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on Experimental Economics |
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Issue of 2015‒10‒04
28 papers chosen by |
| By: | Leonardo Becchetti (University of Rome Tor Vergata); Vittorio Pelligra (University of Cagliari, CRENoS); Francesco Salustri (DEDI, University of Rome "Tor Vergata") |
| Abstract: | We use the Vote-with-the-Wallet game (VWG) to model socially or environmentally responsible consumption, an increasingly relevant but still under-researched phenomenon. Based on a theoretical model outlining game equilibria and the parametric interval of the related multiplayer prisoners’ dilemma (PD) we evaluate with a controlled lab experiment players’ behavior in the game and test the effects of an ex post redistribution mechanism between defectors and cooperators. Our findings document that the redistribution mechanism interrupts cooperation decay and stabilizes the share of cooperators at a level significantly higher, even though inferior to the Nash equilibrium. |
| Keywords: | vote with the wallet, prisoner’s dilemma, lab experiment |
| JEL: | C72 C73 C91 M14 |
| Date: | 2015–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:354&r=all |
| By: | Raja Rajendra Timilsina (Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology) |
| Abstract: | A marketable permits system (MPS) has been deemed effective in laboratory experiments, however, little is known about how the MPS works in the field. We evaluate the MPS efficiency for forest conservation by framed field experiments in Nepal. Forestland demands are elicited from farmers, with which the experiments are carried out. The novelty lies in instituting a uniform price auction (UPA) under trader settings and in identifying the efficiency in the field of developing nations. The results suggest that farmers with limited education understand UPA rules, reveal their forestland valuations and that the MPS is effective with 80% of efficiency. |
| Keywords: | uniform price auction, marketable permits system, framed field experiment, forest management |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2015-22&r=all |
| By: | Takashi Yamada (Faculty of Global and Science Studies, Yamaguchi University, Japan); Nobuyuki Hanaki (Université Nice Sophia Antipolis; GREDEG-CNRS; IUF) |
| Abstract: | We experimentally study Lowest Unique Integer Games (LUIGs). In a LUIG, N (>3) players submit a positive integer up to M and the player choosing the smallest number not chosen by anyone else wins. LUIGs are simplified versions of real systems such as lottery games and Lowest/Highest Unique Bid Auctions that have been attracting attention from scholars, yet experimental studies are still scarce. Here, we consider four LUIGs with N = {3; 4} and M = {3; 4}. We find that (a) choices made by a majority of subjects over 50 rounds of a LUIG were not significantly different from that in the symmetric mixed-strategy Nash equilibrium (MSE) of the LUIG; however, (b) those subjects who behaved significantly differently from what the MSE predicts won the game more frequently than those who behaved similarly to what the MSE predicts. |
| Keywords: | Lowest Unique Integer Game, Laboratory Experiment |
| JEL: | C72 C92 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-34&r=all |
| By: | Federico Fornasari; Matteo Ploner; Ivan Soraperra |
| Abstract: | We investigate investment in risk protection when risk affects either the decision maker or another individual and when the cost to offset risk is borne either by the decision maker or by another individual. We assess be- havior in the experiment against predictions obtained from a well-known social preferences model. In line with our predictions, we find that in- dividuals invest more of others’ resources than of their own resources to protect themselves, and individuals invest more of their own resources in risk protection when risk is borne by themselves than when risk is borne by the others. Furthermore, individuals invest more in risk protection when delegated to choose for others than when choosing for themselves. |
| Keywords: | social preferences; risk; laboratory experiments; delegated choice |
| JEL: | C91 D03 D80 O12 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1503&r=all |
| By: | H. Sun; M. Bigoni |
| Abstract: | By means of a laboratory experiment, we study the impact of the endogenous adoption of a collective punishment mechanism within a one-shot binary trust game. The experiment comprises three games. In the first one, the only equilibrium strategy is not to trust, and not to reciprocate. In the second we exogenously introduce a sanctioning rule that imposes on untrustworthy second-movers a penalty proportional to the number of those who reciprocate trust. This generates a second equilibrium where everybody trusts and reciprocates. In the third game, the collective punishment mechanism is adopted through majority-voting. In line with the theory, we find that the exogenous introduction of the punishment mechanism significantly increases trustworthiness, and to a lesser extent also trust. However, in the third game the majority of subjects vote against it: subjects seem to be unable to endogenously adopt an institution which, when exogenously imposed, proves to be efficiency enhancing. |
