Papers - All

Werner Guth, Carsten Schmidt, Matthias Sutter

Cited by*: 21 Downloads*: 21

On 11 May 2001, readers of the Berliner Zeitung were invited to participate in an ultimatum bargaining experiment played in the strategy vector mode: each participant chooses not only how much (s)he demands of the DM1,000 pie but also which of the nine possible offers of DM100, 200, ..., 900 (s)he would accept or reject. In addition, participants were asked to predict the most frequent type of behavior. Three randomly selected proposer-responder pairs were rewarded according to the rules of ultimatum bargaining and three randomly chosen participants of those who predicted the most frequent type of behavior received a prize of DM500. Decisions could be submitted by mail, fax or via the internet. Behavior is described, statistically analyzed and compared to the usual laboratory ultimatum bargaining results.

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.

Lester Lusher

Cited by*: 0 Downloads*: 20

Procrastination, an issue linked to poor performance and decreased well-being, is a pervasive problem in education. This paper examines the role of commitment and motivation by evaluating a program called CollegeBetter.com which acts as a commitment device and monetary incentive to help college students battle problems of present bias. The zero-sum mechanism is based off a parimutuel betting market, where students join a pool by placing a monetary wager on themselves to achieve the pool's "commitment challenge." Students who successfully commit to the challenge 1) recover their wagers and 2) split losing wagers proportionally. Through a series of lab and field experiments, I find that students interested in the mechanism were low-achieving, overconfident, self-identified procrastinators, while traditional measures of time-preferences were weak predictors of selection. Across all pools, students randomly selected to participate were more likely to achieve the commitment challenge than students who applied for a spot but were randomly excluded. Consistent with loss aversion, having the student risk their own money is a principal contributor to the effectiveness of the mechanism.

Henk Folmer, Tim Jeppesen, John A List

Cited by*: 19 Downloads*: 20

Stricter environmental regulations are often opposed on the grounds that they will alter equilibrium capital flows. Empirical evidence in this area remains largely unresolved, mainly due to the quite disparate results found in the literature. This paper takes a positive look at the relationship between new manufacturing plant location decisions and environmental regulations by examining data from 11 studies that provide more than 365 observations. One major result from our meta-analysis is that methodological considerations play a critical role in shaping the body of received estimates. Our empirical estimates also lend insights into future research that is necessary before any robust conclusions can be made regarding the effects of environmental regulations on capital flows.

Dean S Karlan, Jonathan Zinman

Cited by*: 2 Downloads*: 20

Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South African lender along three dimensions: 1) the initial "offer interest rate" appearing on direct mail solicitations; 2) a "contract interest rate" equal to or less than the offer interest rate and revealed to the over 4,000 borrowers who agreed to the initial offer rate; and 3) a dynamic repayment incentive that extends preferential pricing on future loans to borrowers who remain in good standing. These three randomizations, combined with complete knowledge of the Lender's information set, permit identification of specific types of private information problems. Specifically, our setup distinguishes adverse selection from moral hazard effects on repayment, and thereby generates unique evidence on the existence and magnitudes of specific credit market failures. We find evidence of both adverse selection (among women) and moral hazard (predominantly among men), and the findings suggest that about 20% of default is due to asymmetric information problems. This helps explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers at very high rates.

John A List, Charles F Mason

Cited by*: 0 Downloads*: 20

Are individuals expected utility maximizers? This question represents much more than academic curiosity. In a normative sense, at stake are the fundamental underpinnings of the bulk of the last half-century's models of choice under uncertainty. From a positive perspective, the ubiquitous use of benefit-cost analysis across government agencies renders the expected utility maximization paradigm literally the only game in town. In this study, we advance the literature by exploring CEO's preferences over small probability, high loss lotteries. Using undergraduate students as our experimental control group, we find that both our CEO and student subject pools exhibit frequent and large departures from expected utility theory. In addition, as the extreme payoffs become more likely CEOs exhibit greater aversion to risk. Our results suggest that use of the expected utility paradigm in decision making substantially underestimates society's willingness to pay to reduce risk in small probability, high loss events.

