Papers - Natural

John A List

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Recently an abundance of experimental evidence has been gathered that is consonant with the notion that individual preferences are inconsistent and unstable. These empirical results potentially undermine the theoretical foundation of welfare economics, as the degree of preference liability claimed suggests that perhaps no optimization principles underlie even the most straightforward of choices. Yet policymakers in the environmental arena continue to prescribe policies based on economics-based methods that are constructed on the very principles that have been directly refuted. Are policymakers creatures of habit that move at glacial speed or is there something deeper behind their inertness? In this study, I explore this issue within the U.S. context and argue that there is some rationality behind current public policy decision making. I then explore whether the empirical evidence supports the view that policymakers should take preference anomalies seriously. As a case study, I focus on some of my recent findings on preference inconsistencies in the marketplace.

Brit Grosskopf, Graeme Pearce

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We present a natural field experiment designed to measure other{regarding preferences in the market for taxis. We employed testers of varying ethnicity to take a number of predetermined taxi journeys. In each case we endowed them with only 80% of the expected fare. Testers revealed the amount they could afford to pay to the driver mid-journey and asked for a portion of the journey for free. In a 2x2 between{subjects design we vary the length of the journey and whether drivers havereputational concerns or not. We find that the majority of drivers give at least part of the journey for free and over 25% complete the journey. Giving is found to be proportional to the length of the journey, and the drivers' reputational concerns do not explain their behaviour. Evidence of strong out{group negativity against black testers by both white and South Asian drivers is also reported. In order to link our empirical analysis to behavioural theory we estimate the parameters of a number of utility functions. The data and the structural analysis lend support to the quantitative predictions of experiments that measure other{regarding preferences, and shed further light on how discrimination can manifest itself within our preferences.

Ryan D Friedrichs

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No abstract available

Bruno S Frey, Stephan Meier

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People behave pro-socially in a wide variety of situations that standard economic theory is unable to explain. Social comparison is one explanation for such pro-social behavior: people contribute if others contribute or cooperate as well. This paper tests social comparison in a field experiment at the University of Zurich. Each semester every single student has to decide whether he or she wants to contribute to two Social Funds. We provided 2500 randomly selected students with information about the average behavior of the student population. Some received the information that a high percentage of the student population contributed, while others received the information that a relatively low percentage contributed. The results show that people behave pro-socially, conditional on others. The more others cooperate, the more one is inclined to do so as well. The type of person is important. We are able to fix the "types" by looking at revealed past behavior. Some persons seem to care more about the pro-social behavior of others, while other "types" are not affected by the average behavior of the reference group.

Craig Gallet, John A List, Peter Orazem

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The 1987 academic market was strong, whereas the 1997 market was weak. A multimarket theory of optimal search suggests that job seekers will respond to a weakening market by changing their search strategies at the extensive margin (which markets to enter) and the intensive margin (how many applications to submit per market). Employers respond to the weakening market by raising their hiring standards. High-quality applicants will obtain an increased share of academic interviews in weak markets while applicants from weaker schools will increasingly secure interviews outside of the academic market. Empirical results show that in the bust market, graduates of elite schools shifted their search strategies to include weaker academic institutions, while graduates of lower-ranked schools shifted their applications away from academia and toward the business sector. In bust conditions, academic institutions increasingly concentrate their interviews on elite school graduates, women, and U.S. residents

Junsoo Lee, John A List, Mark Strazicich

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In this paper we examine temporal properties of eleven natural resource real price series from 1870-1990 by employing a Lagrangian Multiplier unit root test that allows for two endogenously determined structural breaks with and without a quadratic trend. Contrary to previous research, we find evidence against the unit root hypothesis for all price series. Our findings support characterizing natural resource prices as stationary around deterministic trends with structural breaks. This result is important in both a positive and normative sense. For example, without an appropriate understanding of the dynamics of a time series, empirical verification of theories, forecasting, and proper inference are potentially fruitless. More generally, we show that both pre-testing for unit roots with breaks and allowing for breaks in the forecast model can improve forecast accuracy.

Jeffrey A Flory, Andreas Leibbrandt, John A List

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Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehavior-bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers' propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.