| JEL: | C72 C92 D72 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1031&r=all |
| By: | Altmann, Steffen; Falk, Armin; Heidhues, Paul; Jayaraman, Rajshri |
| Abstract: | We study how website defaults affect consumer behavior in the domain of charitable giving. In a field experiment that was conducted on a large platform for making charitable donations over the web, we exogenously vary the default options in two distinct choice dimensions. The first pertains to the primary donation decision, namely, how much to contribute to the charitable cause. The second relates to an "add-on" decision of how much to contribute to supporting the online platform itself. We find a strong impact of defaults on individual behavior: in each of our treatments, the modal positive contributions in both choice dimensions invariably correspond to the specified default amounts. Defaults, nevertheless, have no impact on aggregate donations. This is because defaults in the donation domain induce some people to donate more and others to donate less than they otherwise would have. In contrast, higher defaults in the secondary choice dimension unambiguously induce higher contributions to the online platform. |
| Keywords: | Default Options; Online Platforms; Charitable Giving; Field Experiment |
| JEL: | C93 D03 D64 |
| Date: | 2015–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:515&r=all |
| By: | Bursztyn,Leonardo A.; Fiorin,Stefano; Gottlieb,Daniel Wolf; Kanz,Martin |
| Abstract: | This paper studies the role of morality in the decision to repay debts. Using a field experiment with a large Islamic bank in Indonesia, the paper finds that moral appeals strongly increase credit card repayments. In this setting, all of the bank's late-paying credit card customers receive a basic reminder to repay their debt one day after they miss the payment due date. In addition, two days before the end of a ten-day grace period, clients in a treatment group also receive a text message that cites an Islamic religious text and states that ?non-repayment of debts by someone who is able to repay is an injustice.? This message increases the share of customers meeting their minimum payments by nearly 20 percent. By contrast, sending either a simple reminder or an Islamic quote that is unrelated to debt repayment has no effect on the share of customers making the minimum payment. Clients also respond more strongly to this moral appeal than to substantial financial incentives: receiving the religious message increases repayments by more than offering a cash rebate equivalent to 50 percent of the minimum repayment. Finally, the paper finds that removing religious aspects from the quote does not change its effectiveness, suggesting that the moral appeal of the message does not necessarily rely on its religious connotation. |
| Keywords: | E-Business,Bankruptcy and Resolution of Financial Distress,Debt Markets,Banks&Banking Reform,Emerging Markets |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7420&r=all |
| By: | Zhuoqiong (Charlie) (London School of Economics); David Ong (Economic Science Institute & Argyros School of Business and Economics, Chapman University); Roman Sheremeta (Case Western Reserve University) |
| Abstract: | We study how salient group identity, created through competition between students from different universities, as well as differences in the value of winning impact competitive behavior. Our experiment employs a simple all-pay auction within and between two university subject pools. We find that when competing against their peers, students within the lower tier university bid more aggressively than students within the top-tier university. Also, students from the lower tier university, in particular women, bid more aggressively when competing against students from the top-tier university. These findings, interpreted through a theoretical model incorporating both group identity and differential value of winning, suggest that students at the lower tier university have a stronger group identity as well as higher desire to win. |
| Keywords: | experiments, all-pay auction, competitiveness, group identity |
| JEL: | C91 D03 J7 Z13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:15-16&r=all |
| By: | Ioannou, Christos A.; Makris, Miltiadis |
| Abstract: | Global games and Poisson games have been proposed to address equilibrium indeterminacy in Coordination games. The former assume that agents face idiosyncratic uncertainty about economic fundamentals to capture disperse information, whereas the latter model the number of actual players as a Poisson random variable to capture population uncertainty in large games. Given that their predictions differ, it is imperative to understand which type of uncertainty drives empirical behavior in macroeconomic environments with strategic complementarities. Recent experimental literature finds mixed results on whether subjects' behavior is similar in Global and Common Knowledge Coordination games, and hence on whether idiosyncratic uncertainty about economic fundamentals is an important determinant of subjects' behavior. Poisson Coordination games have not been investigated experimentally. We fill this gap. Our findings suggest that uncertainty about the number of actual players may influence subjects' behavior. Crucially, such behavior is consistent with the theoretical prediction of Poisson Coordination games. |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:stn:sotoec:1506&r=all |
