Papers - All

Dmitry Taubinsky, Alex Rees-Jones

Cited by*: 15 Downloads*: 31

This paper shows that accounting for variation in mistakes can be crucial for welfare analysis. Focusing on consumer underreaction to not-fully-salient sales taxes, we show theoretically that the efficiency costs of taxation are amplified by 1) individual differences in under reaction and 2) the degree to which attention is increasing with the size of the tax rate. To empirically assess the importance of these issues, we implement an online shopping experiment in which 2,998 consumers-matching the U.S. adult population on key demographics-purchase common household products, facing tax rates that vary in size and salience. We find that: 1) there are significant individual differences in underreaction to taxes. Accounting for this heterogeneity increases the efficiency cost of taxation estimates by at least 200%, as compared to estimates generated from a representative agent model. 2) Tripling existing sales tax rates roughly doubles consumers' attention to taxes. Our results provide new insights into the mechanisms and determinants of boundedly rational processing of not-fully-salient incentives, and our general approach provides a framework for robust behavioral welfare analysis.

Hans P Binswanger

Cited by*: 412 Downloads*: 122

Attitudes toward risk were measures in 240 households using two methods: an interview method eliciting certainty equivalents and an experimental gambling approach with real payoffs which, at their maximum, exceeded monthly incomes of unskilled laborers. The interview method is subject to interviewer bias and its results were totally inconsistent with the experimental measures of risk aversion. Experimental measures indicate that, at high payoff levels, virtually all individuals are moderately risk-averse with little variation according to personal characteristics. Wealth tends to reduce risk aversion slightly, but its effect is not statistically significant.

Hans P Binswanger

Cited by*: 126 Downloads*: 47

No abstract available

Sungwon Cho, Cannon Koo, John A List, Changwon Park , Pablo Polo, Jason F Shogren, Robert Wilhelmi

Cited by*: 18 Downloads*: 9

We evaluate the impact of three auction mechanisms - the Becker-DeGroot-Marschak mechanism, the second-price auction, and the random nth-price auction - in the measurement of willingness to pay (WTP) and willingness to accept (WTA) measures of value. Our results show that initial bidding in trial 1 in each auction does not contradict the endowment effect; but that, if it is the endowment effect that governs people's initial bidding behavior, it can be eliminated with repetitions of a second-price or random nth-price auction; and if the thesis is that the effect should persist across auctions and across trials is right, our results suggest that there is no fundamental endowment effect.

Andreas Lange, John A List, Michael K Price

Cited by*: 0 Downloads*: 0

Auction theory represents one of the richest areas of research in economics over the past three decades. Yet, whether, and to what extent, the introduction of secondary resale markets influences bidding behavior in sealed bid first-price auctions remains under researched. This study begins by examining field data from a unique data set that includes nearly 3,000 auctions (over 10,000 individual bids) for cutting rights of standing timber in British Columbia from 1996-2000. In comparing bidding patterns across agents who are likely to have resale opportunities with those who likely do not, we find evidence that is consistent with theory. Critical evaluation of the reduced-form bidding model, however, reveals that sharp tests of the theoretical predictions are not possible because several other differences may exist across these bidder types. We therefore use a laboratory experiment to examine if the resale opportunity by itself can have the predicted theoretical effect. We find that while it does have the predicted effect, a theoretical model based on risk-averse bidders explains the overall data patterns more accurately than a model based on risk-neutral bidders. Beyond testing theory, the paper highlights the inferential power of combining naturally occurring data with laboratory data.

Amanda Agan, Sonja Starr

Cited by*: 22 Downloads*: 27

"Ban-the-Box" (BTB) policies restrict employers from asking about applicants' criminal histories on job applications and are often presented as a means of reducing unemployment among black men, who disproportionately have criminal records. However, withholding information about criminal records could risk encouraging statistical discrimination: employers may make assumptions about criminality based on the applicant's race (or other observable characteristics). To investigate BTB's effects, we sent approximately 15,000 fictitious online job applications to employers in New Jersey and New York City both before and after the adoption of BTB policies. These applications varied the race and felony conviction status of the applicants. We confirm that criminal records are a major barrier to employment: employers that ask about criminal records were 63% more likely to call back an applicant if he has no record. However, our results support the concern that BTB policies encourage statistical discrimination on the basis of race: we find that the race gap in callbacks grows dramatically at the BTB-affected companies after the policy goes into effect. Before BTB, white applicants to employers with the box received 7% more callbacks than similar black applicants, but BTB increases this gap to 45%.

