. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated at baseline and that the gains arising from eliminating misallocation would far exceed the costs. Our findings imply that large one-off transfers that enable people to take on more productive occupations can help alleviate persistent poverty.
    Date: 2020–03
  33. By: Jules Gazeaud; Eric Mvukiyehe; Olivier Sterck
    Abstract: Will the fast expansion of cash-based programming in developing countries increase international migration? Theoretically, cash transfers may favor international migration by relaxing liquidity, credit, and risk constraints. But transfers, especially those conditional upon staying at home, may also increase the opportunity cost of migrating abroad. This paper evaluates the impact of a cash-for-work program on migration. Randomly selected households in Comoros were offered up to US$320 in cash in exchange for their participation in public works projects. We find that the program increased migration to Mayotte – the neighboring and richer French Island – by 38 percent, from 7.8% to 10.8%. The increase in migration is explained by the alleviation of liquidity and risk constraints, and by the fact that the program did not increase the opportunity cost of migration for likely migrants.
    Keywords: Migration, cash transfers, financial constraints, risk-aversion
    JEL: J61 O12 O15 F22
    Date: 2020
  34. By: Tristan Gagnon-Bartsch (Harvard University); Marco Pagnozzi (Università di Napoli Federico II and CSEF); Antonio Rosato (University of Technology Sydney)
    Abstract: We explore how taste projection – the tendency to overestimate how similar others’ tastes are to one’s own – affects bidding in auctions. Taste-projecting bidders underestimate the dispersion in valuations and exaggerate the intensity of competition. Consequently, they overbid in firstprice auctions – irrespective of whether values are independent, correlated, or (a)symmetrically distributed – but not in second-price auctions. Hence, first-price auctions raise more revenue. Moreover, the optimal reserve price in first-price auctions is lower than the rational benchmark, and decreasing in the extent of projection and the number of bidders. With an uncertain common-value component, projecting bidders draw distorted inferences about others’ information. This misinference is stronger in second-price and English auctions, reducing their allocative efficiency compared to first-price auctions.
    Keywords: Auctions; Projection Bias; False-Consensus Effect; Overbidding.
    JEL: D03 D44 D82 D83
    Date: 2020–06–24

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.