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.

Joshua D Angrist, Eric Bettinger, Michael Kremer

Cited by*: 2 Downloads*: 20

Colombia's PACES program provided over 125,000 poor children with vouchers that covered half the cost of private secondary school. The vouchers were renewable annually conditional on adequate academic progress. Since many vouchers were assigned by lottery, program effects can reliably be assessed by comparing lottery winners and losers. Estimates using administrative records suggest the PACES program increased secondary school completion rates by 15-20 percent. Correcting for the greater percentage of lottery winners taking college admissions tests, the program increased test scores by two-tenths of a standard deviation in the distribution of potential test scores. Boys, who have lower scores than girls in this population, show larger test score gains, especially in math.

Omar Azfar, Clifford Zinnes

Cited by*: 3 Downloads*: 20

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. We designed an experiment to test these hypotheses using a "prospective randomized evaluation procedure" (PREP). We then apply PREP to training programs as typically funded by donors of economic development assistance. We randomly assigned 274 participating entrepreneurs in the Philippines to one of 26, simultaneous, one-day, training classes in marketing. Trainers were given cash incentives based on the average score of their "students" on a standardized test containing an alternative number of questions, which were randomly assigned to each class. We then examined outcomes based on student satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes. We conclude with ways to improve our approach as well as with a discussion of the implications for using prospective randomized evaluation for improving the evaluation of donor projects.

Stephan Meier

Cited by*: 2 Downloads*: 20

Framing a decision situation differently has affected behavior substantially in previous studies. This paper tests a framing effect in a field experiment at the University of Zurich. Each semester, every student has to decide whether to contribute to two social funds. Students were randomly informed that a high percentage of the student population contributed (or, equivalently, that a low percentage did not contribute), while others received the information that a relatively low percentage contributed (or a high percentage did not contribute). The results show the influence of framing effects is limited. People behave in a conditional cooperative way if informed either about the number of contributors or about the equivalent number of non-contributors. The positive correlation between group behavior and individual behavior is, however, weaker when the focus is on the defectors. The field experiment also shows gender differences in social comparison.

Per Fredriksson , John A List, Warren McHone , Daniel L Millimet

Cited by*: 59 Downloads*: 20

This study examines the effects of air quality regulation on economic activity. Anecdotal evidence and some recent empirical studies suggest that an inverse relationship exists between the stringency of environmental regulations and new plant formations. Using a unique county-level data set for New York State from 1980 to 1990, we revisit this conjecture using a seminonparametric method based on propensity score matching. Our empirical estimates suggest that pollution-intensive plants are responding to environmental regulations; more importantly, we find that traditional parametric methods used in previous studies may dramatically understate the impact of more stringent regulations.

Glenn W Harrison

Cited by*: 5 Downloads*: 19

If we are to examine the role of "controls" in different experimental settings, it is appropriate that the word be defined carefully. The Oxford English Dictionary (Second Edition) defines the verb "control" in the following manner: "To exercise restraint or direction upon the free action of; to hold sway over, exercise power or authority over; to dominate, command." So the word means something more active and interventionist than is suggested by it's colloquial clinical usage. Control can include such mundane things as ensuring sterile equipment in a chemistry lab, to restrain the free flow of germs and unwanted particles that might contaminate some test.

John A List, Warren McHone , Daniel L Millimet

Cited by*: 11 Downloads*: 19

Whether environmental regulations alter capital flows remains a hotly debated issue. This paper uses county-level data to examine the location decisions of domestic and foreign firms in a single empirical model and tests for asymmetries by firm origin in the degree to which capital flows are influenced by environmental standards. We find that while domestic firms are influenced by environmental regulations, foreign firms are not. Since the benefits of foreign investment are well-documented-foreign plants typically provide more jobs and increase local wages by more than domestic plants-this result suggests a double-dividend is available: foreign plants provide an economic stimulus and are not unduly influenced by environmental protections.

