Papers - All

Orana Bandiera, Iwan Barankay, Imran Rasul

Cited by*: 19 Downloads*: 37

The ability to cooperate in collective action problems --such as those relating to the use of common property resources or the provision of local public goods --is a key determinant of economic performance. In this paper we discuss two aspects of collective action problems in developing countries. First, which institutions discourage opportunistic behavior and promote cooperation? Second, what are the characteristics of the individuals involved that determine the degree to which they cooperate? We first review the evidence from field studies, laboratory experiments, and cross community studies. We then present new results from an individual level panel data set of rural workers.

Erwin Bulte, Aart de Zeeuw, Shelby Gerking, John A List

Cited by*: 19 Downloads*: 37

Standard applications of utility theory assume that utility depends solely on outcomes and not on causes. This study uses a field experiment conducted in the Netherlands to determine if alternative causes of an environmental problem affect willingness to pay to ameliorate it. We find evidence supporting the hypothesis that people are willing to pay significantly more to correct problems caused by humans than by nature (the "outrage effect"), but find no support for the hypothesis that "moral responsibility" matters. We also find support for the hypothesis that stated willingness to pay values obtained via "cheap talk" and "consequential" treatments are lower than without inclusion of these protocols.

Raymond C Battalio, John H Kagel, Don N MacDonald

Cited by*: 10 Downloads*: 37

In an earlier paper (Raymond C. Battalio, John H. Kagel, and Don N. Mac Donald, 1985), we reported Allais-type violations of the independence axiom of expected utility theory with rats choosing over positively valued payoffs (food rewards). This note extends this research, examining animals' choices over losses, testing for (1) standard Allais-type common ratio effect violations of expected utility theory and (2) fanning out of indifference curves for random prospects, tests of Mark J. Machina's (1982, 1987) hypothesis II (hereafter H2), over previously unexplored areas of the unit probability triangle. Results from a parallel series of experiments using human subjects choosing over real losses are also reported. For both rats and people, we find standard Allais-type violations of expected utility theory and a systematic failure of the fanning out hypothesis in the southeast corner of the unit probability triangle, in the case of losses. Thus, the fanning out hypothesis (Machina 1982, 1987) cannot provide a satisfactory explanation for behavioral deviations from expected utility theory.

Peter A Riach, Judith Rich

Cited by*: 136 Downloads*: 37

Controlled experiments, using matched pairs of bogus transactors, to test for discrimination in the marketplace have been conducted for over 30 years, and have extended across 10 countries. Significant, persistent and pervasive levels of discrimination have been found against non-whites and women in labour, housing and product markets. Rates of employment discrimination against non-whites, in excess of 25% have been measured in Australia, Europe and North America. A small number of experiments have also investigated employment discrimination against the disabled in Britain and the Netherlands, and against older applicants in the United States.

Tova Levin, Steven D Levitt, John A List

Cited by*: 0 Downloads*: 37

The wealthiest 10% of donors now give 90% of charitable dollars in the U.S., but little is known about what motivates them. This study uses a natural field experiment, tracking over five thousand high capacity donors, to lend preliminary insights into the world of high capacity givers. On some dimensions, high capacity donors mirror modal donors: there is persistence in giving patterns, signals of program quality influence giving, and the price of giving is not unduly important. Unlike typical small donors, the givers in our data respond only on the intensive margin, and often with a longer time lag. Our study highlights the value to practitioners of partnering with academics, as our intervention has generated $30 million in incremental donations to the University.

Rachel Croson, Jen Shang

Cited by*: 10 Downloads*: 36

We study the effect of social information on the voluntary provision of public goods. Competing theories predict that others[1] contributions might be either substitutes or complements to one's own. We demonstrate a positive social information effect on individual contributions, supporting theories of complementarities. We find the most influential level of social information is drawn from the 90th to 95th percentile of previous contributions. We furthermore find the effect to be significant for new members but not for renewing members. In the most effective condition, social information increases contributions by 12% ($13). These increased contributions do not crowd out future contributions.

John A List, Daniel L Millimet

Cited by*: 20 Downloads*: 35

Assumptions of individual rationality and preference stability provide the foundation for a convenient and tractable modeling approach. While both of these assumptions have come under scrutiny in distinct literatures, the two lines of research remain disjointed. This study begins by explicitly linking the two literatures while providing insights into perhaps the central issue facing behavioral economics today: to what extent does market experience mitigate various forms of individual irrationality? We find considerable evidence that the market is a catalyst for rationality. The study then focuses on aggregate market outcomes by examining empirically whether individual rationality is a prerequisite for market efficiency. Using field data gathered from more than 380 subjects of age 6-18 in multi-lateral bargaining markets at a shopping mall, we find that the market is a filter of irrationality--even when markets are populated solely by irrational buyers, aggregate market outcomes quickly converge to neoclassical predictions.

