Papers - All

Maria De Paola, Francesca Gioia, Vincenzo Scoppa

Cited by*: None Downloads*: None

We investigate whether and how social ties affect performance in teams by implementing a field experiment in which a sample of undergraduate students are randomly assigned either to teams composed by friends or to teams composed by individuals not linked by friendship relationships. Students undertake an intermediate exam divided into two parts: one graded on the basis of individual performance and the other graded on the basis of team performance. We find that students assigned to socially connected teams perform significantly better than control students in both the team part and the individual part of the exam, suggesting that social ties are relevant both for solving free-riding problems and for inducing knowledge spillovers among teammates. The positive effect of friendship persists over time: treated students obtain better grades also after the conclusion of the experiment.

Michal Krawczyk

Cited by*: None Downloads*: None

Several studies have identified the "better than average" effect - the tendency of most people to think they are better than most other people on most dimensions. The effect would have profound consequences (see e.g. Barber and Odean (2001)). These findings are predominantly based on non-incentivized, non-verifiable self-reports. The current study looks at the impact of incentives to judge one's abilities accurately in a framed field experiment. Nearly 400 students were asked to predict whether they would do better or worse than average in an exam. The most important findings are that subjects tend to show more confidence when incentivized and when asked before the exam rather than afterwards. The first effect shows particularly in females.

Ran Kivetz, Oleg Urminsky, Yuhuang Zheng

Cited by*: None Downloads*: None

The goal-gradient hypothesis denotes the classic finding from behaviorism that animals expend more effort as they approach a reward. Building on this hypothesis, the authors generate new propositions for the human psychology of rewards. They test these propositions using a field experiment, secondary customer data, paper-and-pencil problems, and Tobit and logit models. The key finding indicate that (1) participants in a real cafe reward program purchase coffee more frequently the closer they are to earning a free coffee; (2) Internet users who rate songs in return for reward certificates visit the rating Web site more often, rate more songs per visit, and persist longer in the rating effort as they approach the reward goal; (3) the illusion of progress toward the goal induces purchase acceleration (e.g., customers who receive a 12-stamp coffee card with 2 preexisting "bonus" stamps complete the 10 required purchases faster than customers who receive a "regular" 10-stamp card) and (4) a stronger tendency to accelerate toward the goal predicts greater retention and faster reengagement in the program. The conceptualization and empirical findings are captured by a parsimonious goal distance model, in which effort investment is a function of the proportion of original distance remaining to the goal. In addition, using statistical and experimental controls, the authors rule out alternative explanations for the observed goal gradients. They discuss the theoretical significance of their findings and the managerial implications for incentive systems, promotions, and customer retention.

Michal Krawczyk, Joanna Rachubik

Cited by*: None Downloads*: None

Despite having the same probability of being drawn, certain number combinations are more popular than others among the lottery players. One explanation of such preferences is the representativeness heuristic (RH). Unlike previous hypothetical experiments, in the present experiment we used real-life lottery tickets, involving a high payout in case of winning to elicit true preferences. To verify if people prefer randomly-looking number combinations, participants were to choose a preferred ticket. To validate if it is likely to be caused by RH, we correlated preference for "random" sequences with the belief in dependence between subsequent coin tosses. We confirm that people strongly prefer random sequences and that a non-trivial fraction believes in dependence between coin tosses. However, there is no correlation between these two tendencies, questioning the RH explanation. By contrast, participants who have an (irrationally) strong preference for number combinations also tend to make (irrationally) specific predictions in the coin task. Unexpectedly, we find that females are considerably more likely to belong to this groups than males.

Erwin Bulte, John A List, Daan van Soest

Cited by*: None Downloads*: None

Incomplete contracts are the rule rather than the exception, and any incentive scheme faces the risk of improving performance on incented aspects of a task at the detriment of performance on non-incented aspects. Recent research documents the effect of loss-framed versus gain-framed incentives on incentivized behavior, but how do such incentives affect overall performance? We explore potential trade-offs by conducting field experiments in an artificial "workplace". We explore two types of incentive spillovers: those contemporaneous to the incented task and those subsequent to the incented task. We report three main results. First, consonant with the extant literature, a loss aversion incentive induces greater effort on the incented task. Second, offsetting this productivity gain, we find that the quality of work decreases if quality is not specified in the incentive contract. Third, we find no evidence of harmful spillover effects to subsequent tasks; if anything, the loss aversion incentive induces more effort in subsequent tasks. Taken together, our results highlight that measuring and accounting for incentive spillovers are important when considering their overall impact.

