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on Experimental Economics |
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Issue of 2024‒04‒22
twenty-one papers chosen by |
| By: | van Lent, Max (Leiden University) |
| Abstract: | This paper studies the relationship between the creative abilities of study peers and academic achievement. We conduct a novel large scale field experiment at university, where students are randomized into work groups based on their score on a creativity test prior to university entry. We first show that the creative abilities of peers matter for a student's academic achievement. A one standard deviation higher creativity peer group improves study performance by 8.4 to 10 percentage points. Notably, this effect is driven by the average group creativity, there is no special impact of creative superstars. Further analysis suggests that students exposed to creative peers become more creative, but do not adjust their overall study effort. This is in line with the idea that creative approaches and questions of peers help students to master the study material better. Overall, our study highlights the importance of peer effects of creative students in shaping academic outcomes. |
| Keywords: | peer effects, academic achievement, creativity, field experiment |
| JEL: | I21 I24 J24 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16847&r=exp |
| By: | Julius D\"uker; Alexander Rieber |
| Abstract: | We investigate how to efficiently set up work groups to boost group productivity, individual satisfaction, and learning. Therefore, we conduct a natural field experiment in a compulsory undergraduate course and study differences between self-selected and randomly assigned groups. We find that self-selected groups perform significantly worse on group assignments. Yet, students in self-selected groups learn more and are more satisfied than those in randomly assigned groups. The effect of allowing students to pick group members dominates the effect of different group compositions in self-selected groups: When controlling for the skill, gender, and home region composition of groups, the differences between self-selected and randomly formed groups persist almost unaltered. The distribution of GitHub commits per group reveals that the better average performance of randomly assigned groups is mainly driven by highly skilled individuals distributed over more groups due to the assignment mechanism. Moreover, these highly skilled individuals contribute more to the group in randomly formed groups. We argue that this mechanism explains why self-selected groups perform worse on the projects but acquire more knowledge than randomly formed groups. These findings are relevant for setting up workgroups in academic, business, and governmental organizations when tasks are not constrained to the skill set of specific individuals. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.12694&r=exp |
| By: | Eli Ben-Michael; D. James Greiner; Melody Huang; Kosuke Imai; Zhichao Jiang; Sooahn Shin |
| Abstract: | The use of Artificial Intelligence (AI) based on data-driven algorithms has become ubiquitous in today's society. Yet, in many cases and especially when stakes are high, humans still make final decisions. The critical question, therefore, is whether AI helps humans make better decisions as compared to a human alone or AI an alone. We introduce a new methodological framework that can be used to answer experimentally this question with no additional assumptions. We measure a decision maker's ability to make correct decisions using standard classification metrics based on the baseline potential outcome. We consider a single-blinded experimental design, in which the provision of AI-generated recommendations is randomized across cases with a human making final decisions. Under this experimental design, we show how to compare the performance of three alternative decision-making systems--human-alone, human-with-AI, and AI-alone. We apply the proposed methodology to the data from our own randomized controlled trial of a pretrial risk assessment instrument. We find that AI recommendations do not improve the classification accuracy of a judge's decision to impose cash bail. Our analysis also shows that AI-alone decisions generally perform worse than human decisions with or without AI assistance. Finally, AI recommendations tend to impose cash bail on non-white arrestees more often than necessary when compared to white arrestees. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.12108&r=exp |
| By: | Marielle BRUNETTE; Stéphane COUTURE; Kene BOUN MY |
| Abstract: | Decisions under uncertainty are an integral part of the daily life of economic agents. However, if uncertainty bears on the probability, on the outcome, or on both, it may not be trivial. In this paper, we study how agents react to these di\u001Berent sources of uncertainty. For that purpose, we implemented a lab experiment with 209 students. We mainly show that the way the decision-makers behave when faced with di\u001Berent sources of uncertainty depends on the level of probability of winning a certain outcome. A majority of subjects thus prefers uncertainty to risk, regardless of the source, when the probability is low. For medium and high probability levels, most of the subjects prefers to face uncertainty on the outcome rather than uncertainty on the probability, whereas the opposite is true for low probability levels. Finally, we show that ambiguity preferences have a signi\u001Ccant e\u001Bect on the individual's behavior under all sources of uncertainty, whereas risk preferences play a role only when double uncertainty is at stake. |
| Keywords: | risk, uncertainty, ambiguity, experiments. |
| JEL: | D8 D9 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-15&r=exp |
| By: | Choi, S.; Goyal, S.; Guo, F.; Moisan, F. |
