Papers - Framed

Michael J. Seiler

Cited by*: 4 Downloads*: 0

Inequity Aversion has long been applied in a game theoretic setting to explain that individuals are willing to sacrifice personal wealth in order to financially penalize players they perceive to be acting selfishly or unfairly. I apply inequity aversion to strategic mortgage default decisions and find that individual homeowners (as well as a second sample of professional mortgage lenders) have a differential stated willingness to walk away from their mortgage based on the perceived characteristics of their lender. Importantly, these significant differences can be removed even with extremely modest loan modifications. Finally, I document that regular homeowners and even professional lenders do a poor job differentiating between the owner of their loan and the servicer of their loan. This is particularly troubling given the extreme misconception of their bank's true character. As a result, much of their willingness to penalize is misplaced resulting in an unnecessary number of strategic mortgage defaults.

Frank W Marlowe

Cited by*: 4 Downloads*: 16

No abstract available

Travis Lybbert

Cited by*: 4 Downloads*: 12

Potential poverty traps among the rural poor suggest a need to reduce poor farmers' vulnerability by stabilizing crop yields and limiting yield losses. Advances in biotechnology will help address this need directly with crops that tolerate climate fluctuation or resist biotic stresses. Evaluating ex ante how farmers will value these "poor" seeds is important for delivery design, but also challenging. This paper describes an experimental economic approach to understanding farmers' valuation of such seeds. Using data from a survey and experiment, I assess Indian farmers' valuation of changes in the mean, variance, and skewness of payoff distributions. These farmers value increases in expected value, but seem indifferent about higher moment changes in payoff distributions. Farmer traits such as wealth and risk exposure affect their valuation of these changes only mildly. While various limitations to the experimental approach must qualify practical implications of these findings, the experiment demonstrates the viability of conducting valuation experiments with open-ended questions in developing countries.

Abigail Barr, Jose Garcia-Montalvo, Magnus Lindelow, Pieter Serneels

Cited by*: 4 Downloads*: 11

We explore the value of the strategy method to field experimentalists. Specifically, we demonstrate that, while the method may lead to reductions in subject understanding, it also generates valuable insights. We played the Third Party Punishment Game and the Generalized Trust Game with Ethiopian medical and nursing students applying the strategy method to the responding role in each case. Then, making use of two proxy measures for the students` cognitive abilities, we investigate the relationship between strategy-type choices and subject understanding. Thus, we find support for the assertion that apparently random and internally inconsistent strategies are symptomatic of problems of cognition. We also find support for the often, implicitly made assumption that, in BDM-type trust games, the ratio of what is returned to what is sent is an appropriate focus for comparative analyses of responder behaviour. Finally, we find evidence that an observed difference in third party punishing behaviour between Swiss and Ethiopian students is due, not to misunderstanding, but to variations in what is perceived as punishable. Our results lead us to conclude that the strategy method is of considerable value in Third Party Punishment Games, but need not be routinely applied in BDM-type trust games.

Lars Hultkrantz, Gunnar Lindberg, Jan-Eric Nilsson, Fridtjof Thomas

Cited by*: 4 Downloads*: 58

Around one million people are killed world wide every year in road-traffic accidents. The risks and consequences of accidents increase progressively with speed, which ultimately is determined by the individual driver. The behaviour of the motorist thus affects both her own and other peoples safety. Internalisation of external costs of road transport has hitherto been focused on distance-based taxes or insurance premiums. While these means, as they are designed today, may affect driven distance, they have no influence on driving behaviour. This paper argues that by linking on-board positioning systems to insurance premiums it is possible to reward careful driving and get drivers to self select into different risk categories depending on their compliance to speed limits. We report two economic field experiments that have tested ways to induce car-owners to have technical platforms installed in their vehicle in order to affect the extent of speeding. It is demonstrated that a bonus to remunerate those that have the device installed, tantamount to a lower insurance premium, increases drivers?propensity to accept the technical devices. In a second experiment the size of the bonus is made dependent on the actual frequency of speeding. We find that this is a second way to discipline users to drive at legal speeds.

Amanda Kowalski

Cited by*: 4 Downloads*: 6

I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization.