| By: | Cárdenas, Juan-Camilo; Rodriguez, Luz Angela; Johnson, Nancy |
| Abstract: | Watersheds and irrigation systems have the characteristic of connecting people vertically by water flows. The location of users along these systems defines their role in the provision and appropriation of water which adds complexity to the potential for cooperation. Verticality thus imposes a challenge to collective action. This paper presents the results of field experiments conducted in four watersheds of Colombia (South America) and Kenya (East Africa) to study the role that location plays in affecting trust and cooperation in decisions regarding to provision and appropriation of water. We recruited 639 watersheds inhabitants from upstream, midstream and downstream locations in these basins and conducted two field experiments: the Irrigation Game and the Water Trust Game. The Irrigation Game (Cardenas et al, 2013; Janssen et al, 2011) involves decisions regarding to the provision and appropriation of water where the location in the system is randomly assigned. The Water Trust Game is an adaptation of the trust game (Berg et al 1995) framed around water and economic compensation flows where we explicitly reveal the actual upstream or downstream location of the two players. The results of the two games show that location affect water provision and distribution and that reciprocity and trust are key motivations for upstream-downstream cooperation. Yet, both experiments also suggest that the lack of trust from downstream players towards upstream players may restrict the possibilities of cooperation among watershed users. |
| Keywords: | Collective Action, Verticality, Watersheds, Field Experiments, Irrigation Game, Trust Game, Water Trust Game, Payments for Environmental Services, Colombia, Kenya., Environmental Economics and Policy, Productivity Analysis, Q0, Q2, C9, |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ulaedd:209363&r=all |
| By: | Igor Asanov (Department of Economics, University of Kassel); Simone Vannuccini (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | We experimentally analyze the effects of external interventions such as subsidy and targeting on investment decisions during the intervention and after. We employ a multi-period version of the trust (investment) game (Berg et al., 1995) introducing either the monetary incentives for contribution or providing a suggestion about the level of investment. The results of the experiment indicate that targeting is an effective instrument to promote trustful behavior, whereas subsidy policy is not effective both in short- and long-run. Therefore we suggest considering a targeting policy as one of the instruments that can foster trustful behavior. |
| Keywords: | Trust Game, Experiment, Policy, Subsidy, Academic Spin-offs |
| JEL: | C92 L50 D80 |
| Date: | 2015–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2015-013&r=all |
| By: | Antonis Adam (Department of Economics, University of Ioannina,); Andreas C. Drichoutis (Department of Agricultural Economics and Rural Development, Agricultural University of Athens); Maria Georgoula (Department of Economics, University of Ioannina,); Pantelis Kammas (Department of Economics, University of Ioannina,) |
| Abstract: | Collective action problems, such as double parking behavior, are pervasive in everyday life. This paper presents the results from a field survey that was carried out at one of the main and busiest streets of the city of Ioannina in Greece, in order to investigate the effect of political ideology on double parking behavior. We find that individuals placing themselves either on the extreme Left or the extreme Right on a [0-10] political spectrum, are characterized by increased propensity of double parking behavior. Taking into account that both the extreme Left and the extreme Right Greek parties are strongly in favor of state intervention, our empirical fndings could be read as follows. Subjects that believe in the superiority of state intervention rely heavier on incentives and constraints provided by the law and therefore in the absence of an effective monitoring mechanism they fail to internalize the social cost of their actions. In contrast, subjects that are in favor of decentralized market solutions, take into account the social impact of their actions even in the absence of a strong monitoring state mechanism. |
| Keywords: | Collective Action; Political Ideology; Political Behavior |
| JEL: | H23 H41 C93 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:aua:wpaper:2015-2&r=all |
| By: | Bryan C. McCannon (West Virginia University, College of Business and Economics); Colleen Tokar Asaad (Baldwin-Wallace University); Mark Wilson (Saint Bonaventure University) |
