Papers - All

John A List, Paramita Sinha, Michael H Taylor

Cited by*: 33 Downloads*: 116

Critics of stated preference methods argue that hypothetical bias precludes survey techniques from providing reliable economic values for non-market goods and services, rendering estimation of the total economic benefits of public programs fruitless. This paper explores a relatively new methodology to obtain the total value of non-market goods and services-choice experiments-which conveniently provide information on the purchase decision as well as the characteristic value vector. The empirical work revolves around examining behavior in two very different field settings. In the first field study, we explore hypothetical bias in the purchase decision by eliciting contributions for a threshold public good in an actual capital campaign. To extend the analysis a level deeper, in a second field experiment we examine both the purchase decision and the marginal value vector via inspection of consumption decisions in an actual marketplace. In support of the new valuation design, both field experiments provide some evidence that hypothetical choice experiments combined with ""cheap talk"" can yield credible estimates of the purchase decision. Furthermore, we find no evidence of hypothetical bias when estimating marginal attribute values. Yet, we do find that the ""cheap talk"" component might induce internal inconsistency of subjects' preferences in the choice experiment.

David Laibson , John A List

Cited by*: 2 Downloads*: 114

There are many great ways to incorporate behavioral economics in a first-year undergraduate economics class-i.e., the course that is typically called "Principles of Economics." Our preferred approach integrates behavioral economics throughout the course (e.g., see Acemoglu, Laibson, and List 2015). With the integrated approach, behavioral content plays a role in many of the chapters of the principles of economics curriculum, including chapters on optimization, equilibrium, game theory, intertemporal choice, probability and risk, social preferences, household finance, the labor market, financial intermediation, monetary policy, economic fluctuations, and financial crises. We prefer the integrated approach because it enables the behavioral insights to show up where they are conceptually most relevant. By illustration, it is best to combine a discussion of downward nominal wage rigidity (i.e., the idea that workers strongly resist nominal wage declines) with the overall discussion of the labor market. Whether or not an instructor integrates behavioral economics throughout the principles of economics course, it makes sense to pull central materials together and dedicate a lecture (or more) to a focused discussion of behavioral economics. This note describes our approach to such a lecture, emphasizing six key principles of behavioral economics. Our choice of content for a behavioral lecture is motivated by three factors. First, we include ideas that are conceptually important. Second, we include material that is practically important and personally relevant to our students-we have found that such content resonates long after the course ends. Third, we include content that relates to what has been (or will be) taught in the rest of the course, and therefore serves as a complement. We want students to see that behavioral economics is an integrated part of economics, not a freak show that is isolated from "the standard ingredients" in the rest of the economics course. This paper summarizes our approach to such a focused behavioral lecture. In Section I, we define behavioral economics and place it in historical context. In Section II, we introduce six modular principles that can be used to teach behavioral economics. We provide PowerPoint notes on our home pages, which instructors should feel free to edit and use.

Orana Bandiera, Iwan Barankay, Imran Rasul

Cited by*: 236 Downloads*: 114

We present evidence on whether workers have social preferences by comparing workers' productivity under relative incentives, where individual effort imposes a negative externality on others, to their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers' behavior.

Rene Bekkers

Cited by*: 20 Downloads*: 112

A field study of altruistic behaviour is presented using a modification of the dictator game in a large random sample survey in the Netherlands (n=1,964). In line with laboratory experiments, only 5.7% donated money. In line with other survey research on giving, generosity increased with age, education, income, trust, and prosocial value orientation.

Martin G Kocher, Matthias Sutter

Cited by*: 127 Downloads*: 111

We examine the degree of trust and trustworthiness in an experimental trust game with 662 participants from six different age groups, ranging from 8-year-olds to retired persons. Although both trust and trustworthiness have been identified as fundamental pillars for efficient economic interactions, economic research has devoted little attention to measuring their strength in different age groups. In our experiment subjects interact with members of the same age group. We find that trust increases almost linearly from early childhood to early adulthood, but stays rather constant within different adult age groups. Trustworthiness prevails in all age groups.

John A List

Cited by*: 0 Downloads*: 111

Not applicable.

Jeffrey A Flory, Andreas Leibbrandt, John A List

Cited by*: 0 Downloads*: 109

Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehaviour - bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers' propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.

