experimental economics

motivated by self-interest and capable of making rational decisions. But research in economics has taken off in new directions. A large and growing body of scientific work is now devoted to the empirical testing and modification of traditional postulates in economics, in particular those of unbounded rationality, pure self-interest, and complete self-control. Moreover, today’s research increasingly relies on new data from laboratory experiments rather than on more traditional field data, that is, data obtained from observations of real economies. This recent research has its roots in two distinct, but converging, traditions: theoretical and empirical studies of human decision-making in cognitive psychology, and tests of predictions from economic theory by way of laboratory experiments. Today, behavioral economics and experimental economics are among the most active fields in economics, as measured by publications in major journals, new doctoral dissertations, seminars, workshops and conferences. This year’s laureates are pioneers of these two fields of research.

Econometrica, American Economic Review, Journal of Public Economics, Games and Economic Behavior, Management Science, Cognition, Experimental Economics, Journal of Economic Behavior and Organization, Scandinavian Journal of Economics, Labour Economics, Journal of Economic Science Association, Economic Enquiry, Journal of Neuroscience, Psychology and Economics, Scientific Reports, Social Cognitive and Affective Neuroscience, Frontiers in Decision Neuroscience, Frontiers in Psychology, Journal of Experimental Criminology, Economic Record, Journal of Experimental Child Psychology

Previous applications of virtual reality in experimental economics were mainly limited to research in desktop virtual worlds like Second Life (Chesney, Chuah, & Hoffmann, 2009; Atlas & Putterman, 2011; Fiedler, Haruvy, & Li, 2011; F¨ ullbrunn, Richwien, & Sadrieh, 2011; Greiner, Caravella, & Roth, 2014). In virtual worlds, however, the degree of immersion is low, as visual information is mediated through 2D monitors, and the interaction with objects and other users is executed through mouse-controlled avatars (virtual representations of humans). While virtual worlds have some remarkable research potential (Bainbridge, 2007; Haruvy, 2011), they also have very important drawbacks for experimental research, as the loss of control over subjects’ characteristics (Duffy, 2011). This led economists only recently to begin utilizing controlled virtual world experiments (Twieg & McCabe, 2014). A paper by (Harrison, Haruvy, & Rutstr¨ om, 2011) discusses the key concepts behind the experiments in virtual worlds and virtual reality.

By shedding light on the effect of three contextual changes on perceptions of col- laborative dishonesty, our study contributes to previous research showing that when individuals are given the incentive to dishonestly cooperate to equally share benefits they cheat more. We conduct three laboratory experiments at the Laboratory of Experimental Economics of the University of Copenhagen using the "dyadic die-rolling paradigm" of Weisel & Shalvi (2015). In the first experiment, we study the effect that second and third-party punishment has on preventing or promoting dishonesty in groups. On the one hand, the threat of punishment may limit the willingness to violate moral rules: each agent may act honestly out of the fear that the other player can punish her if she believes that she was dishonest. On the other hand, the threat of punishment can induce honest people to act dishonestly: punishment can represent a tool to create a social norm of dishonesty and/or make "rationalization" easier for those people that are looking for an excuse for their dishonest intentions. In the second experiment, we study the effect of introducing a conflict of interest in collaborating dishonestly. Introducing unequal rewards might make it more difficult to coordinate on a tacit agreement, since players might be concerned about different motives, such as inequality aversion, than profit- maximization only. Finally, the third experiment extends the findings from Grolleau et al. (2016) and Schindler & Pfattheicher (2016) on the detrimental effect that loss aversion might have on perceptions of dishonesty in group settings.

This dissertation consists of three studies in the economics of education and experimental economics. In Chapter 1, I address a debate in the literature about the effects of measures of school quality on labor market earnings. Using individual-level data, previous studies find no effects of measures of school quality and a subsequent study argues that the result is driven by the sample that includes mainly young individuals. I use recent NLSY79 Geocode data that provides extended earnings observations including prime-age earnings. I find that the percentage of teachers with a Master’s degree has a positive long-run effect on individuals’ earnings in the labor market. In Chapter 2, we examine the Dell Scholars Program which provides a combination of financial support and individualized advising to selected students throughout their postsecondary experience. We capitalize on an arbitrary cutoff in the program’s algorithmic selection process and a regression-discontinuity analytic strategy. We find that, at the margin of eligibility, being selected as a Dell Scholar has positive impacts on later persistence and on-time bachelor’s degree completion. Finally, in Chapter 3, we conduct a series of laboratory experiments to explore the effects of religion on prosocial risk taking. We find that the religious message can induce prosocial risk taking only when doing so help others of the same beliefs.