Daniel J Benjamin, James O Berger, Magnus Johannesson, Brian A Nosek, E. J Wagenmakers, Richard Berk, Kenneth A Bollen, Bjorn Brembs, Lawrence Brown, Colin F Camerer, David Cesarini, Christopher D. Chambers, Merlise Clyde, Thomas D Cook, Paul De Boeck, Zoltan Dienes, Anna Dreber, Kenny Easwaran, Charles Efferson, Ernst Fehr, Fiona Fidler, Andy P. Field, Malcom Forster, Edward I. George, Tarun Ramadorai, Richard Gonzalez, Steven Goodman, Edwin Green, Donald P Green, Anthony Greenwald, Jarrod D. Hadfield, Larry V. Hedges, Leonhard Held, Teck Hau Ho, Herbert Hoijtink, James Holland Jones, Daniel J Hruschka, Kosuke Imai, Guido Imbens, John P.A. Ioannidis, Minjeong Jeon, Michael Kirchler, David Laibson , John A List, Roderick Little, Arthur Lupia, Edouard Machery, Scott E. Maxwell, Michael McCarthy, Don Moore, Stephen L. Morgan, Marcus Munafo, Shinichi Nakagawa, Brendan Nyhan, Timothy H Parker, Luis Pericchi, Marco Perugini, Jeff Rouder, Judith Rousseau, Victoria Savalei, Felix D. Schonbrodt, Thomas Sellke, Betsy Sinclair, Dustin Tingley, Trisha Van Zandt, Simine Vazire, Duncan J. Watts, Christopher Winship, Robert L. Wolpert, Yu Xie, Cristobal Young, Jonathan Zinman, Valen E. Johnson

Cited by*: 1 Downloads*: 965

We propose to change the default P-value threshold for statistical significance for claims of new discoveries from 0.05 to 0.005.

Michael Fix, Raymond J Struyk

Cited by*: 32 Downloads*: 955

Auditing is a technique used to test for discrimination. The concept is straightforward: Two individuals are matched on all relevant characteristics except the one presumed to lead to discrimination. Each person then applies for the same job, housing, mortgage loan, or credit card. The differential treatment they receive provides a measure of discrimination. The authors argue that the value of auditing has grown in the current legal and political environment because it can detect subtle forms of discrimination.

Abhijit Banerjee, Angus Deaton, Esther Duflo

Cited by*: 28 Downloads*: 482

What are the determinants of the health and of well-being? Income and wealth are clearly part of the story, but does access to health-care have a large independent effect, as the advocates of more investment in health-care, such as the World Health Organization's Commission on Macroeconomics and Health (Commission on Macroeconomics and Health (2001)), have argued? This paper reports on a recent survey in a poor rural area of the state of Rajasthan in India intended to shed some light on this issue, where there was an attempt to use a set of interlocking surveys to collect data on health and economic status, as well as the public and private provision of health care.

Luigi Butera, John A List

Cited by*: 1 Downloads*: 355

Novel empirical insights by their very nature tend to be unanticipated, and in some cases at odds with the current state of knowledge on the topic. The mechanics of statistical inference suggest that such initial findings, even when robust and statistically significant within the study, should not appreciably move priors about the phenomenon under investigation. Yet, a few well-conceived independent replications dramatically improve the reliability of novel findings. Nevertheless, the incentives to replicate are seldom in place in the sciences, especially within the social sciences. We propose a simple incentive-compatible mechanism to promote replications, and use experimental economics to highlight our approach. We begin by reporting results from an experiment in which we investigate how cooperation in allocation games is affected by the presence of Knightian uncertainty (ambiguity), a pervasive and yet unexplored characteristic of most public goods. Unexpectedly, we find that adding uncertainty enhances cooperation. This surprising result serves as a test case for our mechanism: instead of sending this paper to a peer-reviewed journal, we make it available online as a working paper, but we commit never to submit it to a journal for publication. We instead offered co-authorship for a second, yet to be written, paper to other scholars willing to independently replicate our study. That second paper will reference this working paper, will include all replications, and will be submitted to a peer- reviewed journal for publication. Our mechanism allows mutually-beneficial gains from trade between the original investigators and other scholars, alleviates the publication bias problem that often surrounds novel experimental results, and accelerates the advancement of economic science by leveraging the mechanics of statistical inference.

