Papers - Framed

Julian Conrads, Tommaso Reggiani, Rainer M Rilke

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Ambiguity about the chances of winning represents a key aspect in lotteries. By means of a controlled field experiment, we exogenously vary the degree of ambiguity about the winning chances of lotteries organized to incentivize the contribution for a public good. In one treatment, people have been simply informed about the maximum number of potential participants (i.e. the number of lottery tickets released). In a second treatment, this information has been omitted as in all traditional lotteries. Our general finding shows that simply reducing the degree of ambiguity of the lottery leads to a sizable and significant increase (67%) in the participation rate. This result is robust to alternative prize configurations.

Julian Conrads, Bernd Irlenbusch, Tommaso Reggiani, Rainer M Rilke, Dirk Sliwka

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How to hire voluntary helpers? We shed new light on this question by reporting a field experiment in which we invited 2859 students to help at the 'ESA Europe 2012' conference. Invitation emails varied non-monetary and monetary incentives to convince subjects to offer help. Students could apply to help at the conference and, if so, also specify the working time they wanted to provide. Just asking subjects to volunteer or offering them a certificate turned out to be significantly more motivating than mentioning that the regular conference fee would be waived for helpers. By means of an online-survey experiment, we find that intrinsic motivation to help is likely to have been crowded out by mentioning the waived fee. Increasing monetary incentives by varying hourly wages of 1, 5, and 10 Euros shows positive effects on the number of applications and on the working time offered. However, when comparing these results with treatments without any monetary compensation, the number of applications could not be increased by offering money and may even be reduced.

John A List, Anya Samek, Terri Zhu

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We use a field experiment to investigate the effect of incentives on food purchase decisions at a grocery store. We recruit over 200 participants and track their purchases for a period of 6 months, permitting us a glimpse of more than 3,500 individual shopping trips. We randomize participants to one of several treatments, in which we incentivize fresh fruit and vegetable purchases, provide tips for fruit and vegetable preparation, or both. We report several key insights. First, our informational content treatment has little effect. Second, we find an important price effect: modest pecuniary incentives more than double the proportion of dollars spent on produce in the grocery store. Third, we find an interesting pattern of consumption after the experiment ends: even when incentives are removed, the treatment group has higher fruit and vegetable purchases compared to the control group. These long-term results are in stark contrast to either a standard price model or a behavioral model of 'crowd out.' Rather, our results are consonant with a habit formation model. This opens up the distinct possibility that short term incentives can be used as a key instrument to combat obesity.

Anne M Farrell, Susan D Krische, Karen L Sedatole

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Complementing proprietary archival data with an experiment, we examine employees' subjective valuations of their employee stock options and explore a stock option education program as a mechanism for influencing those valuations. We argue that the conflicting evidence on employee subjective valuations in prior studies can be attributed in part to knowledge differences. Our archival and experimental results show most employees value their options lower than the corresponding Black-Scholes cost. We find that a stock option education program that provides descriptive information about the Black-Scholes option pricing model and quantitative information about option values using that model increases not only employees' subjective valuations but also their self-reported loyalty and motivation. We complement our primary results with analyses of the cross-sectional determinants of subjective valuations, the differential effects on valuations of different components of the education program, and the heuristics used to formulate subjective valuations.

Paul J Ferraro

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Economic analyses of asymmetric information typically start with the assumption that individuals know more about their own characteristics than outside observers. This assumption implies that individuals can accurately assess their own competence in a given domain. However, individuals can only judge their competence if they are sufficiently competent. The relationship between competence and self-awareness explains a great deal of the overconfidence observed among economic agents. More specifically, overconfidence is inversely proportional to competence. Through a series of experiments and analyses of field data, the link between incompetence and overconfidence is confirmed and its implications for economic theory are explored.