Fuhai Hong, Tanjim Hossain, John A List

Cited by*: 3 Downloads*: 35

Exploiting findings that losses loom larger than gains, studies have shown that framing manipulations can increase productivity of workers. Using a natural field experiment that exogenously manipulates wage bonuses within contests in a Chinese high-tech manufacturing facility, we show that how loss aversion affects worker behavior critically depends on the incentive scheme as well as the framing manipulation. Four sets of two identical teams competed against each other to win a bonus given to the team, within a set, with the higher average hourly productivity over the week. In each set, the bonus was framed as a reward or gain for one team and as a punishment or loss for the other. Average weekly productivity was slightly higher under the loss treatment, but this increase was statistically insignificant. However, the team under the loss treatment was at least 35% more likely to win the contest. As teams' payoffs are based on relative productivity under a contest, framing effect is much stronger in terms of relative productivity. Finally, workers seemingly responded to the bonus by increasing the quality of production as well as quantity-defect rate fell as productivity increased.

Erwin Bulte, Andreas Kontoleon, John A List, Ty Turley, Maarten Voors

Cited by*: 0 Downloads*: 35

The experimental literature has shown the tendency for experimental trading markets to converge to neoclassical predictions. Yet, the extent to which theory explains the equilibrating forces in markets remains under-researched, especially in the developing world. We set up a laboratory in 94 villages in rural Sierra Leone to mimic a real market. We implement several treatments, varying trading partners and the anonymity of trading. We find that when trading with co-villagers average efficiency is somewhat lower than predicted by theory (and observed in different contexts), and markets do not fully converge to theoretical predictions across rounds of trading. When participants trade with strangers efficiency is reduced more. Anonymizing trade within the village does not affect efficiency. This points to the importance of behavioral norms for trade. Intra-village social relationships or hierarchies, instead, appear less important as determinants of trading outcomes. This is confirmed by analysis of the trader-level data, showing that individual earnings in the experiment do not vary with one's status or position in local networks.

John A List

Cited by*: 117 Downloads*: 34

No abstract available

Andris Saulitis

Cited by*: 0 Downloads*: 34

This paper examines the extent to which a noncompliant debtor can be induced to pay back the debt by sending a randomly assigned message via mobile phone and e-mail, ranging from a simple reminder to personalized messages and a social norm. In cooperation with a debt-collector enterprise in Latvia, the field experiment was carried out on 24,781 unique cases of consumer debts with unpaid liabilities, ranging from one to 40,060.26 euros. Overall, sending a message to a debtor increases compliance in comparison of not sending a message at all. However, messages, which include debtor's name, agent's name or social norm, do not increase compliance in comparison to a simple reminder message. I also looked at the interaction effect between the content of the message and the debt amount, which has been hardly examined in previous experiments on compliance. Messages with a debtor's name significantly increase compliance in comparison to a simple reminder among the debts smaller than 170 euros. However, such a message is counter-effective for debts larger than 1,340 euros, the same trend is true for a message with the social norm. Hence, a different policy needs to be applied to the debtors who are extensively overindebted in comparison to those with comparatively small debt amounts.

Juan-Camilo Cardenas, Elinor Ostrom

Cited by*: 40 Downloads*: 34

The study of collective action requires an understanding of the individual incentives and of the institutional constraints that guide people in making choices about cooperating or defecting on the group facing the dilemma. The use of local ecosystems by groups of individuals is just one example where individual extraction increases well-being, but aggregate extraction decreases it. The use of economic experiments has enhanced the already diverse knowledge from theoretical and field sources of when and how groups can solve the problem through selfgoverning mechanisms. These studies have identified several factors that promote and limit collective action, associated with the nature of the production system that allows groups to benefit from a joint-access local ecosystem, and associated with the institutional incentives and constraints from both self-governed and externally imposed rules. In general, there is widespread agreement that cooperation can happen and be chosen by individuals as a rational strategy, beyond the "tragedy of the commons" prediction. A first step in this paper is to propose a set of layers of information that the individuals might be using to decide over their level of cooperation. The layers range from the material incentives that the specific production function imposes, to the dynamics of the game, to the composition of the group and the individual characteristics of the player. We next expand the experimental literature by analyzing data from a set of experiments conducted in the field with actual ecosystem users in three rural villages of Colombia using this framework. We find that repetition brings reciprocity motives into the decision making. Further, prior experience of the participants, their perception of external regulation, or the composition of the group in terms of their wealth and social position in the village, influence decisions to cooperate or defect in the experiment. The results suggest that understanding the multiple levels of the game, in terms of the incentives, the group and individual characteristics or the context, can help understand and therefore explore the potentials for solving the collective-action dilemma.