The three large categories of proposals recited above are not exclusive. For example, Ioannidis (2014) provides a variety of ideas for reform that warrant careful thought and perhaps formalization. An intriguing one is to reduce the return from obtaining grants and occupying positions of power in terms of academic recognition. On the contrary, he envisions a regime where these resources are ‘penalized’, viewed as opportunities that the researcher will have to utilize by increased productivity. On a final positive note, Nosek, Spies and Motyl (2012) are proponents of ‘paradigmatic-driven’ research, whereby the research material is standardized and altered in a very structured way for each new piece of research. It seems to us that experimental economics already achieves this standard relative to other disciplines such as psychology (Hertwig and Ortmann, 2001).

In most countries, the percentage of individual income tax returns that are subject to a tax audit is less than 1 percent of all returns, and the penalty rarely exceeds the amount of unpaid taxes (Alm & Gomez, 2008; Alm et al., 1992c). A purely economic analysis of the evasion gamble would thus suggest that most rational individuals should underreport taxable income (Alm et al., 1999; Frey & Feld, 2002; Webley et al., 1991). In the real world, however, evasion never rises to the levels predicted by the standard economic theory of compliance, even in the least compliant countries, and in fact there are often substantial numbers of individuals who apparently pay all of their taxes all of the time, regardless of the financial incentives they face from the enforcement regime 4 . It is only with very high levels of risk aversion (Arrow-Pratt measures of risk aversion of more than 30) that observed tax compliance rates can be explained. This extremely high risk aversion assumption is not supported though by empirical evidence from other studies 5 . It thus seems implausible that government enforcement activities alone can account for these levels of compliance. And as a matter of fact, the tax compliance puzzle should be restated as “why people pay taxes” not as “why people evade taxes”. This real life observation suggests that there are factors not captured by the economics-of-crime approach that might be affecting the decision to comply.

This workshop will include a lunch breakout session where graduate students and young professionals have the opportunity to discuss their research ideas with experienced researchers and receive constructive criticism regarding their experimental designs. Young professionals and graduate students currently planning a behavioural or experimental study are encouraged to submit an abstract related to their research. Accepted proposals will be discussed and feedback will be provided. The feedback will be provided in small groups that will be developed based on commonalities in research areas and/or research methodologies (i.e., lab experiments, field experiments, randomized controlled trials).

deadlines treatment performed best, while subjects in the no-deadline treatment per- formed the worst. In addition, self-imposed deadlines were often not set optimally and hence did not improve performance as much as expected. Possible reasons for what Ariely and Wertenbroch call imperfect sophistication (or “partial naivet´ e”) might be biased self-perception and cognitive limitations in calibrating deadlines or even a de- liberate mixed strategy of balancing flexibility and self-control. The results of Bisin and Hyndman (2014) are in line with that: There setting a self-imposed binding dead- line did not increase completion rates either, even though sophisticated people show a high demand for commitment in the form of self-imposed deadlines. Bisin and Hynd- man argue that there are various factors besides present-bias causing procrastination such as over-confidence and lack of preference. Ariely and Wertenbroch (2002) also find that under intermediate deadlines performance is higher and there is less delay. However, Burger et al. (2011) observed the exact opposite. In their experiments, ex- ogenous intermediate deadlines did not improve the completion rate. On the contrary, they lowered it. The major difference between their experimental design and Ariely and Wertenbroch’s was that not meeting intermediate deadlines resulted in failure of completion while Ariely and Wertenbroch’s subjects were penalized for missing a dead- line but could still participate in the experiment. Burger et al. conclude that some deadlines may in fact reduce flexibility enough to overcome any benefits they provide in terms of improving performance.

charities) and boys give less (significantly to their peers). 20 The current data thus show that Harbaugh et al.’s results, which focus on a relatively suburban white population, are robust to our sample consisting of a majority of urban African-American children. Also, similar to the behavior of college students reported in Eckel and Grossman [1996], we find that children in first through eleventh grade, as well as their parents, give more to charities than to peers. For instance, aggregating across voucher winners and losers, we find that children on average gave $3.77 (38 percent) of their $10 endowment to the charities but only $2.61 (26 percent) to other children. Regressions (not shown) indicate that these differences are highly significant. Finally, similar to college student’s behavior reported in Andreoni and Vesterlund [2001], we find that the exchange rate has a negative but insignificant affect on the amount children give to their peers. These comparisons indicate that our measures are externally valid with, and provide robustness to, the previous experimental evidences on the determinants of altruism with different populations.