James Andreoni, John A List

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No abstract available

Laura Derksen, Adamson Muula, Joep van Oosterhout

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The HIV epidemic in southern Africa has important consequences for economic development. The epidemic could be stopped by a universal test and treat policy, as antiretroviral drugs block the spread of the virus. However, demand for HIV testing and treatment are surprisingly low. This paper develops a model in which the decision to seek an HIV test is a signal of infection, and those who seek a test are subject to statistical discrimination from potential sexual partners. We evaluate an information experiment designed to test the theory, and find evidence that this form of discrimination is a significant barrier to HIV testing. In particular, we provide information at the community level on the public benefit of antiretroviral therapy: because the drugs prevent HIV transmission, a person who is tested and treated for HIV is a relatively safe sexual partner. This information reduces discrimination and increases HIV testing, with the strongest effects in communities where the new information becomes common knowledge. The results demonstrate that discrimination towards HIV positive individuals can be due to rational behavior by a misinformed public, and that providing new information can be an effective way to mitigate its effects.

Sultan Orazbayev

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Academic journal editors reject a significant portion of first submissions without sending them out for peer review. This decision, desk rejection, is made to reduce the workload on associate editors and referees, to give the submitting author a head start on revision or pursuit of an alternative venue, as well as to achieve quicker turnaround time for the journal. Desk rejection is a judgement based on the manuscript's perceived quality, impact and fit with the journal's scope. Could extraneous factors which are unrelated to the content of the manuscript, affect the editorial decision? This paper examines whether the sequential order in which manuscripts are submitted to a large academic journal affects the editorial decision. Becoming the first submission on the editor's list of manuscripts to review increases the probability of a desk rejection by up to 7% without any effect on the likelihood of a rejection after peer review.

Uri Gneezy, Kenneth Leonard, John A List

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This study uses a controlled experiment to explore whether there are gender differences in selecting into competitive environments across two distinct societies: the Maasai in Tanzania and the Khasi in India. One unique aspect of these societies is that the Maasai represent a textbook example of a patriarchal society whereas the Khasi are matrilineal. Similar to the extant evidence drawn from experiments executed in Western cultures, Maasai men opt to compete at roughly twice the rate as Maasai women. Interestingly, this result is reversed amongst the Khasi, where women choose the competitive environment more often than Khasi men, and even choose to compete weakly more often than Maasai men. We view these results as potentially providing insights into the underpinnings of the factors hypothesized to be determinants of the observed gender differences in selecting into competitive environments.

Fuhai Hong, Tanjim Hossain, John A List, Migiwa Tanaka

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Using a natural field experiment with factory workers where we introduce a quantity-based performance-pay scheme in addition to their base salary, we quantify the impact of one-dimensional monetary incentives on both incentivized (quantity) and non-incentivized (quality) dimensions of output. While the management typically observes only quantity, we also observe quality by hiring quality-inspectors unbeknownst to the workers. While some workers receive a flat-rate base salary, others receive a piece-rate base salary. We find sharp evidence that workers under a flat-rate base salary trade off quality for quantity. Interestingly, this quantity-quality trade-off is statistically insignificant for workers under a piece-rate base salary. This variation in the treatment effect is consistent with a simple theoretical model that predicts that when agents are already incented at the margin, the quantity-quality trade-off resulting from additional incentives will be less prominent.

Richard C Bishop, Kevin J Boyle, Richard T Carson, David Chapman, Matthew DeBell, Colleen Donovan, W. Michael Hanemann, Barbara Kanninen, Matthew Konopka, Raymond J Kopp, Jon A Krosnick, John A List, Norman Meade, Robert Paterson, Stanley Presser, Nora Scherer, V. Kerry Smith, Roger Tourangeau, Michael Welsh, Jeffrey M Wooldridge

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No abstract available

Egil Matsen, Bjarne Strom

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This paper examines data from the Norwegian television game show Joker, where contestants make well-specified choices under risk. The game involves very large stakes, randomly drawn contestants, and ample opportunities for learning. Expected utility (EU) theory gives a simple prediction of choice under weak conditions, as one choice is always first-order stochastically dominating. We document frequent, systematic and costly violations of dominance. Most alternative theories fail to add explanatory power beyond the EU benchmark, but many contestants appear to have a systematic expectation bias that can be related to Tversky and Kahneman's (1973) "availability heuristic". In addition, there seems to be a stochastic element in choice that is well captured by the so-called Fechner model.

