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on Experimental Economics |
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Issue of 2020‒05‒11
twenty-one papers chosen by |
| By: | Siebert, Jan |
| Abstract: | Poor people have, on average, a higher marginal propensity to consume. One (out of many) possible explanations for this is that poverty affects impatience. This would have important implications for monetary and fiscal policy. While some macroeconomists simply assume lower individual discount factors for poorer households, little is known about this phenomenon from a behavioural point of view. This paper presents a laboratory experiment to test whether the poor show more impatient behaviour. In the experiment, half of the participants gets a high participation fee, while the other half gets a low participation fee. All participants perform an intertemporal multiple price list task. The participation fee has a significant effect. Surprisingly, participants with a lower participation fee are less impatient. |
| Keywords: | Intertemporal preferences,patience,saving,consumption,experiments |
| JEL: | C9 D9 E2 |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:845&r=all |
| By: | Taha Movahedi (University of Portsmouth) |
| Abstract: | This paper studies the effect of uncertainty in group identity on social preferences. We run a laboratory experiment to investigate the uncertainty choice and its impact on social preferences. Firstly, we have replicated the result of the literature on in-group favouritism and out-group discrimination in experimental works in psychology and economics. Secondly, we find that only 60 percent of participants are willing to know the identity of their matched counterparts. The participants who decide to know the identity of their counterparts are 64 percent more likely to choose social- welfare-maximising outcome but show 27 percent decrease in charity concerns toward an in-group member. Moreover, the subjects are less likely to reward and more likely to punish when their counterpart is an in-group member. The participants who decide not to know the identity of their counterpart are more reciprocal than participants who choose to know the identity of their counterpart. They are more likely to reward and less likely to punish their counterparts. |
| Date: | 2020–05–04 |
| URL: | https://d.repec.org/n?u=RePEc:pbs:ecofin:2020-07&r=all |
| By: | Felix Sebastian Doessing (CEBI, Department of Economics, University of Copenhagen); David Dreyer Lassen (CEBI, Department of Economics, University of Copenhagen) |
| Abstract: | Discussions about the legitimacy and welfare consequences of paternalistic interventions usually begin with the assumption that regulators are both benevolent and competent. We present experimental evidence that neither need be the case. In our experiment, individuals choose whether to restrict the choice of another participant and we see that regulation, on average, decreases choice efficiency. While more competent regulators are more likely to restrict choice sets in order to improve welfare for subjects when they use their regulatory privilige, selection into being an active regulator is unrelated to competence. The propensity for kind regulation is increasing in own competence, while the propensity for unkind regulation is both negatively related to own competence and positively related to the competence of the subject. |
| Keywords: | Paternalism, choosing for others, risk preferences, beneficence |
| JEL: | C91 D60 D62 D64 D91 |
| Date: | 2019–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:1905&r=all |
| By: | Christina Gravert (CEBI, Department of Economics, University of Copenhagen); Linus Olsson Collentine (University of Gothenburg) |
| Abstract: | In three large-scale field experiments with over 32,000 individuals, we investigate whether public transport uptake can be in uenced by behavioral interventions and by economic incentives. Despite their effectiveness in other domains, we find a tightly estimated zero for social norms and implementation intentions on ridership. Doubling the trial period from two to four weeks significantly increases uptake and long-term usage. This increase is sustained for months after removing the incentive. The effect is mainly driven by initial low users, which is evidence for habit formation. While there is scope for long-term behavior change, nudges might not be the right approach. |
| Keywords: | transport, nudging, field experiment, habit formation |
| JEL: | C93 D04 D91 L91 |
| Date: | 2019–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:1910&r=all |
| By: | Cloos, Janis; Greiff, Matthias; Rusch, Hannes (RS: GSBE other - not theme-related research, General Economics 1 (Micro)) |
| Abstract: | We examine geographical concentration, scientific quality, and editorial favoritism in the field of experimental economics. We use a novel data set containing all original research papers ( NÂ = 596) that exclusively used laboratory experiments for data generation and were published in the American Economic Review, Experimental Economics, or the Journal of the European Economic Association between 1998 and 2018. The development of geographical concentration is examined using data on authors' affiliations at the time of the respective publication. Results show that research output produced by US-affiliated economists increased slower than overall research output, leading to a decrease in geographical concentration. Several proxies for scientific quality indicate that experiments conducted in Europe are of higher quality than experiments conducted in North America: European experiments rely on a larger total number of participants as well as participants per treatment, and receive more citations compared to experiments conducted in North America. Examining laboratory experiments published in the AER more closely, we find that papers authored by economists with US-affiliations receive significantly fewer citations in the first 5 and 10 years after publication compared to papers by authors from the rest of the world. |