| Abstract: | Social interactions shape individual behavior and public policy increasingly uses networks to improve effectiveness. It is therefore important to understand if the theoretical predictions on the relation between networks and individual choice are empirically valid. This paper tests a key result in the theory of games on networks: an individual’s action is proportional to their (Bonacich) centrality. Our experiment shows that individual efforts increase in centrality but at a rate of increase that is lower than the theoretical prediction. These departures from equilibrium are accompanied by significant departures in individual earnings from theoretical predictions. We propose a model of network based imitation decision rule to explain these deviations. |
| JEL: | C92 D83 D85 Z13 |
| Date: | 2024–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2401&r=exp |
| By: | Felix Chopra (University of Copenhagen, CEBI); Christopher Roth (University of Cologne, ECONtribute, MPI for Collective Goods Bonn,); Johannes Wohlfart (University of Copenhagen, CEBI) |
| Abstract: | How do households adjust their spending behavior in response to changes in home price expectations? We conduct a field experiment with a sample of Americans that links survey data on home price expectations to actual spending behavior as measured in a rich home-scanner dataset. In the experiment we exogenously vary households' home price expectations by providing them with different expert forecasts. Homeowners do not adjust their spending in response to exogenously higher home price expectations, consistent with wealth effects and higher expected housing costs offsetting each other. However, renters reduce their spending in response to an increase in home price expectations. We provide evidence that the effects on renters operate through an increase in expected rental costs and higher expected costs of a future home that many renters intend to buy. Our evidence has implications for the role of asset price expectations in business cycle dynamics and consumption inequality. |
| Keywords: | Consumption, Expectations, Home prices, Homeowner, Information, Renter |
| JEL: | D14 D83 D84 E03 E21 |
| Date: | 2023–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2303&r=exp |
| By: | Callen, Mike; Weigel, Jonathan; Yuchtman, Noam |
| Abstract: | We review an emerging experimental literature studying institutional change. Institutions are a key determinant of economic growth, but the “critical junctures” in which institutions can change are not precisely defined. For example, such junctures are often identified ex post, raising methodological problems: selection on the outcome of institutional change; an inability to study beliefs, central to coordination and thus the process of institutional change; and an inability to conduct experiments to identify causal effects. We argue that critical junctures are identifiable in real-time as moments when there exists deep uncertainty about future institutions. Consistent with this conception, the papers reviewed: (i) examine changes to institutions, i.e., the “fundamental rules of the game”; (ii) are real-time studies of plausible critical junctures; and, (iii) use field experiments to achieve causal identification. Substantively, this literature examines institutional changes in state capacity and legitimacy, political inclusion, and political accountability. We also advocate more systematic measurement of beliefs about future institutions to identify critical junctures as they happen and provide an empirical proof of concept. Such work is urgent given contemporary critical junctures arising from democratic backsliding, state fragility, climate change, and conflicts over the rights of the marginalized. |
| Keywords: | institutional change; critical junctures; field experiments; fragile states; belief elicitation |
| JEL: | P00 O10 D70 |
| Date: | 2023–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122367&r=exp |
| By: | Maximilian Andres (University of Potsdam, Berlin School of Economics) |
| Abstract: | The present paper proposes a novel approach for equilibrium selection in the infinitely repeated prisoner’s dilemma where players can communicate before choosing their strategies. This approach yields a critical discount factor that makes different predictions for cooperation than the usually considered sub-game perfect or risk dominance critical discount factors. In laboratory experiments, we find that our factor is useful for predicting cooperation. For payoff changes where the usually considered factors and our factor make different predictions, the observed cooperation is consistent with the predictions based on our factor. |
| Keywords: | cooperation, communication, infinitely repeated game, machine learning |
| JEL: | C73 C92 D83 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:75&r=exp |
| By: | Sidhya Balakrishnan; Eric Bettinger; Michael S. Kofoed; Dubravka Ritter; Douglas A. Webber; Ege Aksu; Jonathan S. Hartley |
| Abstract: | We conduct a survey-based experiment with 2, 776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with varying outcomes. |
| JEL: | D14 D82 G51 H81 I22 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32260&r=exp |
| By: | Gergely Horvath |
| Abstract: | We experimentally study effort provision and network formation in the linear-quadratic game characterized by positive externality and complementarity of effort choices among network neighbors. We compare experimental outcomes to the equilibrium and efficient allocations and study the impact of group size and linking costs. We find that individuals overprovide effort relative to the equilibrium level on the network they form. However, their payoffs are lower than the equilibrium payoffs because they create fewer links than it is optimal which limits the beneficial spillovers of effort provision. Reducing the linking costs does not significantly increase the connectedness of the network and the welfare loss is higher in larger groups. Individuals connect to the highest effort providers in the group and ignore links to relative low effort providers, even if those links would be beneficial to form. This effect explains the lack of links in the network. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.05913&r=exp |