Steven Blader, Claudine Gartenberg, Andrea Prat

Cited by*: 0 Downloads*: 19

This paper investigates how the success of a management practice depends on the nature of the long-term relationship between the firm and its employees. A large US transportation company is in the process of fitting its trucks with an electronic on-board recorder (EOBR), which provide drivers with information on their driving performance. In this setting, a natural question is whether the optimal managerial practice consists of: (1) Letting each driver know his or her individual performance only; or (2) Also providing drivers with information about their ranking with respect to other drivers. The company is also in the first phase of a multi-year initiative to remake its internal operations. This first phase corresponds to an overhaul of the relational contract with its employees, focusing exclusively on changing values toward a greater emphasis on teamwork and empowerment. The main result of our randomized experiment is that (2) leads to better performance than (1) in a particular site if and only if the site has not yet received the values intervention, and worse performance if it has. The result is consistent with the presence of a conflict between competition-based managerial practices and a cooperation-based relational contract. More broadly, it highlights the role of intangible relational factors in determining the optimal set of managerial practices.

Michael Kremer, Edward Miguel

Cited by*: 16 Downloads*: 19

We examine social learning using data from a program that promoted use of deworming medicine in Kenyan schools. These drugs kill worms in the body; although people are soon reinfected, treatment interferes with the cycle of transmission, generating positive externalities. Individuals randomly exposed to more information about deworming drugs through their social network were significantly less likely to take the drugs and more likely to believe the drugs are "not effective." This finding is consistent with the hypothesis that those exposed to the program had overly optimistic prior beliefs about net private drug benefits. The combination of strong social effects and extensive social networks among teenagers implies that a "child-to-child" public health approach focused on teenagers will speed social learning. There are large differences between social effect estimates relying on experimental variation (negative estimates) and nonexperimental methods (positive estimates).

Xavier Gine, Dean S Karlan

Cited by*: 12 Downloads*: 19

Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor and enforce each other's loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender's overall profitability and the poor's access to financial markets. We worked with a bank in the Philippines to conduct a field experiment to examine these issues. We randomly assigned half of the 169 pre-existing group liability centers of approximately twenty women to individual-liability centers (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in center size by attracting new clients.

Tanjim Hossain, John A List

Cited by*: 9 Downloads*: 19

Recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets. Such gains in knowledge have come primarily via laboratory experiments--a missing piece of the puzzle in many cases is parallel evidence drawn from naturally-occurring field counterparts. We provide a small movement in this direction by taking advantage of a unique opportunity to work with a Chinese high-tech manufacturing facility. Our study revolves around using insights gained from one of the most influential lines of behavioral research--framing manipulations--in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both "losses" and "gains" increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of the effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their importance over time; rather the effects are observed over the entire sample period. Moreover, we learn that worker reputation and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long-run production function.

Nava Ashaf, Dean S Karlan, Wesley Yin

Cited by*: 110 Downloads*: 19

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current tradeoffs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.

John A List

Cited by*: 0 Downloads*: 19

No abstract available

Alan S Gerber, Donald P Green, Ron Shachar

Cited by*: 39 Downloads*: 19

Habit is a frequently mentioned but understudied cause of political action. This article provides the first direct test of the hypothesis that casting a ballot in one election increases one's propensity to go to the polls in the future. A field experiment involving 25,200 registered voters was conducted prior to the November general election of 1998. Subjects were randomly assigned to treatment conditions in which they were urged to vote through direct mail or face-to-face canvassing. Compared to a control group that received no contact, the treatment groups were significantly more likely to vote in 1998. The treatment groups were also significantly more likely to vote in local elections held in November of 1999. After deriving a statistical estimator to isolate the effect of habit, we find that, ceteris paribus, voting in one election substantially increases the likelihood of voting in the future. Indeed, the influence of past voting exceeds the effects of age and education reported in previous studies.