| JEL: | A11 A14 C90 I23 |
| Date: | 2020–05–06 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umagsb:2020014&r=all |
| By: | Matthias Stefan; Jürgen Huber; Michael Kirchler; Matthias Stefan; Markus Walzl |
| Abstract: | Rankings are prevalent information and incentive tools in labor markets with strong competition for talent. In a dynamic model of multi-tasking and an accompanying experiment with financial professionals, we identify hidden ranking costs when performance in one task is incentivized and ranked while another prosocial task is not: (i) a ranking influences behavior if individuals lag behind: they spend more total effort and substitute effort in the prosocial task with effort in the ranked task; (ii) those ahead in the ranking spend less total effort and lower relative effort in the ranked task. Implications for incentive schemes are discussed. |
| Keywords: | multi-tasking decision problem, rank incentives, framed field experiment, finance professionals |
| JEL: | C93 D02 D91 |
| Date: | 2020–06 |
| URL: | https://d.repec.org/n?u=RePEc:inn:wpaper:2020-06&r=all |
| By: | Akerlof, Robert (University of Warwick); Li, Hongyi (UNSW Business School); Yeo, Jonathan (University of Warwick) |
| Abstract: | This paper uses a laboratory experiment to study competitions for power — and the role of patronage in such competitions. We construct and analyze a new game — the “chicken-and-egg game” — in which chickens correspond to positions of power andeggsarethegame’scurrency. Wefindthatpowertendstoaccumulate,througha “power begets power” dynamic, in the hands of “lords.” Other subjects behave like their vassals in the sense that they take lords’ handouts rather than compete against them. We observe substantial wealth inequality as well as power inequality. There are also striking gender differences in outcomes — particularly in rates of lordship. In a second treatment, where we eliminate patronage by knocking out the ability to transfer eggs, inequality is vastly reduced and the “power begets power” dynamic disappears. |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wcreta:56&r=all |
| By: | Tim Kaiser; Annamaria Lusardi; Lukas Menkhoff; Carly J. Urban |
| Abstract: | We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains, and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions. |
| JEL: | D14 I21 |
| Date: | 2020–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:27057&r=all |
| By: | Thomas Epper (University of St.Gallen, School of Economics and Political Science); Ernst Fehr (University of Zurich, Department of Economics); Helga Fehr-Duda (University of Zurich, Department of Banking and Finance); Claus Thustrup Kreiner (CEBI, Department of Economics, University of Copenhagen); David Dreyer Lassen (CEBI, Department of Economics, University of Copenhagen); Soeren Leth-Petersen (CEBI, Department of Economics, University of Copenhagen); Gregers Nytoft Rasmussen (CEBI, Department of Economics, University of Copenhagen) |
| Abstract: | This paper documents a large association between individuals� time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory. |
| Keywords: | Wealth inequality, savings behavior, time discounting, experimental methods, administrative data |
| JEL: | C91 D31 E21 |
| Date: | 2019–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:1908&r=all |
| By: | Noussair, C.N. (Tilburg University, Center For Economic Research); Popescu, Andreea Victoria (Tilburg University, Center For Economic Research) |
| Keywords: | Contagion; asset pricing; two trees model; experimental pricing; time series momentum; return predictability |
| JEL: | C53 C92 D50 G12 |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiucen:f29687f7-d02c-4fad-98c2-0a013efbfbd7&r=all |
| By: | Rodemeier, Matthias; Löschel, Andreas |
| Abstract: | How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes. |
| Keywords: | persuasion,optimal taxation,internality taxes,field experiments,energy efficiency,behavioral public economics |
| JEL: | D61 D83 H21 Q41 Q48 |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cawmdp:112&r=all |
| By: | Rodemeier, Matthias; Löschel, Andreas |
| Abstract: | How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes. |
| Keywords: | persuasion,optimal taxation,internality taxes,field experiments,energy efficiency,behavioral public economics |
| JEL: | D61 D83 H21 Q41 Q48 |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:20019&r=all |
| By: | Zahra Murad (University of Portsmouth); Robert Dowell (Funding Circle) |