Glenn W Harrison, Morten I Lau, Elisabet E Rutstrom, Melonie B Williams

Cited by*: 29 Downloads*: 303

We design experiments to jointly elicit risk and time preferences for the adult Danish population. The experimental procedures build on laboratory experiments that have been evaluated using traditional subject pools. The field experiments utilize field sampling designs that we developed, and procedures that were chosen to be relatively transparent in the field with non-standard subject pools. Our overall design was also intended to be a general template for such field experiments in other countries. We examine the characterization of risk over a wider domain for each subject than previous experiments, allowing more precise estimates of risk attitudes. We also examine individual discount rates over six time horizons, as the first stage in a panel experiment in which we revisit subjects to test consistency and stability of responses over time. Risk and time preferences are heterogeneous, varying by observable individual characteristics. On a methodological level, we implement a refinement of existing procedures which elicits much more precise estimates, and also mitigates framing effects.

John A List, Azeem M Shaikh, Yang Xu

Cited by*: 33 Downloads*: 278

Empiricism in the sciences allows us to test theories, formulate optimal policies, and learn how the world works. In this manner, it is critical that our empirical work provides accurate conclusions about underlying data patterns. False positives represent an especially important problem, as vast public and private resources can be misguided if we base decisions on false discovery. This study explores one especially pernicious influence on false positives-multiple hypothesis testing (MHT). While MHT potentially affects all types of empirical work, we consider three common scenarios where MHT influences inference within experimental economics: jointly identifying treatment effects for a set of outcomes, estimating heterogenous treatment effects through subgroup analysis, and conducting hypothesis testing for multiple treatment conditions. Building upon the work of Romano and Wolf (2010), we present a correction procedure that incorporates the three scenarios, and illustrate the improvement in power by comparing our results with those obtained by the classic studies due to Bonferroni (1935) and Holm (1979). Importantly, under weak assumptions, our testing procedure asymptotically controls the familywise error rate - the probability of one false rejection - and is asymptotically balanced. We showcase our approach by revisiting the data reported in Karlan and List (2007), to deepen our understanding of why people give to charitable causes.

John A List, Anya Samek, Dana L Suskind

Cited by*: 0 Downloads*: 258

Behavioral economics and field experiments within the social sciences have advanced well beyond academic curiosum. Governments around the globe as well as the most powerful firms in modern economies employ staffs of behavioralists and experimentalists to advance and test best practices. In this study, we combine behavioral economics with field experiments to reimagine a new model of early childhood education. Our approach has three distinct features. First, by focusing public policy dollars on prevention rather than remediation, we call for much earlier educational programs than currently conceived. Second, our approach has parents at the center of the education production function rather than at its periphery. Third, we advocate attacking the macro education problem using a public health methodology, rather than focusing on piecemeal advances.

Ufuk Akcigit, Fernando Alvarez, Stephane Bonhomme, George M Constantinides, Douglas W Diamond, Eugene F Fama, David W Galenson, Michael Greenstone, Lars Peter Hansen, Uhlig Harald, James J Heckman, Ali Hortacsu, Emir Kamenica, Greg Kaplan, Anil K Kashyap, Steven D Levitt, John A List, Robert E Lucas Jr., Magne Mogstad, Roger Myerson, Derek Neal, Canice Prendergast, Raghuram G Rajan, Philip J Reny, Azeem M Shaikh, Robert Shimer, Hugo F Sonnenschein, Nancy L Stokey, Richard H Thaler, Robert H Topel, Robert Vishny, Luigi Zingales

Cited by*: 0 Downloads*: 207

No abstract available

John A List, Robert D Metcalfe, Michael H Taylor, Ivo Vlaev

Cited by*: 44 Downloads*: 193

Tax collection problems date back to the earliest recorded history of mankind. This paper begins with a simple theoretical construct of paying (rather than declaring) taxes, which we argue has been an overlooked aspect of tax compliance. This construct is then tested in two large natural field experiments. Using administrative data from more than 200,000 individuals in the UK, we show that including social norms and public goods messages in standard tax payment reminder letters considerably enhances tax compliance. The field experiments increased taxes collected by the Government in the sample period and were cost-free to implement, demonstrating the potential importance of such interventions in increasing tax compliance.

