Papers - Natural

Matilde Giaccherini, David H Herberich, David Jimenez-Gomez, John A List, Giovanni Ponti, Michael K Price

Cited by*: None Downloads*: None

This paper uses a field experiment to estimate the effects of prices and social norms on the decision to adopt and efficient technology. We find that prices and social norms influence the adoption and decision along different margins: while prices operate on both the extensive and intensive margins, social norms operate mostly through the extensive margin. This has both positive and normative implications, and suggests that economics and psychology may be strong complements in the diffusion process. To complement the reduced form results, we estimate a structural model that points to important household heterogeneity: whereas some consumers welcome the opportunity to purchase and learn about the new technology, for others the inconvenience and social pressure of the ask results in negative welfare. As a whole, our findings highlight that the design of optimal technological diffusion policies will require multiple instruments and a recognition of household heterogeneity.

Marianne Bertrand, Sendhil Mullainathan

Cited by*: 20 Downloads*: 31

We perform a field experiment to measure racial discrimination in the labor market. We respond with fictitious resumes to help-wanted ads in Boston and Chicago newspapers. To manipulate perception of race, each resume is assigned either a very African American sounding name or a very White sounding name. The results show significant discrimination against African-American names: White names receive 50 percent more callbacks for interviews. We also find that race affects the benefits of a better resume. For White names, a higher quality resume elicits 30 percent more callbacks whereas for African Americans, it elicits a far smaller increase. Applicants living in better neighborhoods receive more callbacks but, interestingly, this effect does not differ by race. The amount of discrimination is uniform across occupations and industries. Federal contractors and employers who list Equal Opportunity Employer' in their ad discriminate as much as other employers. We find little evidence that our results are driven by employers inferring something other than race, such as social class, from the names. These results suggest that racial discrimination is still a prominent feature of the labor market.

Simon Gachter, Henrik Orzen, Elke Renner, Chris Starmer

Cited by*: 0 Downloads*: 87

An extensive literature demonstrates the existence of framing effects in the laboratory and in questionnaire studies. This paper reports new evidence from a natural field experiment using a subject pool one might expect to be particularly resistant to such effects: experimental economists. We find that while the behaviour of junior experimental economists is affected by the description of the decision task they face, this is not the case for the more senior members of our subject pool.

Bruno S Frey, Stephan Meier

Cited by*: 57 Downloads*: 24

Most professional economists believe that economists in general are more selfish than other people and that this increased selfishness is due to economics education. This article offers empirical evidence against this widely held belief. Using a unique data set about giving behavior in connection with two social funds at the University of Zurich, it is shown that economics education does not make people act more selfishly. Rather, this natural experiment suggests that the particular behavior of economists can be explained by a selection effect.

Tanjim Hossain, John Morgan

Cited by*: 3 Downloads*: 8

We conducted 80 auctions on eBay. Forty of these auctions were for various popular music CDs while the remaining 40 auctions were for video games for Microsoft's Xbox gaming console. The revenue equivalence theorem states that any auction form having the same effective reserve price yields the same expected revenue. The effective reserve price on eBay consists of three components: the opening bid amount, the secret reserve amount, and the shipping and handling charge to keep the overall reserve level fixed. We set no secret reserve price and varied the opening bid and the shipping and handling charge to keep the overall reserve level fixed. When the effective reserve was $4, auctions with a low opening bid and high shipping charges attracted more bidders, earlier bidding, and yielded higher revenue than those with a high opening bid and low shipping charges. The same results hold only for Xbox games under the $8 effective reserve. Unlike the other treatments, where the reserve represents less than 30% of the retail price of the item, for CDs, the $8 effective reserve represents over 50% of the retail price of the item. In this treatment, we find no systematic difference in the number of bidders attracted to the auction or revenues as a function of how the effective reserve is allocated between opening bid and shipping charges. We show that these results can be accounted for by bounded-rational bidding behavior.

Dmitry Taubinsky, Alex Rees-Jones

Cited by*: 15 Downloads*: 31

This paper shows that accounting for variation in mistakes can be crucial for welfare analysis. Focusing on consumer underreaction to not-fully-salient sales taxes, we show theoretically that the efficiency costs of taxation are amplified by 1) individual differences in under reaction and 2) the degree to which attention is increasing with the size of the tax rate. To empirically assess the importance of these issues, we implement an online shopping experiment in which 2,998 consumers-matching the U.S. adult population on key demographics-purchase common household products, facing tax rates that vary in size and salience. We find that: 1) there are significant individual differences in underreaction to taxes. Accounting for this heterogeneity increases the efficiency cost of taxation estimates by at least 200%, as compared to estimates generated from a representative agent model. 2) Tripling existing sales tax rates roughly doubles consumers' attention to taxes. Our results provide new insights into the mechanisms and determinants of boundedly rational processing of not-fully-salient incentives, and our general approach provides a framework for robust behavioral welfare analysis.