Richard Damania, Per Fredriksson , John A List

Cited by*: 45 Downloads*: 34

This study explores the linkages between trade policy, corruption, and environmental policy. We begin by presenting a theoretical model that produces several testable predictions, including: (i) the effect of trade liberalization on the stringency of environmental policy depends on the level of corruption; and (ii) corruption reduces environmental policy stringency. Using panel data from a mix of developed and developing countries from 1982 to 1992, we find evidence that supports these conjectures. We view these results as representing an attempt at understanding the myriad of complex relationships that exist in an open economy.

John A List

Cited by*: 70 Downloads*: 34

This study examines social preferences in three distinct field environments. In the first field setting, I allow consumers of all age and education levels to participate in one-shot and multiple-shot public goods games in a well-functioning marketplace. The second field study, an actual university capital campaign, gathers data from mail solicitations sent to 2,000 Central Florida residents. In the third field experiment, I examine data from an uncontrolled environment, a television gameshow, which closely resembles the classic prisoner's dilemma game. Several insights emerge; perhaps the most provocative is that age and social preferences appear linked.

Daniel Hungerman, Mark Ottoni-Wilhelm

Cited by*: 1 Downloads*: 34

There are independent literatures in economics considering tax-price and match-price incentives for giving. The match-price literature has produced well-identified small price elasticities, but scholars have widely questioned whether these estimates can inform tax policy. The tax-price literature in contrast has produced a large range of estimates. Here, we explore and compare these different incentives. First, we consider tax incentives for giving by focusing on a state-level tax credit that creates a convex kink. We use traditional, as well as more novel, kink methods to estimate the tax-price elasticity of giving. Second, a subgroup of donors in our data were temporarily offered a match for their gifts, creating an opportunity to compare tax-price and match-price effects for the same group of donors giving to the same organization at the same time. We find the tax-price elasticity is about -.2. The match-price elasticity is essentially the same. Our results thus suggest a small tax-price elasticity, close to the match-price elasticity, and close to match-price elasticity estimates in the experimental match-price literature. The implication is that in the giving environment we investigate the match-price elasticity is informative for tax policy.

Rachel Croson, Jen Shang

Cited by*: 78 Downloads*: 34

In this paper we study the effect of downward social information in contribution decisions to fund public goods. We describe the results of a field experiment run in conjunction with the fundraising campaigns of a public radio station. Renewing members are presented with social information (information about another donor's contribution) which is either above or below their previous (last year's) contribution. We find that respondents change their contribution in the direction of the social information; increasing their contribution when the social information is above their previous contribution, and decreasing their contribution when the social information is below. We hypothesize about the psychological motivations that may cause the results and test these hypotheses by comparing the relative size of the upward and downward shifts. These results improve our understanding of cooperation in public good provision and suggest differential costs and benefits to fundraisers in providing social information.

Lorenz Goette, Alois Stutzer, Michael Zehnder

Cited by*: 0 Downloads*: 34

In this paper, we propose a decision framework where people are individually asked to either actively consent or dissent to some pro-social behavior. We hypothesize that confronting individuals with the choice of engaging in a specific pro-social behavior contributes to the formation of issue-specific altruistic preferences while simultaneously involving a commitment. The hypothesis is tested in a large-scale field experiment on blood donation. We find that this "active-decision" intervention substantially increases the stated willingness to donate blood, as well as the actual donation behavior of people who have not fully formed preferences beforehand.

John A List

Cited by*: 155 Downloads*: 34

Neoclassical theory postulates that preferences between two goods are independent of the consumer's current entitlements. Several experimental studies have recently provided strong evidence that this basic independence assumption, which is used in most theoretical and applied economic models to assess the operation of markets, is rarely appropriate. These results, which clearly contradict closely held economic doctrines, have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory e.g., prospect theory, which invokes psychological effects. This paper pits neoclassical theory against prospect theory by investigating three clean tests of the competing hypotheses. In all three cases, the data, which are drawn from nearly 500 subjects actively participating in a well-functioning marketplace, suggest that prospect theory adequately organizes behavior among inexperienced consumers, whereas consumers with intense market experience behave largely in accordance with neoclassical predictions. The pattern of results indicates that learning primarily occurs on the sell side of the market: agents with intense market experience are more willing to part with their entitlements than lesser-experienced agents.

Raghabendra Chattopadhyay, Esther Duflo

Cited by*: 3 Downloads*: 33

No abstract available

Andreas Lange, John A List, Michael K Price

Cited by*: 35 Downloads*: 33

This study explores the economics of charitable fund-raising. We begin by developing theory that examines the optimal lottery design while explicitly relaxing both risk-neutrality and preference homogeneity assumptions. We test our theory using a battery of experimental treatments and find that our theoretical predictions are largely confirmed. Specifically, we find that single and multiple prize lotteries dominate the voluntary contribution mechanism both in total dollars raised and the number of contributors attracted. Moreover, we find that the optimal fund-raising mechanism depends critically on the risk postures of potential contributors and preference heterogeneity.