| Abstract: | We study whether reservation wages of native workers are affected by the information about visa salary requirements for foreign workers. We conduct two experiments to test the hypothesis, a survey experiment on university students and an incentivized experiment with workers on an online labour platform. We find that native workers’ reservation wages are higher when exposed to a high than low visa salary requirement for foreign workers. We test for several mechanisms behind this finding. Our results can partly be explained by the visa salary requirement information acting as an anchor reference point for fair wage perceptions which in turn affects reservation wages. Our results highlight the importance of unintended consequences of immigration policies on local labour markets. |
| Keywords: | reservation wages, fair wages, visa salary requirement, immigration policy, experiment |
| JEL: | C90 E24 C83 |
| Date: | 2020–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:pbs:ecofin:2020-06&r=all |
| By: | Matthew Olckers |
| Abstract: | Over sixty percent of employees at a large South African financial services company select the minimum rate of 7.5 percent for their monthly retirement contributions, far below the recommended rate of 15 percent. I use a field experiment to investigate whether providing employees with a retirement calculator, which shows projections of retirement income, leads to increases in contributions. The average treatment effect is positive but very small and not statistically different from zero. |
| Date: | 2020–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2005.01692&r=all |
| By: | Gagnon, Nickolas (RS: GSBE other - not theme-related research, General Economics 1 (Micro)); Bosmans, Kristof (RS: GSBE Theme Human Decisions and Policy Design, General Economics 1 (Micro)); Riedl, Arno (RS: GSBE Theme Human Decisions and Policy Design, General Economics 1 (Micro)) |
| Abstract: | Labor market opportunities and wages may be unfair for various reasons, and how workers respond to different types of unfairness can have major economic consequences. Using an online labor platform, where workers engage in an individual task for a piece-rate wage, we investigate the causal effect of neutral and gender-discriminatory unfair chances on labor supply. We randomize workers into treatments where we control relative pay and chances to receive a low or a high wage. Chances can be fair, unfair based on an unspecified source, or unfair based on gender discrimination. Unequal pay reduces labor supply of low-wage workers, irrespective of whether the low wage is the result of fair or unfair chances. Importantly, the source of unfair chances matters. When a low wage is the result of gender-discriminatory chances, workers matched with a high-wage worker substantially reduce their labor supply compared to the case of equal low wages (−22%). This decrease is twice as large as those induced by low wages due to fair chances or unfair chances coming from an unspecified source. In addition, exploratory analysis suggests that in response to unequal pay, low-wage male workers reduce labor supply irrespective of the source of inequality, whereas low-wage female workers reduce labor supply only if unequal pay is due to gender-discriminatory chances. Our results concerning gender discrimination indicate a new reason for the lower labor supply of women, which is a prominent explanation for the gender gap in earnings. |
| JEL: | D90 E24 J22 J31 J71 M50 |
| Date: | 2020–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umagsb:2020005&r=all |
| By: | Islam, Asad; Kwon, Sungoh; Masood, Eema; Prakash, Nishith; Sabarwal, Shwetlena; Saraswat, Deepak |
| Abstract: | In this study, we use at scale randomized control trial among 18,000 secondary students in 181 schools in Tanzania (Zanzibar) to examine the effects of personal best goal-settings on students’ academic performance. We also offer non-financial rewards to students to meet the goals they set. We find that goal-setting has a significant positive impact on student time use, study effort, and self-discipline. However, we do not find any significant impact of goalsetting on test scores. We find that, this could be partially because about 2/3rd of students do not set realistic goals. Third, we find weaker results on time use, study effort, and discipline when we combine goal-setting with non-financial rewards, suggesting that typing goal-setting to extrinsic incentives could weaken its impact. We also find that female students improved on outcomes much more than male students and that students coming from relatively weaker socio-economic backgrounds improved more than their counterparts. |
| Keywords: | Goal-Setting,Recognition Rewards,Student Performance,Zanzibar |
| JEL: | D9 I20 I25 O15 O55 |
| Date: | 2020 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:526&r=all |
| By: | Jayles, Bertrand; Escobedo, Ramon; Cezera, Stéphane; Blanchet, Adrien; Kameda, Tatsuya; Sire, Clément; Théraulaz, Guy |
| Abstract: | A major problem that resulted from the massive use of social media networks is the diffusion of incorrect information. However, very few studies have investigated the impact of incorrect information on individual and collective decisions. We performed experiments in which participants had to estimate a series of quantities before and after receiving social information. Unbeknownst to them, we controlled the degree of inaccuracy of the social information through "virtual influencers", who provided some incorrect information. We find that a large proportion of individuals only partially follow the social information, thus resisting incorrect information. Moreover, we find that incorrect social information can help a group perform better when it overestimates the true value, by partly compensating a human underestimation bias. Overall, our results suggest that incorrect information does not necessarily impair the collective wisdom of groups, and can even be used to dampen the negative effects of known cognitive biases. |