Sungwon Cho, Cannon Koo, John A List, Changwon Park , Pablo Polo, Jason F Shogren, Robert Wilhelmi

Cited by*: 18 Downloads*: 9

We evaluate the impact of three auction mechanisms - the Becker-DeGroot-Marschak mechanism, the second-price auction, and the random nth-price auction - in the measurement of willingness to pay (WTP) and willingness to accept (WTA) measures of value. Our results show that initial bidding in trial 1 in each auction does not contradict the endowment effect; but that, if it is the endowment effect that governs people's initial bidding behavior, it can be eliminated with repetitions of a second-price or random nth-price auction; and if the thesis is that the effect should persist across auctions and across trials is right, our results suggest that there is no fundamental endowment effect.

Andreas Lange, John A List, Michael K Price

Cited by*: 0 Downloads*: 0

Auction theory represents one of the richest areas of research in economics over the past three decades. Yet, whether, and to what extent, the introduction of secondary resale markets influences bidding behavior in sealed bid first-price auctions remains under researched. This study begins by examining field data from a unique data set that includes nearly 3,000 auctions (over 10,000 individual bids) for cutting rights of standing timber in British Columbia from 1996-2000. In comparing bidding patterns across agents who are likely to have resale opportunities with those who likely do not, we find evidence that is consistent with theory. Critical evaluation of the reduced-form bidding model, however, reveals that sharp tests of the theoretical predictions are not possible because several other differences may exist across these bidder types. We therefore use a laboratory experiment to examine if the resale opportunity by itself can have the predicted theoretical effect. We find that while it does have the predicted effect, a theoretical model based on risk-averse bidders explains the overall data patterns more accurately than a model based on risk-neutral bidders. Beyond testing theory, the paper highlights the inferential power of combining naturally occurring data with laboratory data.

Amanda Agan, Sonja Starr

Cited by*: 22 Downloads*: 27

"Ban-the-Box" (BTB) policies restrict employers from asking about applicants' criminal histories on job applications and are often presented as a means of reducing unemployment among black men, who disproportionately have criminal records. However, withholding information about criminal records could risk encouraging statistical discrimination: employers may make assumptions about criminality based on the applicant's race (or other observable characteristics). To investigate BTB's effects, we sent approximately 15,000 fictitious online job applications to employers in New Jersey and New York City both before and after the adoption of BTB policies. These applications varied the race and felony conviction status of the applicants. We confirm that criminal records are a major barrier to employment: employers that ask about criminal records were 63% more likely to call back an applicant if he has no record. However, our results support the concern that BTB policies encourage statistical discrimination on the basis of race: we find that the race gap in callbacks grows dramatically at the BTB-affected companies after the policy goes into effect. Before BTB, white applicants to employers with the box received 7% more callbacks than similar black applicants, but BTB increases this gap to 45%.

Erwin Bulte, John A List, Qin Tu

Cited by*: 0 Downloads*: 32

A vibrant literature has emerged that explores the economic implications of the sex ratio (the ratio of men to women in the population), including changes in fertility rates, educational outcomes, labor supply, and household purchases. Previous empirical efforts, however, have paid less attention to the underlying channel via which changes in the sex ratio affect economic decisions. This study combines evidence from a field experiment and a survey to document that the sex ratio importantly influences female bargaining power: as the sex ratio increases, female bargaining power increases.

Erwin Bulte, John A List, Jason F Shogren

Cited by*: 1 Downloads*: 2

An important public policy question that remains unresolved is whether devolution will enhance sensible policy making by exploiting informational asymmetries or, instead, trigger a "beggar thy neighbor" response and stimulate free riding amongst localities. We analyze this question within the framework of U.S. environmental policy making by scrutinizing a unique panel data set on state-level endangered species expenditure patterns. Our empirical estimates are consistent with the notion that states free ride, which may lead to an expenditure equilibrium that is not Pareto efficient.

Per Fredriksson , John A List, Daniel L Millimet

Cited by*: 33 Downloads*: 9

Previous studies have proposed that equilibrium capital flows are affected by environmental regulations-the commonly coined 'pollution haven' hypothesis. We revisit this issue by treating environmental policies as endogenous and allowing governmental corruption to influence foreign direct investment patterns. Via these two simple extensions, we are able to provide a much richer model of international capital flows. The theoretical model presumes that the effect of corruption on FDI operates via two channels: corruption affects capital flows through its impact on environmental policy stringency and due to greater theft of public funds earmarked for public spending. We empirically examine the implications of the model using US state-level panel data from four industrial sectors over the period 1977-1987. Empirical results suggest environmental policy and corruption both play a significant role in determining the spatial allocation of inbound US FDI. In addition, the estimated effect of environmental policy is found to depend critically on exogeneity assumptions.