Glenn W Harrison, John A List

Cited by*: 644 Downloads*: 105

Experimental economists are leaving the reservation. They are recruiting subjects in the field rather than in the classroom, using field goods rather than induced valuations, and using field context rather than abstract terminology in instructions. We argue that there is something methodologically fundamental behind this trend. Field experiments differ from laboratory experiments in many ways. Although it is tempting to view field experiments as simply less controlled variants of laboratory experiments, we argue that to do so would be to seriously mischaracterize them. What passes for "control" in laboratory experiments might in fact be precisely the opposite if it is artificial to the subject or context of the task. We propose six factors that can be used to determine the field context of an experiment: the nature of the subject pool, the nature of the information that the subjects bring to the task, the nature of the commodity, the nature of the task or trading rules applied, the nature of the stakes, and the environment that subjects operate in.

Alex Imas, Sally Sadoff, Anya Samek

Cited by*: 1 Downloads*: 104

There is growing interest in the use of loss contracts that offer performance incentives as upfront payments that employees can lose. Standard behavioral models predict a tradeoff in the use of loss contracts: employees will work harder under loss contracts than under gain contracts; but, anticipating loss aversion, they will prefer gain contracts to loss contracts. In a series of experiments, we test these predictions by measuring performance and preferences for payoff-equivalent gain and loss contracts. We find that people indeed work harder under loss than gain contracts, as the theory predicts. Surprisingly, rather than a preference for the gain contract, we find that people actually prefer loss contracts. In exploring mechanisms for our results, we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance.

Stephen Benard, Shelley Correll, In Paik

Cited by*: 14 Downloads*: 104

Survey research finds that mothers suffer a substantial wage penalty, although the causal mechanism producing it remains elusive. The authors employed a laboratory experiment to evaluate the hypothesis that status-based discrimination plays an important role and an audit study of actual employers to assess its real-world implications. In both studies, participants evaluated application materials for a pair of same-gender equally qualified job candidates who differed on parental status. The laboratory experiment found that mothers were penalized on a host of measures, including perceived competence and recommended starting salary. Men were not penalized for, and sometimes benefited from, being a parent. The audit study showed that actual employers discriminate against mothers, but not against fathers.

John A List, William S Neilson, Michael K Price

Cited by*: 0 Downloads*: 101

Recent theoretical and empirical studies have explored the effect of group membership and identity on individual decision-making. This line of research highlights that economic models focusing on the individual as the sole entity in the decision-making environment potentially miss critical features. This study takes this literature in a new direction by overlaying a field experiment onto a setting where groups have arisen naturally. Our experimental laboratory is large open air markets, where we are able to examine the effects of group membership on seller's collusive behavior as measured by prices and surplus allocations. This permits us to explore strategic implications of group composition. Empirical results illustrate the importance of group composition on pricing decisions, and show that deviations from Nash equilibrium are crucially related to group membership.

John A List

Cited by*: 262 Downloads*: 100

This study examines individual behavior in two well-functioning marketplaces to investigate whether market experience eliminates the endowment effect. Field evidence from both markets suggests that individual behavior converges to the neoclassical prediction as market experience increases. In an experimental test of whether these observations are due to treatment (market experience) or selection (e.g., static preferences), I find that market experience plays a significant role in eliminating the endowment effect. I also find that these results are robust to institutional change and extend beyond the two marketplaces studied. Overall, this study provides strong evidence that market experience eliminates an important market anomaly.

Uri Gneezy, Andreas Leibbrandt, John A List

Cited by*: 1 Downloads*: 98

Competitiveness pervades life: plants compete for sunlight and water, animals for territory and food, and humans for mates and income. Here we investigate human competitiveness with a natural experiment and a set of behavioral experiments. We compare competitiveness in traditional fishing societies where local natural forces determine whether fishermen work in isolation or in collectives. We find sharp evidence that fishermen from individualistic societies are far more competitive than fishermen from collectivistic societies and that this difference emerges with work experience. These findings suggest that humans can evolve traits to specific needs, support the idea that socio-ecological factors play a decisive role for individual competitiveness, and provide evidence how individualistic and collectivistic societies shape economic behaviour.