Steven D Levitt, John A List, Susanne Neckermann, Sally Sadoff

Cited by*: 0 Downloads*: 161

Research on behavioral economics has established the importance of factors such as reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find that incentives framed as losses have more robust effects than comparable incentives framed as gains. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were not effective with older students. Finally, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to under-investment. For policymakers, our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps.

Anthony Heyes, John A List

Cited by*: 2 Downloads*: 157

No abstract available

Jie Bai

Cited by*: 0 Downloads*: 157

There is often a lack of reliable high quality provision in many markets in developing countries. I designed an experiment to understand this phenomenon in a setting that features typical market conditions in a developing country: the retail watermelon market in a major Chinese city. I begin by demonstrating empirically that there is substantial asymmetric information between sellers and buyers on sweetness, the key indicator of quality for watermelons, yet sellers do not sort and price watermelons by quality. I then randomly introduce one of two branding technologies into 40 out of 60 markets-one sticker label that is widely used and often counterfeited and one novel laser-cut label. I track sellers' quality, pricing and sales over an entire season and collect household panel purchasing data to examine the demand side's response. I find that laser branding induced sellers to provide higher quality and led to higher sales profits, establishing that reputational incentives are present and can be made to pay. However, after the intervention was withdrawn, all markets reverted back to baseline. To rationalize the experimental findings, I build an empirical model of consumer learning and seller reputation. The structural estimates suggest that consumers are hesitant to upgrade their perception about quality under the existing branding technology, which makes reputation building a low return investment. While the new technology enhances consumer learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology for small individual sellers. Counterfactual analysis shows that information frictions and fragmented markets lead to significant under-provision of quality. Third-party interventions that subsidize initial reputation building for sellers could improve welfare.

Shlomo Benartzi, Richard H Thaler

Cited by*: 298 Downloads*: 146

As firms switch from defined-benefit plans to defined-contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or who participate at a very low level appear to be saving at less than the predicted life cycle savings rates. Behavioral explanations for this behavior stress bounded rationality and self-control and suggest that at least some of the low-saving households are making a mistake and would welcome aid in making decisions about their saving. In this paper, we propose such a prescriptive savings program, called Save More Tomorrow (hereafter, the SMarT program). The essence of the program is straightforward: people commit in advance to allocating a portion of their future salary increases toward retirement savings. We report evidence on the first three implementations of the SMarT program. Our key findings, from the first implementation, which has been in place for four annual raises, are as follows: (1) a high proportion (78 percent) of those offered the plan joined, (2) the vast majority of those enrolled in the SMarT plan (80 percent) remained in it through the fourth pay raise, and (3) the average saving rates for SMarT program participants increased from 3.5 percent to 13.6 percent over the course of 40 months. The results suggest that behavioral economics can be used to design effective prescriptive programs for important economic decisions.

Uri Gneezy, John A List, Jeffrey A Livingston, Xiangdong Qin, Sally Sadoff, Yang Xu

Cited by*: 1 Downloads*: 124

Tests measuring and comparing educational achievement are an important policy tool. We experimentally show that offering students extrinsic incentives to put forth effort on such achievement tests has differential effects across cultures. Offering incentives to U.S. students, who generally perform poorly on assessments, improved performance substantially. In contrast, Shanghai students, who are top performers on assessments, were not affected by incentives. Our findings suggest that in the absence of extrinsic incentives, ranking countries based on low-stakes assessments is problematic because test scores reflect differences in intrinsic motivation to perform well on the test itself, and not just differences in ability.

Marsha Blumenthal, Charles Christian, Joel Slemrod

Cited by*: 148 Downloads*: 124

In 1995 a group of 1724 randomly selected Minnesota taxpayers was informed by letter that the returns they were about to file would be 'closely examined'. Compared to a control group that did not receive this letter, low and middle-income taxpayers in the treatment group on average increased tax payments compared to the previous year, which we interpret as indicating the presence of noncompliance. The effect was much stronger for those with more opportunity to evade; in fact, the difference in differences is not statistically significant for those who do not have self-employment or farm income, and do not pay estimated tax. Surprisingly, however, the reported tax liability of the high income treatment group fell sharply relative to the control group.