David M Harrison, Mark A. Lane, Michael J. Seiler

Cited by*: 4 Downloads*: 0

This study examines the herding behavior of individuals in the context of their willingness to strategically default on a mortgage based on the (falsely) observed behavior of those around them. We find that homeowners are easily persuaded to follow the herd and adopt a strategic default proclivity consistent with that of their peers. Herding behavior is stronger when a Maven, or thought leader, is involved and weaker when the person finds strategic default to be morally objectionable. Homeowners appear to herd more for informational gains rather than for social reasons, and do not herd differentially based on signal strength. In a robustness check using a sample of real estate professionals, the strong mimetic herding result continues to hold.

Lee Cronk

Cited by*: 4 Downloads*: 10

The effects of cultural framing on behavior in experimental games were explored with a trust game and the Maasai concept of osotua. Maasai use the term osotua to refer to gift-giving relationships based on obligation, need, respect, and restraint. In the trust game, the first player is given money and an opportunity to give any portion of it to the second player. The amount given is then multiplied by the experimenter, and the second player has an opportunity to give any amount back to the first player. Fifty trust games were played by Maasai men at a field site in north central Kenya. Half of the games were played without deliberate framing, and half were framed with the statement, "This is an osotua game." Compared to games with no deliberate framing, those played within the osotua rhetorical frame were associated with lower transfers by both players and with lower expected returns on the part of the first players. Osotua rhetorical framing is also associated with a negative correlation between amounts given by the first player and amounts returned by the second. These results have implications both for the experimental game method and for our understanding of the relationship between culture and behavior.

John A List, Anya Samek

Cited by*: 4 Downloads*: 13

Childhood obesity has reached epidemic proportions in the U.S., with now almost a third of children ages 2-19 deemed overweight or obese. In this study, we leverage recent findings from behavioral economics to explore new approaches to tackling one aspect of childhood obesity: food choice and consumption. Using a field experiment where we include more than 1,500 children, we report several key insights. First, we find that individual incentives can have large influences: in the control, only 17% of children prefer the healthy snack, whereas the introduction of small incentives increases take-up of the healthy snack to roughly 75%, more than a four-fold increase. There is some evidence that the effects continue after the treatment period, consistent with a model of habit formation. Second, we find little evidence that the framing of incentives (loss versus gain) matters. While incentives work, we find that educational messaging alone has little influence on food choice. Yet, we do observe an important interaction effect between messaging and incentives: together they provide an important influence on food choice. For policymakers, our findings show the power of using incentives to combat childhood obesity. For academics, our approach opens up an interesting combination of theory and experiment that can lead to a better understanding of theories that explain healthy decisions and what incentives can influence them.

John A List

Cited by*: 4 Downloads*: 6

Walrasian tatonnement has been a fundamental assumption in economics ever since Walras' general equilibrium theory was introduced in 1874. Nearly a century after its introduction, Vernon Smith relaxed the Walrasian tatonnement assumption by showing that neoclassical competitive market theory explains the equilibrating forces in ""double- auction"" markets. I make a next step in this evolution by exploring the predictive power of neoclassical theory in decentralized naturally occurring markets. Using data gathered from two distinct markets--the sports card and collector pin markets--I find a tendency for exchange prices to approach the neoclassical competitive model prediction after a few market periods.

Stefano DellaVigna, John A List, Ulrike Malmendier, Gautam Rao

Cited by*: 4 Downloads*: 61

Why do people vote? We design a field experiment to estimate a model of voting 'because others will ask'. The expectation of being asked motivates turnout if individuals derive pride from telling others that they voted, or feel shame from admitting that they did not vote, provided that lying is costly. In a door-to-door survey about election turnout, we experimentally vary (i) the informational content and use of a flyer pre-announcing the survey, (ii) the duration and payment for the survey, and (iii) the incentives to lie about past voting. The experimental results indicate significant social image concerns. For the 2010 Congressional election, we estimate a value of voting 'to tell others' of about $15, contributing 2 percentage points to turnout. Lastly, we evaluate a get-out-the-vote intervention in which we tell potential voters that we will ask if they voted.

Peter Bohm, Hans Lind

Cited by*: 4 Downloads*: 11

Preference reversal, or choice/reservation-price inconsistency, has been documented experimentally for certain types of lotteries. We argue that the relevance of these findings for real-world markets is uncertain because the type of objects used cannot exist on a market and because the extent to which the subjects had any real interest in the objects is unknown. Using real-world lotteries, we have tested choice/price consistency on subjects who prefer lotteries to cash. Preference reversal was observed, but the frequency was much lower than in earlier experiments. There were no differences between subjects who qualify as ""lottery interested"" and those who did not.