Fuhai Hong, Tanjim Hossain, John A List, Migiwa Tanaka

Cited by*: 6 Downloads*: 98

A well-recognized problem in the multitasking literature is that workers might substantially reduce their effort on tasks that produce unobservable outputs as they seek the salient rewards to observable outputs. Since the theory related to multitasking is decades ahead of the empirical evidence, the economic costs of standard incentive schemes under multitasking contexts remain largely unknown. This study provides empirical insights quantifying such effects using a field experiment in Chinese factories. Using more than 2200 data points across 126 workers, we find sharp evidence that workers do trade off the incented output (quantity) at the expense of the non-incented one (quality) as a result of a piece rate bonus scheme. Consistent with our theoretical model, treatment effects are much stronger for workers whose base salary structure is a flat wage compared to those under a piece rate base salary. While the incentives result in a large increase in quantity and a sharp decrease in quality for workers under a flat base salary, they result only in a small increase in quantity without affecting quality for workers under a piece rate base salary.

Steven D Levitt, John A List

Cited by*: 321 Downloads*: 96

A critical question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. To address that question, we build a model in which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants and tasks are selected. We present empirical evidence demonstrating the importance of these various factors. To the extent that lab and naturally occurring environments systematically differ on any of these dimensions, the results obtained inside and outside the lab need not correspond. Focusing on experiments designed to measure social preferences, we discuss the extent to which the existing laboratory results generalize to naturally-occurring markets. We summarize cases where the lab may understate the importance of social preferences as well as instances in which the lab might exaggerate their importance. We conclude by emphasizing the importance of interpreting laboratory and field data through the lens of theory.

Alec Brandon, Paul J Ferraro, John A List, Robert D Metcalfe, Michael K Price, Florian Rundhammer

Cited by*: 4 Downloads*: 95

This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.

Omar Al-Ubaydli, John A List

Cited by*: 5 Downloads*: 89

A commonly held view is that laboratory experiments provide researchers with more "control" than natural field experiments, and that this advantage is to be balanced against the disadvantage that laboratory experiments are less generalizable. This paper presents a simple model that explores circumstances under which natural field experiments provide researchers with more control than laboratory experiments afford. This stems from the covertness of natural field experiments: laboratory experiments provide researchers with a high degree of control in the environment which participants agree to be experimental subjects. When participants systematically opt out of laboratory experiments, the researcher's ability to manipulate certain variables is limited. In contrast, natural field experiments bypass the participation decision altogether and allow for a potentially more diverse participant pool within the market of interest. We show one particular case where such selection is invaluable: when treatment effects interact with participant characteristics.

Jeffrey A Flory, Uri Gneezy, Kenneth Leonard, John A List

Cited by*: 0 Downloads*: 88

Research on competitiveness at the individual level has emphasized sex as a physiological determinant, focusing on the gap in preference for competitive environments between young men and women. This study presents evidence that women's preferences over competition change with age such that the gender gap, while large for young adults, disappears in older populations due to the fact that older women are much more competitive. Our finding that tastes for competition appear just as strong among older women as they are among men suggests a simple gender-based view of competitiveness is misleading; age seems just as important as sex. These findings are consistent with one of the most commonly cited views on the deeper origins of gender differences: that they stem at least in part from human evolution.

Daniel Houser, John A List, Marco Piovesan, Anya Samek, Joachim Winter

Cited by*: 5 Downloads*: 88

Acts of dishonesty permeate life. Understanding their origins, and what mechanisms help to attenuate such acts is an underexplored area of research. This study takes an economics approach to explore the propensity of individuals to act dishonestly across different contexts. We conduct an experiment that includes both parents and their young children as subjects, exploring the roles of moral cost and scrutiny on dishonest behavior. We find that the highest level of dishonesty occurs in settings where the parent acts alone and the dishonest act benefits the child. In this spirit, there is also an interesting, quite different, effect of children on parents' behavior: parents act more honestly under the scrutiny of daughters than under the scrutiny of sons. This finding sheds new light on the origins of the widely documented gender differences in cheating behavior observed among adults, where a typical result is that females are more honest than males.

Omar Al-Ubaydli, John A List

Cited by*: 2 Downloads*: 88

This is a review of the literature of field experimental studies of markets. The main results covered by the review are as follows: (1) Generally speaking, markets organize the efficient exchange of commodities; (2) There are some behavioral anomalies that impede efficient exchange; (3) Many behavioral anomalies disappear when traders are experienced.