| Abstract: | Social preferences and third-party enforcement of formal contracts are two mechanisms that facilitate performance of an agreement. The standard argument is that formal contracting substitutes when social preferences are lacking. We explore the hypothesis that social preferences and contract enforcement are complements. We measure social preferences from a Trust Game and use it is an explanatory variable in a contract game. We find that both increased contract enforcement and high trusting preferences lead to enhanced rates of contract formation and larger investments. There is an interaction effect where trusting individuals make larger investment agreements, specifically when enforcement is greater. Thus, contracts and social preferences complement one another. |
| Keywords: | contract, experiment, risk, social preference, trust |
| JEL: | D86 K12 C91 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:wvu:wpaper:15-15&r=all |
| By: | Michael Luca (Harvard Business School, Negotiation, Organizations & Markets Unit); Timothy Wu (Columbia Law School); Sebastian Couvidat (Yelp.com); Daniel Frank (Yelp.com); William Seltzer (Yelp.com) |
| Abstract: | While Google is known primarily as a search engine, it has increasingly developed and promoted its own content as an alternative to results from other websites. By prominently displaying Google content in response to search queries, Google is able to use its dominance in search to gain customers for this content. This may reduce consumer welfare if the internal content is inferior to organic search results. In this paper, we provide a legal and empirical analysis of this practice in the domain of online reviews. We first identify the conditions under which universal search would be considered anticompetitive. We then empirically investigate the impact of this practice on consumer welfare. To investigate, we implement a randomized controlled trial in which we vary the search results that subjects are shown - comparing Google's current policy of favorable treatment of Google content to results in which external content is displayed. We find that users are roughly 40% more likely to engage with universal search results (which receive favored placement) when the results are organically determined relative to when they contain only Google content. To shed further light on the underlying mechanisms, we show that users are more likely to engage with the OneBox when there are more reviews, holding content constant. This suggests that Google is reducing consumer welfare by excluding reviews from other platforms in the OneBox. |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:16-037&r=all |
| By: | Charles F. Manski; Aleksey Tetenov |
| Abstract: | Medical research has evolved conventions for choosing sample size in randomized clinical trials that rest on the theory of hypothesis testing. Bayesians have argued that trials should be designed to maximize subjective expected utility in settings of clinical interest. This perspective is compelling given a credible prior distribution on treatment response, but Bayesians have struggled to provide guidance on specification of priors. We use the frequentist statistical decision theory of Wald (1950) to study design of trials under ambiguity. We show that epsilon-optimal rules exist when trials have large enough sample size. An epsilon-optimal rule has expected welfare within epsilon of the welfare of the best treatment in every state of nature. Equivalently, it has maximum regret no larger than epsilon. We consider trials that draw predetermined numbers of subjects at random within groups stratified by covariates and treatments. The principal analytical findings are simple sufficient conditions on sample sizes that ensure existence of epsilon-optimal treatment rules when outcomes are bounded. These conditions are obtained by application of Hoeffding (1963) large deviations inequalities to evaluate the performance of empirical success rules. |
| JEL: | C90 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:430&r=all |
| By: | Sebastian Barfort (Department of Economics, University of Copenhagen); Nikolaj Harmon (Department of Economics, University of Copenhagen); Frederik Hjorth (Department of Political Science, University of Copenhagen); Asmus Leth Olsen (Department of Political Science,, University of Copenhagen) |
| Abstract: | Are country-level differences in corruption related to the dishonesty level of individuals entering public service? Recent studies have found that dishonest individuals self-select into public service in high-corruption settings. Little is known, however, about what is driving this pattern and whether a similar pattern exists in low-corruption settings. This paper examines selection into public service in the world’s least corrupt country, Denmark. We subject a relevant student population to a standard experimental dishonesty task and develop a novel method to estimate individual-level dishonesty from the experimental data. We then relate estimates of dishonesty to subjects’ job preferences and characteristics. In contrast to previous findings, dishonest individuals in low-corruption Denmark are less likely to want to enter public service. This self-selection is not related to risk-aversion or ability. Instead, we find that dishonest individuals who self-select into higher paid private sector careers such as finance are less altruistic and place a higher weight on their own earning opportunities. Accordingly, counterfactual wage questions suggest that higher public sector wages would attract more dishonest candidates to the public sector in Denmark. |