Andrea Morone, Paola Tiranzoni

Cited by*: None Downloads*: None

This study presents an analysis of hypothetical bias in WTA valuation connected with a bargaining game setting, in a field experiment context. The field of the experiment is the History Channel television "Pawn Stars". We collected a unique dataset that allowed us to analyze not only the gap between real and hypothetical WTA but also how they affect the bargaining game and vice versa. The general aim of this paper is to study the hypothetical bias related to subjects' WTA, and the factors that mostly affect it. The main results, of our paper, show that the hypothetical bias is positive, and it depends mainly on the price range and the type of good.

Werner Guth, Carsten Schmidt, Matthias Sutter

Cited by*: 1 Downloads*: 17

5,132 readers of the German weekly, Die Zeit, participated in a three-person bargaining experiment. In our data analysis we focus on (1) the influence of age, gender, profession and medium chosen for participation and (2) the external validity of student behaviour (inside and outside the lab). We find that older participants and women care more about equal distributions and that Internet users are more self-regarding than those using mail or fax. Decisions made by students in the lab are rather similar to those made by participants in the newspaper experiment, indicating a high degree of external validity of student data.

Erwin Bulte, John A List, Qin Tu

Cited by*: 0 Downloads*: 32

A vibrant literature has emerged that explores the economic implications of the sex ratio (the ratio of men to women in the population), including changes in fertility rates, educational outcomes, labor supply, and household purchases. Previous empirical efforts, however, have paid less attention to the underlying channel via which changes in the sex ratio affect economic decisions. This study combines evidence from a field experiment and a survey to document that the sex ratio importantly influences female bargaining power: as the sex ratio increases, female bargaining power increases.

Erwin Bulte, John A List, Jason F Shogren

Cited by*: 1 Downloads*: 2

An important public policy question that remains unresolved is whether devolution will enhance sensible policy making by exploiting informational asymmetries or, instead, trigger a "beggar thy neighbor" response and stimulate free riding amongst localities. We analyze this question within the framework of U.S. environmental policy making by scrutinizing a unique panel data set on state-level endangered species expenditure patterns. Our empirical estimates are consistent with the notion that states free ride, which may lead to an expenditure equilibrium that is not Pareto efficient.

Timothy Cason, Anya Samek, Roman Sheremeta

Cited by*: 2 Downloads*: 4

Motivated by problems of coordination failure observed in weak-link games, we experimentally investigate behavioral spillovers for order-statistic coordination games. Subjects play the minimum- and median-effort coordination games simultaneously and sequentially. The results show the precedent for cooperative behavior spills over from the median game to the minimum game when the games are played sequentially, but not when they are played simultaneously. Moreover, spillover occurs even when group composition changes, although the effect is not as strong. We also find that the precedent for uncooperative behavior does not spill over from the minimum game to the median game. These findings suggest guidelines for increasing cooperative behavior within organizations.

Peter Bohm

Cited by*: 3 Downloads*: 16

The robust laboratory evidence of preference reversal for lotteries has been interpreted as a threat to the general vailidity of standard theories of decision-making under uncertainty. This evidence is obtained from laboratory, that is, not real-world, lotteries with subjects who have not sought to make decisions among such lotteries. Here, the prevalence of preference reversal is studied in a field experiment with used cars, that is, a case of real-world non-trivial, non-lottery - but still payoff-uncertain - choice objects, and with subjects who registered as potential buyers of such cars. No sign of preference reversal was observed.

John A List, David Lucking-Reiley

Cited by*: 12 Downloads*: 9

Whether rationality of economic behavior increases with expected payoffs and decreases with the cognitive cost it takes to formulate an optimal strategy remains an open question. We explore these issues with field data, using individual bids from sealed-bid auctions in which we sold nearly $10,000 worth of sportscards. Our results indicate that stakes do indeed matter, as high-priced ($70) cards produced more of the theoretically predicted strategic behavior than did lower-priced ($3) cards. We find additional evidence consistent with the importance of cognitive costs, as subjects more experienced with sportscard auctions exhibited a greater tendency to behave strategically than did less experienced bidders.

Douglas Dyer, John H Kagel

Cited by*: 7 Downloads*: 29

Experienced construction industry executives suffer from a winner's curse in laboratory common value auction markets (Dyer et al. [Dyer, D., J. H. Kagel, D. Levin. 1989. A comparison of naive and experienced bidders in common value offer auctions: Laboratory analysis. Econom. J. 99 108-115.]). This paper identifies essential differences between field environments and the economic theory underlying the laboratory markets that account for the executives' success in the field and a winner's curse in the lab. These are (1) industry-specific mechanisms which enable contractors to escape the winner's curse even when they bid too low, (2) learned, industry-specific evaluative processes which enable experienced contractors to avoid the winner's curse in the first place, and (3) important private value elements that underlie bidding. Also identified are a number of industry-specific bidding characteristics whose evolution can be explained using modern auction theory. Lessons are drawn regarding the use of experimental methods in economics.