Andreas Lange, John A List, Michael K Price

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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.

Jeffrey A Flory, Andreas Leibbrandt, John A List

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Workplace misbehaviors are often governed by explicit monitoring and strict punishment. Such enforcement activities can serve to lessen worker productivity and harm worker morale. We take a different approach to curbing worker misbehaviour - bonuses. Examining more than 6500 donor phone calls across more than 80 workers, we use a natural field experiment to investigate how different wage contracts influence workers' propensity to break workplace rules in harmful ways. Our findings show that even though standard relative performance pay contracts, relative to a fixed wage scheme, increase productivity, they have a dark side: they cause considerable cheating and sabotage of co-workers. Yet, even in such environments, by including an unexpected bonus, the employer can substantially curb worker misbehavior. In this manner, our findings reveal how employers can effectively leverage bonuses to eliminate undesired behaviors induced by performance pay contracts.

John A List, Fatemeh Momeni

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Corporate Social Responsibility (CSR) has become a cornerstone of modern business practice, developing from a "why" in the 1960s to a "must" today. Early empirical evidence on both the demand and supply sides has largely confirmed CSR's efficacy. This paper combines theory with a large-scale natural field experiment to connect CSR to an important but often neglected behavior: employee misconduct and shirking. Through employing more than 3,000 workers, we find that our usage of CSR increases employee misbehavior - 20% more employees act detrimentally toward our firm by shirking on their primary job duty when we introduce CSR. Complementary treatments suggest that "moral licensing" is at work, in that the "doing good" nature of CSR induces workers to misbehave on another dimension that hurts the firm. In this way, our data highlight a potential dark cloud of CSR, and serve to forewarn that such business practices should not be blindly applied.

Luca Fumarco

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In this study, I show that with the appropriate experimental strategy, a correspondence test can be adapted to investigate disability discrimination in the rental housing market. I focus on discrimination against blind tenants assisted by guide dogs in Italy and obtain very robust results. The utilization of three fictitious household tenants (that is, a married couple, a married couple with a blind wife who owns a guide dog, and a married couple where the wife is normal sighted and owns a pet dog) allows me to investigate whether discrimination is due to the blindness or to guide dog alone. I find that apartment owners discriminate blind tenants because of the presence of the guide dog alone. According to the Italian law, this is indirect discrimination, which in the US corresponds to the refusal to provide reasonable accommodation.

Cody Cook, Rebecca Diamond, Jonathan Hall, John A List, Paul Oyer

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The growth of the "gig" economy generates worker flexibility that, some have speculated, will favor women. We explore one facet of the gig economy by examining labor supply choices and earnings among more than a million rideshare drivers on Uber in the U.S. Perhaps most surprisingly, we find that there is a roughly 7% gender earnings gap among drivers. The uniqueness of our data - knowing exactly the production and compensation functions - permits us to completely unpack the underlying determinants of the gender earnings gap. We find that the entire gender gap is caused by three factors: experience on the platform (learning-by-doing), preferences over where/when to work, and preferences for driving speed. This suggests that, as the gig economy grows and brings more flexibility in employment, women's relatively high opportunity cost of non-paid-work time and gender-based preference differences can perpetuate a gender earnings gap even in the absence of discrimination.

Ufuk Akcigit, Fernando Alvarez, Stephane Bonhomme, George M Constantinides, Douglas W Diamond, Eugene F Fama, David W Galenson, Michael Greenstone, Lars Peter Hansen, Uhlig Harald, James J Heckman, Ali Hortacsu, Emir Kamenica, Greg Kaplan, Anil K Kashyap, Steven D Levitt, John A List, Robert E Lucas Jr., Magne Mogstad, Roger Myerson, Derek Neal, Canice Prendergast, Raghuram G Rajan, Philip J Reny, Azeem M Shaikh, Robert Shimer, Hugo F Sonnenschein, Nancy L Stokey, Richard H Thaler, Robert H Topel, Robert Vishny, Luigi Zingales

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No abstract available