| Keywords: | occupational choice, sector choice, coin tossing, dice under cup |
| JEL: | D73 C91 H83 |
| Date: | 2015–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1512&r=all |
| By: | Corrado Giulietti; Mirco Tonin; Michael Vlassopoulos |
| Abstract: | Discrimination in access to public services can act as a major obstacle towards addressing racial inequality. We examine whether racial discrimination exists in access to a wide spectrum of public services in the US. We carry out an email correspondence study in which we pose simple queries to more than 19,000 local public service providers. We find that emails are less likely to receive a response if signed by a black-sounding name compared to a white-sounding name. Given a response rate of 72% for white senders, emails from putatively black senders are almost 4 percentage points less likely to receive an answer. We also find that responses to queries coming from black names are less likely to have a cordial tone. Further tests suggest that the differential in the likelihood of answering is due to animus towards blacks rather than inferring socioeconomic status from race. |
| Keywords: | discrimination, public services provision, school districts, libraries, sheriffs, field experiment, correspondence study |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:080&r=all |
| By: | Brice Corgnet (Economic Science Institute & Argyros School of Business and Economics, Chapman University); Mark DeSantis (Economic Science Institute & Argyros School of Business and Economics, Chapman University); David Porter (Economic Science Institute & Argyros School of Business and Economics, Chapman University) |
| Abstract: | The ability of markets to aggregate disperse information leading to prices that reflect the fundamental value of an asset is key to assessing the often-debated efficiency of markets. We study information aggregation in the experimental environment originally created by Plott and Sunder (1988). Contrary to the current belief, we find that markets do not aggregate information. The model that best describes our data, as well as data on information aggregation subsequent to Plott and Sunder (1988), is prior information (Lintner, 1969). That is, traders use their private information but fail to use market prices to infer other traders’ information. We argue that reflecting on asset prices to infer others’ information requires specific skills related to the concept of cognitive reflection. We develop a learning model in which only a subset of the traders possess this reflective capacity. We show, using both simulations and laboratory experiments, that information aggregation can only be achieved when the market is populated by highly reflective traders and this high level of cognitive reflection is commonly known to all of the traders. |
| Keywords: | Information aggregation, market efficiency, experimental asset markets, behavioral finance |
| JEL: | C92 G02 G14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:15-15&r=all |
| By: | M. Bigoni; G. Camera; M. Casari |
| Abstract: | Impersonal exchange is the hallmark of an advanced society and money is one key institution that supports it. Economic theory regards money as a crude arrangement for monitoring counterparts’ past conduct. If so, then a public record of past actions—or memory—should supersede the function performed by money. This intriguing theoretical postulate remains untested. In an experiment, we show that the suggested functional equivalence between money and memory does not translate into an empirical equivalence. Monetary systems perform a richer set of functions than just revealing past behaviors, which are crucial in promoting large-scale cooperation. |
| JEL: | C70 C90 D03 E02 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1030&r=all |
| By: | LUYTEN, Jeroen; DESMET, Pieter; KESSELS, Roselinde; GOOS, Peter; BEUTELS, Philippe |
| Abstract: | Priority setting in health care involves many complex social value judgments. Whereas a wide body of empirical research has emerged that describe how people make these judgments, little is known about the psychological background against which they are made. In this study, we investigate whether the character trait of dispositional optimism, i.e. anticipating a positive or negative future, influences the way people think about priority setting in health care. We do this by linking a representative sample of the Belgian population’s (N=750) responses on the Revised Life Orientation Test to their responses to a discrete choice experiment (DCE) about priority setting. We find that more pessimistic individuals are on average in worse (self-reported) health, are younger, are more likely to smoke and are less likely to have a university degree than their more optimistic counterparts. Controlling for these respondent characteristics, we find that dispositional optimism indeed matters to priority setting. “Pessimists” are less willing to invest limited resources in prevention and are less in support of prioritizing younger generations over older ones. |