Specifically I find evidence supporting the game as a measure of innate individual-specific trustworthiness, not just a method of identifying individuals more sensitive to social sanct[r]

It must be noticed that in this case the data (e*) used to argue for parallelism constitute a sub-sample of the data (e) that originally motivated the experimental investigation. They are all, in fact, productivity data ranging over the same period. They are supposed to provide novel information nonetheless, because, although the same mechanism (either that described by the RNNE or the winner’s curse mechanism) is supposed to be at work in all auctions, slightly different effects follow from different initial conditions (e.g. the kind of information available to bidders). Theoretical reasoning plays an important role in selecting the ‘right’ sub- set of data. This ‘nesting’ of e and e* at any rate does not have to hold in general: the field data used for parallelism might be totally independent of the field data that motivated the experiments. When the data-set changes, other problems with generalising, inferring, inducing from one case to another necessarily arise. The inferences, once again, can only be supported by other assumptions: that the data generating process stays fixed, for example. Such assumptions may be based on empirical evidence on their own; or simply be considered reasonable in the absence of any proof to the contrary; or supported by theoretical reasoning. Background knowledge of this sort, is indispensable in the game of science. 237

In the health economics literature, several authors have highlighted the different incentives in commonly used payment systems like fee-for-service (FFS) or capitation (CAP). In their seminal article, Ellis and McGuire (1986) let the physician (she) decide on the quan- tity of medical services as an agent of the patient (he) and the hospital. The physician’s utility derives from two elements—the hospital’s profit and the patient’s benefit. Accord- ing to Newhouse (2002), Ellis and McGuire’s model is also applicable to a primary care setting rather resembling the setup we are interested in. This implies that the physician is assumed to be concerned about her own profit π and the patient benefit B, both de- pending on the quantity of medical services q. A major argument for including B into the physician’s utility function is the professional code of medical ethics the physician is obliged to (Hippocratic Oath). 3 Ellis and McGuire find that FFS provides an incentive to overserve patients whereas CAP may lead to underprovision of medical services. Moreover, capitation payments can cause underprovision of necessary services (Blomqvist, 1991) and may lead to cream-skimming of patients (Newhouse, 1996 and Barros, 2003).

Regression (5) shows, conditional on selling price, a perceived 10% change in mark-up when earnings are displayed increases the purchasing rate by 4.6 percentage points but this is more [r]

International  Meeting  in  Experimental  and  Behavioral  Economics,  IMEBE,  Bilbao;   Department  of  Economics  and  CNRS,  University  of  Rennes;  Department  of  Economics   at  the  University  of  Bologna,  (Italy);  Department  of  Economics  at  the  University  of   Trento  (Italy);  LATEX  and  Department  of  Economics  at  the  University  of  Alicante   (Spain);    

Can (4.1) the same social preferences that are measured in the laboratory also be the preferences that explain cooperative behavior in the real life repeated game, even though it is al[r]

Harvard School of Public Health, Assistant Professor of Global Health Economics, Global Health and Population Department, 2011-current.. Harvard School of Public Health, Postdoctoral [r]

Experimental economics has been moving in this direction over the past decade (Hen- rich et al., 2010). With the development of brick and mortar experimental laboratories in non- WEIRD populations and the combination of increased global access to the internet paired with more sophisticated digital interfaces for data collection, sampling a more diverse set of popu- lations is increasingly feasible. By using these data to explore the underlying causes of inter- cultural differences, social scientists are better able to extrapolate results to larger or different populations. Building a better understanding of cross-cultural similarities and differences in behavior may help explain some empirical puzzles and may ultimately allow researchers to use - carefully - easily accessible populations to begin to understand phenomena in other parts of the world. The value of this extended avenue of research lies in the fact that there will always be some populations that researchers cannot feasibly reach. Whether it be small tribes in remote areas or a set of billion dollar CEOs with sizable opportunity costs of time, instances of pro- hibitively expensive sampling will continue to plague researchers. By exploring the underlying causes of inter-cultural differences, social scientists will be better able to extrapolate results to larger or different populations and will be working toward analysis of the future.

ests include experimental economics, decision-making and economics of religion. He has publis- hed his research in Games & Economic Behavior, Journal of Conflict Resolution, Experimental Economics, Journal of Economic Behavior and Organization, Journal of Money, Credit and Ban- king or Journal of Economic Psychology.

In the legal decision, the fatwa by the DSN and MPS sets several economics ethics. In wakalah, for instance, the fatwa by the DSN establishes the suitability of Sharia practices on objects involved. The same provision is set on kafalah contract which confirms the existence of halal object. In addition, the DSN also specifies the willing attitude in Kafalah contract. 78 The other ethics settle fine as a social fund (due to late payment/exceed/over-limit), riba- free, the absence of unlawful or immoral transaction, israf-free (wastefulness- free) and the prevention of endless debt (ghalabah al-dayn). 79 In the same way, the fatwa by the MPS also specifies some provision that ujrah is based on real services and is not associated with qard, that debt moratorium and cash with cash exchange on different values are prohibited and that the setting of wages on wakalah by the percentage of loans is banned because this practice resembles riba. 80