Per Fredriksson , John A List, Daniel L Millimet

Cited by*: 33 Downloads*: 18

Previous studies have proposed that equilibrium capital flows are affected by environmental regulations-the commonly coined 'pollution haven' hypothesis. We revisit this issue by treating environmental policies as endogenous and allowing governmental corruption to influence foreign direct investment patterns. Via these two simple extensions, we are able to provide a much richer model of international capital flows. The theoretical model presumes that the effect of corruption on FDI operates via two channels: corruption affects capital flows through its impact on environmental policy stringency and due to greater theft of public funds earmarked for public spending. We empirically examine the implications of the model using US state-level panel data from four industrial sectors over the period 1977-1987. Empirical results suggest environmental policy and corruption both play a significant role in determining the spatial allocation of inbound US FDI. In addition, the estimated effect of environmental policy is found to depend critically on exogeneity assumptions.

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.

Colin F Camerer

Cited by*: 23 Downloads*: 19

To test whether naturally occurring markets can be strategically manipulated, $500 and $1,000 bets were made, then cancelled, at horse racing tracks. The net effects of these costless temporary bets give clues about how market participants react to information large bets might contain. The bets moved odds on horses visibly (compared to matched-pair control horses with similar prebet odds) and had a slight tendency to draw money toward the horse that was temporarily bet, but the net effect was close to zero and statistically insignificant. The results suggest that some bettors inferred information from bets and others did not, and their actions roughtly cancelled out.

Francis Larson, John A List, Robert D Metcalfe

Cited by*: 1 Downloads*: 61

Behavioral economists have recently put forth a theoretical explanation for the equity premium puzzle based on combining myopia and loss aversion. Complementing the behavioral theory is evidence from laboratory experiments, which provide strong empirical support consistent with myopic loss aversion (MLA). Yet, whether, and to what extent, such preferences underlie behaviors of traders in their natural domain remains unknown. Indeed, a necessary condition for the MLA theory to explain the equity premium puzzle is for marginal traders in markets to exhibit such preferences. Using minute-by-minute trading observations from over 864,000 price realizations in a natural field experiment, we find data patterns consonant with MLA: in their normal course of business, professional traders who receive infrequent price information invest 33% more in risky assets, yielding profits that are 53% higher, compared to traders who receive frequent price information. Beyond testing theory, these results have important implications for efficient resource allocation as well as characterizing the optimal structure of social and economic policies.

Omar Al-Ubaydli, Steffen Andersen, Uri Gneezy, John A List

Cited by*: 0 Downloads*: 2

Constructing compensation schemes for effort in multi-dimensional tasks is complex, particularly when some dimensions are not easily observable. When incentive schemes contractually reward workers for easily observed measures, such as quantity produced, the standard model predicts that unrewarded dimensions, such as quality, will be neglected. Yet, there remains mixed empirical evidence in favor of this standard principal-agent model prediction. This paper reconciles the literature by using both theory and empirical evidence. The theory outlines conditions under which principals can use a piece rate scheme to induce higher quantity and quality levels than analogous fixed wage schemes. Making use of a series of complementary laboratory and field experiments we show that this effect occurs because the agent is uncertain about the principal's monitoring ability and the principal's choice of a piece rate signals to the agent that she is efficient at monitoring.

John A List, Yana Peysakhovichc

Cited by*: 1 Downloads*: 5

This paper examines aggregate time series data on individual charitable donations from 1968 to 2007. We find that changes in individual giving show an asymmetric response to changes in the S&P 500: individuals are more responsive to stock market upturns than downturns.

John A List, Michael K Price

Cited by*: 8 Downloads*: 7

One fact that has emerged in modern societies is that people help others. Whether it is donating a few dollars to help feed the poor or volunteering time to help rebuild someone's life after a natural disaster, people around the globe commonly lend a hand. This study provides an overview of that support, summarizing gifts of both time and money around the globe. We also highlight research that indicates useful ways in which we can enhance the charitable pie. Our discussion revolves around both individual giving and corporate philanthropy, but we focus on empirical insights from recent charitable fundraising field experiments in the Western World. We present information that is useful for policymakers, fundraising practitioners, and academicians.

Armin Falk

Cited by*: 8 Downloads*: 17

This study reports data from a field experiment that was conducted to investigate the relevance of gift-exchange for charitable giving. Roughly 10,000 solicitation letters were sent to potential donors in the experiment. One third of the letters contained no gift, one third contained a small gift and one third contained a large gift. Whether a potential donor received a letter with or without a gift was randomly determined. We observe strong and systematic effects from including gifts. Compared to the no gift condition, the relative frequency of donations increased by 17 percent if a small gift was included and by 75 percent for a large gift. Consequently, including gifts was highly profitable for the charitable organization. The contribution of this paper is twofold: first, it shows that gift-exchange is important for charitable giving, in addition to the warm-glow motive. Second, the paper confirms the economic relevance of reciprocity by using field data. This extends the current body of research on reciprocity, which is almost exclusively confined to laboratory studies.