| Date: | 2020–05 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:124257&r=all |
| By: | Casoria, Fortuna; Riedl, Arno (RS: GSBE Theme Human Decisions and Policy Design, General Economics 1 (Micro)); Werner, Peter (RS: GSBE Theme Human Decisions and Policy Design, General Economics 1 (Micro)) |
| Abstract: | This paper reviews experimental studies that investigate the effects of communication on behavior in organizational settings. Two main classes of studies are identified: (a) studies on coordination and competition, which include experimental research that tests whether communication can help to overcome coordination failure within organizations, and (b) studies that analyze the role of communication in alleviating problems arising from information asymmetries at the workplace. The evidence from these studies indicates that communication is suited to improve efficient coordination within firms and to mitigate information problems in employer-employee relationships. In addition, studies are presented that focus on the interaction between communication and monetary incentive schemes in companies. |
| JEL: | C90 D82 D83 J53 |
| Date: | 2020–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umagsb:2020010&r=all |
| By: | Brian Jabarian |
| Abstract: | In their article, "Egalitarianism under Severe Uncertainty", (Philosophy and Public Affairs, 2018), Thomas Rowe and Alex Voorhoeve elegantly develop a theory of distributive justice, called "pluralist egalitarianism", for cases under maximal uncertainty. In this pr\'ecis for our PEA Soup Discussion, I firstly sketch their views and arguments. I then discuss their main scenarios. Finally, I suggest several objections against their view, proposing a two-stage ambiguity thought experiment. |
| Date: | 2020–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2004.08892&r=all |
| By: | Hambulo Ngoma; Amare Teklay Hailu; Stephen Kabwe; Arild Angelsen |
| Abstract: | Forests are important havens for biodiversity. If left standing, they sequester and store carbon, and thereby help mitigate climate change. Forests supplement household incomes for a large share of rural people, perform a myriad of other ecosystem functions and contribute to national incomes. Yet forests are overexploited and degrading, threatening the products and services they supply. Sustainable use and conservation of forests is, therefore, high on national policy agendas, but it is less clear how to do so effectively and efficiently. We conducted framed field experiments (FFEs) to test, ex-ante, the impact of three possible policies for forest conservation in Zambia: community forest management (CFM), command and control (CAC), and payments for environmental services (PES). The experiments were designed to mimic how local dwellers use forests in real life. A random sample of 191 forest users drawn from four villages in Mpika and Serenje districts, the actual localities where they make forest use decisions participated in the experiments, using actual tree branches as the commodity in the task of harvesting trees. A total of 24 groups, each with eight participants played the experiments and made harvest decisions for 10 rounds. Relative to open access, PES to individuals reduced harvest by 18 percentage points while each of CAC and CFM reduced harvest rates by 6 percentage points. Communication in the CFM treatment improved cooperation and to some extent ignited non-pecuniary, prosocial and other – regarding choices among our participants. The large effects of individual pay underscores the merit in paying forest users through incentive-based schemes, provided the transaction costs of such individual payments can be kept at a reasonably low level. Free and easy-riding and uncertainty on how others will respond dampens the positive effects of group pay for forest conservation, as do externally imposed sanctions in CAC. We conclude that individual pay performs better than group pay for forest conservation. Optimal forest conservation outcomes might, however, be achieved by some combinations of CFM and individual PES. Clarifying benefit sharing mechanisms in Zambia’s community forest management and taking into account individuals’ non-pecuniary motives will be important to achieve win-win outcomes for conservation and livelihoods. |
| Keywords: | Food Security and Poverty, International Development |
| Date: | 2019–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:ags:miffrp:303049&r=all |
| By: | Shilpa Aggarwal; Valentina Brailovskaya; Jonathan Robinson |
| Abstract: | We test whether the provision of multiple labeled savings accounts affects savings and downstream outcomes in an experiment with 761 microentrepreneurs in urban Malawi. Treatment respondents received one or multiple savings accounts, in the form of lockboxes or mobile money. We find that while providing additional boxes increased savings by 40%, technical issues marred the efficacy of a second mobile money account. Both types of accounts had impacts on downstream outcomes, including farming decisions and credit extended to customers. We do not detect differential downstream effects by the number of accounts. |
| JEL: | D14 O12 O16 |
| Date: | 2020–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:27035&r=all |