| Keywords: | Equity, Prevention, Allocation, Personality, Discrete choice experiment |
| JEL: | C25 C99 I18 I19 H4 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2015015&r=all |
| By: | Naef, Michael; Sontuoso, Alessandro |
| Abstract: | We examine a novel class of conformist preferences which falls within the realm of belief-dependent motivations in that the peers’ expectations about others’ behavior may affect every group-member’s welfare. Similar other-regarding motivations, like guilt-aversion, have been inferred from evidence of a belief-behavior correlation but the issue of causality has been disputed. In examining conformism we propose a design that verifies the presence of the relevant causality direction while ruling out alternative other-regarding motivations. Our data reveal “self-servingly conformist” behavior in that subjects choose to match their strategy to the peers’ expectations when it is in their interest to do so. |
| Keywords: | conformist preferences, consensus effects, belief-dependent utility, guilt aversion, social norms, trust |
| JEL: | C72 C91 |
| Date: | 2015–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66965&r=all |
| By: | Jeanette A.M.J. Deetlefs (School of Marketing, UNSW Business School, UNSW); Mathew Chylinski (School of Marketing, UNSW Business School, UNSW); Andreas Ortmann (School of Economics, UNSW Business School, UNSW) |
| Abstract: | Widely accepted as a low-cost, fast-turnaround solution with acceptable validity, Amazon’s Mechanical Turk (MTurk) is increasingly being used to source participants for academic studies (Berinsky et al. 2012; Bohannon 2011; Chandler et al. 2014; Mason and Suri 2012). Yet two commonly raised concerns remain: the presence of quasi-professional respondents, or “Super-Turkers”, and the presence of “Spammers”, those that compromise quality while optimising their pay rate. We isolate the influence on research results of experienced subjects (Super-Turkers), and of unreliable subjects (Spammers), jointly and separately. Jointly including these subjects produces very similar results to jointly excluding them, yet effect sizes decrease disproportionately to their sample representation. Furthermore, separately including experienced subjects in research results is shown to be as problematic as inclusion of unreliable subjects, although the noise introduced by these subjects is divergent and measure dependent. Hence removing only one of these types of respondents can be even more damaging to the reliability of results, than including both. |
| Keywords: | data collection, experimentation, field experiment, internet, Mechanical Turk |
| JEL: | C91 C93 D80 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2015-20&r=all |
| By: | Altmann, Steffen; Falk, Armin; Grunewald, Andreas |
| Abstract: | The behavioral relevance of non-binding defaults is well established. While most research has focused on decision makers’ responses to a given default, we argue that this individual decision making perspective is incomplete. Instead, a comprehensive understanding of default effects requires to take account of the strategic interaction between default setters and decision makers. We analyze theoretically and empirically which defaults emerge in such interactions, and under which conditions defaults are behaviorally most relevant. Our analysis demonstrates that the alignment of interests between default setters and decision makers, as well as their relative level of information are key drivers of default effects. In particular, default effects are more pronounced if the interests of the default setter and decision makers are more closely aligned. Moreover, decision makers are more likely to follow default options the less they are privately informed about the relevant decision environment. |
| Keywords: | Default Options; Behavioral Economics; Strategic Communication; Laboratory Experiment |
| JEL: | D03 D18 D83 C92 |
| Date: | 2015–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:516&r=all |
| By: | Banerjee, Priyodorshi; Das, Tanmoy |
| Abstract: | A contingent plan is consistent if the specification for any particular contingency in the plan is invariant to the set of alternative contingencies or, equivalently, is independent of irrelevant information emerging from alternative contingencies or choice problems. Our experiments show that consistency may be obtainable when choice problems are complete, with monetary and immediate outcomes, but is likely to face violation in more complex settings. We further found that decisions are more likely to change when irrelevant information arises rather than subsides, and that any observed failure of consistency has the use of irrelevant information in decision-making at its core. |
| Keywords: | contingent plans, consistent choices, irrelevant information and decision making |
| JEL: | C91 D01 D03 D81 G11 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66995&r=all |
| By: | Climent Quintana-Domeque; Marco Gonzalez-Navarro |