| By: | Anup Malani; Cynthia Kinnan; Gabriella Conti; Kosuke Imai; Morgen Miller; Shailender Swaminathan; Alessandra Voena; Bartek Woda |
| Abstract: | Universal health coverage is a widely shared goal across lower-income countries. We conducted a large-scale, 4-year trial that randomized premiums and subsidies for India’s first national, public hospital insurance program, RSBY. We find roughly 60% uptake even when consumers were charged premiums equal to the government’s cost for insurance. We also find substantial adverse selection into insurance at positive prices. Insurance enrollment increases insurance utilization, partly due to spillovers from use of insurance by neighbors. However, many enrollees attempted to use insurance but failed, suggesting that learning is critical to the success of public insurance. We find very few statistically significant impacts of insurance access or enrollment on health. Because there is substantial willingness-to-pay for insurance, and given how distortionary it is to raise revenue in the Indian context, we calculate that our sample population should be charged a premium for RSBY between INR 500-1000 rather than a zero premium to maximize the marginal value of public funds. |
| Keywords: | health insurance, adverse selection, spillovers, marginal value of public funds |
| JEL: | D10 I13 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11006&r=exp |
| By: | Shilpa Aggarwal; Dahyeon Jeong; Naresh Kumar; David Sungho Park; Jonathan Robinson; Alan Spearot |
| Abstract: | While cash transfers consistently show large effects on immediate outcomes like consumption, limited access to markets may mute their impact on productive investment. In an experiment in Malawi, we cross-cut cash transfers with an "input fair, " designed to reduce transport costs to access agricultural inputs. Cash alone increases investment by 27%, while the joint provision of cash and the input fair increases investment by about 40%; thus, the incremental effect of the input fair is equivalent to about a 50% increase compared to the effect of cash alone. Input fairs alone were ineffective. |
| JEL: | O13 Q12 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32263&r=exp |
| By: | Ege Aksu; Sidhya Balakrishnan; Eric Bettinger; Jonathan S. Hartley; Michael S. Kofoed; Dubravka Ritter; Douglas A. Webber |
| Abstract: | We conduct a survey-based experiment with 2, 776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with varying outcomes. |
| Keywords: | education finance; education insurance; income insurance; adverse selection; financial aid; income-share agreement; ISA; student loan; student debt; higher education; income-driven repayment; IDR; income-contingent financing |
| JEL: | D14 D82 G51 H81 I22 |
| Date: | 2024–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:97988&r=exp |
| By: | Jian, L.; Linton, O. B.; Tang, H.; Zhang, Y. |
| Abstract: | We investigate how to improve efficiency using regression adjustments with covariates in covariate-adaptive randomizations (CARs) with imperfect subject compliance. Our regression-adjusted estimators, which are based on the doubly robust moment for local average treatment effects, are consistent and asymptotically normal even with heterogeneous probabilities of assignment and misspecified regression adjustments. We propose an optimal but potentially misspecified linear adjustment and its further improvement via a nonlinear adjustment, both of which lead to more efficient estimators than the one without adjustments. We also provide conditions for nonparametric and regularized adjustments to achieve the semiparametric efficiency bound under CARs. |
| Keywords: | Covariate-adaptive randomization, High-dimensional data, Local average treatment effects, Randomized experiment, Regression adjustment |
| JEL: | C14 C21 I21 |
| Date: | 2023–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2315&r=exp |
| By: | Collewet, Marion; Fairley, Kim; Kessels, Roselinde; Knoef, Marike; van Vliet, Olaf |
| Abstract: | We study Dutch taxpayers’ preferences in designing a social welfare system. With help of a choice experiment we ask 2000 respondents to make choices between policy packages, characterized by different levels of income for welfare recipients, of obligations, of sanctions, of earnings and gifts disregards, and of taxes for the average Dutch household. The results show that respondents are in favor of relatively generous benefits and disregards, but also find monitoring and activation very important. Both self-interest and altruism, as well as trust in the government, appear to shape respondents' preferences. Respondents’ preferences line up with their voting behavior. |
| Date: | 2024–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:4am7e&r=exp |
| By: | Simon Gächter (University of Nottingham); Esther Kaiser (ZHAW School of Management and Law); Manfred Königstein (University of Erfurt) |
| Abstract: | Explicit and implicit incentives and opportunities for mutually beneficial voluntary cooperation co-exist in many contractual relationships. In a series of eight laboratory gift-exchange experiments, we show that incentive contracts can lead to crowding out of voluntary cooperation even after incentives have been abolished. This crowding out occurs also in repeated relationships, which otherwise strongly increase effort compared to one-shot interactions. Using a unified econometric framework, we unpack these results as a function of positive and negative reciprocity, as well as the principals’ wage offer and the incentivecompatibility of the contract. Crowding out is mostly due to reduced wages and not a change in reciprocal wage-effort relationships. Our systematic analysis also replicates established results on gift exchange, incentives, and crowding out of voluntary cooperation while exposed to incentives. Overall, our findings show that the behavioral consequences of explicit incentives strongly depend on the features of the situation in which they are embedded. |