Juan-Camilo Cardenas

Cited by*: 1 Downloads*: 54

This paper discusses why running experiments in the field, outside of the university lab, can help us enrich the analysis we do of experimental data. One of the main arguments of the paper is that people participating in experiments, including students, do not come naked to the lab. They bring a great deal of rules of thumb, heuristics, values, prejudices, expectations and knowledge about the others participating, and about similar games, and use such information to make their decisions. The paper offers a short mention of relevant field experiments, and a more detailed look at field experiments conducted by the author, including a data set of CPR experiments run in 10 villages, between 2000 and 2002, with more than 1300 villagers in about 220 sessions, and replications with about 250 university students in more than 40 sessions. It offers then main lessons from bringing the lab to the field. Also there is a discussion of additional information gathered through different field instruments as well as community workshops with the participants to discuss the experimental data, the external validity of the experiments and their results, through parallels with their daily life. One of the lessons is that the greater variance in certain demographics about the experimental subjects might help explain variations in lab behavior that cannot be fully explained by the experimental institutions we study. Also, certain significant differences in behavior between villagers and students will be discussed.

Per Fredriksson , John A List, Daniel L Millimet

Cited by*: 33 Downloads*: 18

Previous studies have proposed that equilibrium capital flows are affected by environmental regulations-the commonly coined 'pollution haven' hypothesis. We revisit this issue by treating environmental policies as endogenous and allowing governmental corruption to influence foreign direct investment patterns. Via these two simple extensions, we are able to provide a much richer model of international capital flows. The theoretical model presumes that the effect of corruption on FDI operates via two channels: corruption affects capital flows through its impact on environmental policy stringency and due to greater theft of public funds earmarked for public spending. We empirically examine the implications of the model using US state-level panel data from four industrial sectors over the period 1977-1987. Empirical results suggest environmental policy and corruption both play a significant role in determining the spatial allocation of inbound US FDI. In addition, the estimated effect of environmental policy is found to depend critically on exogeneity assumptions.

Per Fredriksson , John A List, Daniel L Millimet

Cited by*: 33 Downloads*: 9

Previous studies have proposed that equilibrium capital flows are affected by environmental regulations-the commonly coined 'pollution haven' hypothesis. We revisit this issue by treating environmental policies as endogenous and allowing governmental corruption to influence foreign direct investment patterns. Via these two simple extensions, we are able to provide a much richer model of international capital flows. The theoretical model presumes that the effect of corruption on FDI operates via two channels: corruption affects capital flows through its impact on environmental policy stringency and due to greater theft of public funds earmarked for public spending. We empirically examine the implications of the model using US state-level panel data from four industrial sectors over the period 1977-1987. Empirical results suggest environmental policy and corruption both play a significant role in determining the spatial allocation of inbound US FDI. In addition, the estimated effect of environmental policy is found to depend critically on exogeneity assumptions.

John A List, Jason F Shogren

Cited by*: 78 Downloads*: 21

We design and implement a field experiment to elicit and calibrate in-sample hypothetical and actual bids given the presence of other goods and intensity of market experience. Using market goods that possess characteristics beyond the norm but yet remain deliverable, bidding behavior was consistent with theory. But we also observe the average calibration factor for hypothetical bids in the auction with other goods to be more severe (0.3) than for the auction without the goods (0.4). The results support the view that the calibration of hypothetical and actual bidding is good- and context-specific.

John A List, Jason F Shogren

Cited by*: 19 Downloads*: 20

This paper calibrates real and hypothetical willingness-to-accept estimates elicited for consumer goods in a multi-unit, random nth-price auction. Using a within-subject experimental design, we find that people understated their real willingness to accept in the hypothetical regimes, framed both as demand and non-demand revealing. After controlling for personspecific effects, however, hypothetical and real statements are equivalent on the margin.

Colin F Camerer

Cited by*: 23 Downloads*: 19

To test whether naturally occurring markets can be strategically manipulated, $500 and $1,000 bets were made, then cancelled, at horse racing tracks. The net effects of these costless temporary bets give clues about how market participants react to information large bets might contain. The bets moved odds on horses visibly (compared to matched-pair control horses with similar prebet odds) and had a slight tendency to draw money toward the horse that was temporarily bet, but the net effect was close to zero and statistically insignificant. The results suggest that some bettors inferred information from bets and others did not, and their actions roughtly cancelled out.