| Abstract: | We provide the first experimental estimation of the effects of the supply of publicly financed urban infrastructure on property values. Using random allocation of first-time street asphalting of residential streets located in peripheral neighbourhoods in Mexico, we show that within two years of the intervention households are able to transform their increased property wealth into significantly larger rates of vehicle ownership, household appliances, and home improvements. Increased consumption is made possible via both credit use and less saving. A cost-benefit analysis indicates that the valuation of street asphalting as capitalized into property values is about as large as construction costs. We provide the first experimental estimation of the effects of the supply of publicly financed urban infrastructure on property values. Using random allocation of first-time street asphalting of residential streets located in peripheral neighbourhoods in Mexico, we show that within two years of the intervention households are able to transform their increased property wealth into significantly larger rates of vehicle ownership, household appliances, and home improvements. Increased consumption is made possible via both credit use and less saving. A cost-benefit analysis indicates that the valuation of street asphalting as capitalized into property values is about as large as construction costs. |
| Keywords: | development, infrastructure, credit use, wealth effect, randomized controlled trial |
| JEL: | C93 H41 O12 O18 |
| Date: | 2015–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:757&r=all |
| By: | Schudy, Simeon; Utikal, Verena |
| Abstract: | Although understanding preferences for privacy is of great importance to economists, businesses and politicians little is known about the factors that shape the individual willingness to share personal data. This article provides three experimental studies with a total of 470 participants that help characterizing individual preferences for sharing personal data varying the characteristics of potential recipients. We find that participants’ willingness to share personal data with anonymous recipients decreases with the number of recipients. However, social distance to the recipients and the extent of personal data a single recipient receives do not decrease the willingness to share personal data. Further, we provide a methodological insight by showing that verification of personal data is essential when eliciting privacy preferences. |
| Keywords: | preference elicitation; data privacy; informational privacy; experiment |
| JEL: | C90 C91 D80 D82 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:25264&r=all |
| By: | Margaret Brehm; Scott A. Imberman; Michael F. Lovenheim |
| Abstract: | This paper estimates the effect of the individual incentives teachers face in a teacher-based value-added merit pay tournament on student achievement. We first build an illustrative model in which teachers use proximity to an award threshold to update their information about their own ability, which informs their expected marginal return to effort. The model predicts that those who are closer to an award cutoff in a given year will increase effort and thus will have higher achievement gains in the subsequent year. However, if value-added scores are too noisy, teachers will not respond. Using administrative teacher-student linked data, we test this prediction employing a method akin to the bunching estimator of Saez (2010). Specifically, we examine whether teachers who are proximal to a cutoff in one year exhibit excess gains in test score growth in the next year. Our results show consistent evidence that teachers do not respond to the incentives they face under this program. In line with our model, we argue that a likely reason for the lack of responsiveness is that the value-added measures used to determine awards were too noisy to provide informative feedback about one's ability. This highlights the importance of value-added precision in the design of incentive pay systems. |
| JEL: | H75 I21 J33 J38 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21598&r=all |
| By: | Avitabile,Ciro; De Hoyos Navarro,Rafael E. |
| Abstract: | A randomized control trial was conducted to study whether providing 10th grade students with information about the returns to upper secondary and tertiary education, and a source of financial aid for tertiary education, can contribute to improve student performance. The study finds that the intervention had no effects on the probability of taking a 12th grade national standardized exam three years after, a proxy for on-time high school completion, but a positive and significant impact on learning outcomes and self-reported measures of effort. The effects are larger for girls and students from households with a relatively high income. These findings are consistent with a simple model where time discount determines the increase in effort and only students with adequate initial conditions are able to translate increased effort into better outcomes. |
| Keywords: | Education For All,Secondary Education,Gender and Education,Tertiary Education,Primary Education |
| Date: | 2015–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7422&r=all |