| Keywords: | principal-agent games; gift-exchange experiments; incomplete contracts, explicit incentives; implicit incentives; repeated games; crowding out |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2024-02&r=exp |
| By: | Yuliet Verbel (University of Michigan) |
| Abstract: | When faced with the choice of behaving corruptly, are people more willing to accept a bribe or to embezzle money? Situations of bribery and embezzlement usually differ in their decision-making dynamics, with bribery requiring coordination between decision-makers (i.e., briber and bribee) while embezzlement does not require such coordination for a decision of corruption. This study makes use of outcome-equivalent games to examine participants’ willingness to engage in these two types of corruption. The results show people are more likely to undertake bribery than embezzlement, and this is attributed to the joint decision-making dynamic of bribery, which shapes the responsibility for the outcome of corruption to be shared between the decision-makers instead of concentrated as it is in a situation of embezzlement. In an additional experiment eliciting social norms related to bribery and embezzlement, I find a clear norm of no-corruption, which highlights a discrepancy between the perceived appropriateness of these situations and the actual behavior exhibited in them. I further find that the social appropriateness ratings for each type of corruption are not significantly different. My findings suggest that anticorruption efforts should account for factors that facilitate rule-breaking behavior, such as coordinated decisions that lead to shared responsibility for the outcome. |
| Keywords: | Bribery; Experiment; Embezzlement; Corruption |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2024-03&r=exp |
| By: | Marco Ceccarelli (VU University Amsterdam); Stefano Ramelli (University of St. Gallen - School of Finance; Swiss Finance Institute) |
| Abstract: | We study expectations about the energy transition (climate transition beliefs) as drivers of “green” investment decisions and financial performance expectations. In a preregistered survey of U.S. retail investors (N=1, 007), we document considerable heterogeneity in climate transition beliefs at different horizons. More optimistic climate transition beliefs are associated with higher green expected financial performance and investments, especially for investors without strong pro-environmental preferences. A pre-registered information provision experiment (N=3, 003) provides causal evidence of the role of climate transition optimism in investment behavior. By influencing the availability of capital for green projects, the prevailing narratives and beliefs around the energy transition can have important self fulfilling properties. |
| Keywords: | Behavioral Finance, Climate Change, ESG, Expected returns, Heterogeneous beliefs, Information provision experiment, Survey, Sustainable finance. |
| JEL: | D14 H42 G18 P16 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2422&r=exp |
| By: | Ritesh Jain; Kirby Nielsen; |
| Abstract: | large literature has documented violations of expected utility consistent with a preference for certainty (the “certainty effect†), but recent studies question the prominence of this phenomenon. We design an experiment using lotteries spanning over the entire probability simplex to establish the prevalence of the certainty effect relative to its opposite. 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 three dimensions: varying the mixing lottery, moving slightly away from certainty, and having a zero outcome. |
| Keywords: | independence axiom, expected utility theory, certainty effect, Allais Paradox, common ratio effect |
| JEL: | C79 D82 |
| URL: | http://d.repec.org/n?u=RePEc:liv:livedp:202402&r=exp |
| By: | Dinarte Diaz, Lelys (World Bank) |
| Abstract: | Globally, 150 million adolescents report being victims of or engaging in peer-to-peer violence in and around school. One strategy to reduce this risk is to occupy youth in after-school programs (ASP). Yet, the question remains: how does peer group composition affect the effectiveness of an ASP? I address this question by randomly assigning youths to either a control, homogeneous, or heterogeneous peer group within an ASP implemented in El Salvador. I find that, unlike homogeneous groups, heterogeneous peer groups do help students avoid violence. These results are relevant to public policy discussions on optimal group composition for violence reduction programs. |
| Keywords: | peer effects, violence, integration, tracking, after-school programs |
| JEL: | I29 K42 Z13 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16830&r=exp |
| By: | Katherine B. Coffman; Lucas C. Coffman; Keith Marzilli Ericson |
| Abstract: | Economics research has largely overlooked non-binary individuals. We aim to jump-start the literature by providing data on several economically-important beliefs and preferences. Among many results, non-binary individuals report more gender-based discrimination and express different career and life aspirations, including less desire for children. Anti-non-binary sentiment is stronger than anti-LGBT sentiment, and strongest among men. Non-binary respondents report lower assertiveness than men and women, and their social preferences are similar to men’s and less prosocial than women’s, with age an important moderator. Elicited beliefs reveal inaccurate stereotypes as people often mistake the direction of group differences or exaggerate their size. |
| JEL: | C90 D10 J16 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32222&r=exp |