Jonathan E Alevy, Craig E Landry, John A List

Cited by*: 4 Downloads*: 46

A pillar of behavioral research is that preferences are constructed during the process of choice. A prominent finding is that uninformative numerical "anchors" influence judgment and valuation. It remains unclear whether such processes influence market equilibria. We conduct two experiments that extend the study of anchoring to field settings. The first experiment produces evidence that some consumers' valuations can be anchored in novel situations; there is no evidence that experienced agents are influenced by anchors. The second experiment finds that anchors have only transient effects on market outcomes that converge to equilibrium predictions after a few market periods.

John A List, Robert D Metcalfe

Cited by*: 3 Downloads*: 14

Field experiments represent a relatively new area in economics to understand the causal links from one variable to another. They have been used by academics to help answer interesting and policy-relevant questions in the developed world relating to educational attainment, tax avoidance, consumer finance, negative externalities, charitable giving, and labour market contracts. In this paper we bring together the key ideas behind the different variants of field experiments, how field experiments have been used to test theory, their limitations, and the new areas currently being opened up by field experiments.

Xavier Gine, Pamela Jakiela, Dean S Karlan, Jonathan Morduch

Cited by*: 3 Downloads*: 15

Microfinance has been heralded as an effective way to address imperfections in credit markets. But from a theoretical perspective, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. The authors created an experimental economics laboratory in a large urban market in Lima, Peru and over seven months conducted 11 different games that allow them to unpack microfinance mechanisms in a systematic way. They find that risk-taking broadly conforms to predicted patterns, but that behavior is safer than optimal. The results help to explain why pioneering microfinance institutions have been moving away from group-based contracts.

Raghabendra Chattopadhyay, Esther Duflo

Cited by*: 3 Downloads*: 33

No abstract available

Sera Linardi, Tomomi Tanaka

Cited by*: 3 Downloads*: 7

This paper describes a randomized field experiment testing the impact of a savings competition on the behavior of working homeless individuals at a transitional shelter. When monetary prizes were offered for achieving the highest saving rates within a particular month, average savings increased by $80 (a 30% increase) while income and attendance at case management meetings remained unchanged. However, repeating the competition in the following month had no effect because responsive savers selected out of the shelter after the first month. In summary, while competition can increase savings in the short run, its effect may be limited to the intensive margin and may diminish with repetition. Combined with our findings that the strongest determinant of savings is income, it appear that for transitional populations on the economic margin, policies that provide opportunities to increase income may be a more effective first step than saving incentives.

Peter Bohm

Cited by*: 3 Downloads*: 16

The robust laboratory evidence of preference reversal for lotteries has been interpreted as a threat to the general vailidity of standard theories of decision-making under uncertainty. This evidence is obtained from laboratory, that is, not real-world, lotteries with subjects who have not sought to make decisions among such lotteries. Here, the prevalence of preference reversal is studied in a field experiment with used cars, that is, a case of real-world non-trivial, non-lottery - but still payoff-uncertain - choice objects, and with subjects who registered as potential buyers of such cars. No sign of preference reversal was observed.

Alberto Cavallo, Guillermo Cruces, Ricardo Perez-Truglia

Cited by*: 3 Downloads*: 15

Information frictions play a central role in the formation of household inflation expectations, but there is no consensus about their origins. We address this question with novel evidence from survey experiments. We document two main findings. First, individuals in lower-inflation contexts have significantly weaker priors about the inflation rate. This finding suggests that rational inattention may be an important source of information frictions. Second, cognitive limitations also appear to be a source of information frictions: even when information about inflation statistics is made readily available, individuals still place a significant weight on less accurate sources of information, such as their memories of the price changes of the supermarket products they purchase. We discuss the implications of these findings for macroeconomic models and policy-making.

Jay R Corrigan, Matthew C Rousu

Cited by*: 3 Downloads*: 18

Policymakers are considering including stricter standards in international trade agreements. Using auctions to assess preferences, we find that the median consumer places no premium on fair trade foods produced under more stringent labor and environmental standards. This indicates that current trade policies may be preferable to U.S. consumers.