Working Papers
Information campaigns have the potential to influence decisions, but how should these campaigns be evaluated in the presence of heterogeneous responses? For example, information on the returns to education can lead to continuing and discontinuing education or entering and exiting a major. We make explicit the conditions for prior beliefs to identify heterogeneous responses to treatment. These conditions have testable implications. We use this approach to analyze an information provision RCT in Ibadan, Nigeria, implemented at a critical juncture when adolescents had to decide to stop or continue schooling. The average effect of the intervention is a 3.8 percentage point increase in the high school dropout rate one year later from a baseline of 9.4 percent. However, more than twice as many students changed their decisions due to the intervention, with one student deciding to continue schooling per two students deciding to discontinue schooling.
"Incentivized learning and attention-driven treatment effects," with Ragan Petrie, May 2023
[link to paper] We investigate how incentives affect learning when attention is multidimensional. Households are provided high-frequency information on gas usage and/or monetary incentives to reduce energy consumption. Information coupled with incentives leads to lower consumption, and information without incentives leads to higher consumption. Higher consumption persists a year later for those who did not receive incentives. Both groups accessed the same information technology to learn preferences and costs for warmer/colder indoor temperatures yet have different durable treatment effects. Incentives focused learning on cost, rather than comfort - those offered incentives explored colder house temperatures, while those without incentives tried a warmer house. Objective, real-time information can produce opposite behavior, as incentives affect learning.
"Short-circuiting Crime: Evidence from a Post-incarceration Field Experiment," with Sera Linardi and Ragan Petrie, November 2022
[link to paper] Many individuals who were previously incarcerated are re-arrested in the months and years following release from prison. We investigate whether encouragement to use post-incarceration support services reduces re-arrest. Voluntary participants in our field experiment are offered a monetary incentive to complete either three or five visits to a support service provider. Those in the incentives groups increased visits compared to the control group, but the majority do not complete the required visits to obtain the incentive. We find no significant intent-to-treat or local average treatment effects of the visits on average re-arrest rates. We show that this is due to heterogeneous treatment effects for different complier types rather than a uniform null effect. An increase in visits causally decreases re-arrest for one complier response, the type complying with the easier goal (3 visits), but it increases re-arrests for another, the types complying with the harder goal (5 visits). Encouragement of support service usage can be effective for some people, but not others. Our results highlight the importance of uncovering latent response types to treatments to properly evaluate the effectiveness of programs aimed to help the previously incarcerated.
"Optimal Incentive to Give," with Ragan Petrie, August 2021
[link to paper] We explore optimal incentives, using the context of charitable giving, with a large-scale field experiment involving 26 charities and over 112,000 unique individuals. The price of giving is varied by offering a fixed match if the donation meets a threshold amount (e.g. “give at least $25 and the charity receives a $25 match”). We structurally estimate a model of charitable giving with behavioral types and employ the estimates to evaluate the effectiveness of various counterfactual incentive schemes. Our estimates suggest using schemes that are robust to behavioral biases, such as ignoring marginal subsidies. These optimal incentives were implemented in a two-year, follow-up field study. As predicted by theory and our simulations, the high threshold scheme increased out-of-pocket donations, by 5.4%. Our findings highlight the pitfalls of relying on a particular parameterization of a policy to evaluate effectiveness. The best-guess incentives in our initial field experiment turned out to be ineffective at increasing donations because optimal incentives should have been set much higher.
"Negative Childhood Experiences and Risk Aversion: Evidence from Children Exposed to Domestic Violence," May 2019
[link to paper] Using a longitudinal study of 1,900 Peruvian children, I show that children who grow up in a household where mothers report experiencing domestic violence are more risk averse and have lower cognitive development. Risk attitudes are measured with an incentivized experiment. The effect of domestic violence on risk attitudes is not mediated by cognitive development and suggests that early negative experiences in life can directly influence the risk attitudes of children. This experience is associated with other behavioral changes as well, including lower physical activity and higher BMI.
"Risk preferences and decision quality of the poor," with Chenna Cotla, Ragan Petrie and Maximo Torero, June 2018
[link to paper] Behavioral experiments and structural estimation afford us identification of two im- portant components of individual choice: risk preferences and decision quality. Using a large, representative sample of households living in poverty and extreme poverty in Peru, we show that both components predict a variety of field behaviors and affect estimation results. The quality of decision-making improves after experiencing a bad shock, and households in which decision quality is high are more likely to be economi- cally efficient. When decision quality is ignored, gender differences in risk aversion are overestimated, and the large negative impact of risk aversion on asset accumulation is underestimated.
"Friends Asking Friends for Charity: The Importance of Gifts and Audience," with Clarence Wardell and Ragan Petrie, August 2017
[link to paper] We explore the underlying motivations for donors to ask their friends to give to charity and the effectiveness of alternative ways to ask for support. Using data from a field experiment with a global crowdfunding community and over 9,800 unique donors, we find that asking a friend in front of his friends is the most effective way to fundraise. Our estimates show that $1 spent to encourage donors to ask friends pays for itself by returning about $1.60. The social pressure that an audience provides is the primary driver for this result, rather than asking a larger group of individuals. Social pressure is costly, and donors are reluctant to use it with their friends. Providing donors with a “gift” for the friend, however, increases the willingness to ask. Both social context and donor incentives are equally important in explaining giving.
"Taring the Multiple Price List: Imperceptive Preferences and the Reversing of the Common Ratio Effect," with David Eil, September 2015
[link to paper] The Multiple Price List (MPL) is a common method of measuring preferences in economics experiments. Many studies have noticed that the design of the list can affect subject choices. Measuring these effects could allow researchers using MPLs to control for it, and thereby make better predictions of out-of-sample behavior. We study the effect of status quo bias on choices in MPLs. We propose a simple model of a constant utility bias towards the status quo. This model makes differ- ent predictions that the Koszegi and Rabin (2007) model of reference dependence. In particular, although the reference dependent model predicts the “common ratio effect,” whereby subjects become less risk averse the riskier their choices are, we find instead that subjects exhibit the common ratio effect in one treatment, but the reverse common ratio effect - becoming more risk averse when facing riskier choices - in another, as predicted by our constant status quo bias model. We also estimate a parametric model and find that the constant status quo bias model fits better.
Published Papers
"Detecting Drivers of Behavior at an Early Age: Evidence from a Longitudinal Field Experiment," with John List, Ragan Petrie and Anya Samek, forthcoming, Journal of Political Economy
[link to paper] We investigate how skills developed when children are 3-5 years old drive schooling outcomes in middle childhood and adolescence. We find that skills map onto three distinct factors - cognitive skills, executive functions, and economic preferences. Executive functions reduce disciplinary referrals, and increase test scores and grades. Cognitive skills increase test scores and weakly reduce disciplinary referrals, but do not predict grades. Economic preferences have an independent effect: children who are impatient in early childhood have more disciplinary referrals. Finally, random assignment to preschool impacts grades and disciplinary referrals through changes to cognitive skills and executive functions.
"Barriers to Charitable Giving," with Ragan Petrie and Clarence Wardell, 2023, Journal of Public Economics, 224, 104945.
[link to paper] Donating to charity requires time, effort and attention. If the costs to give are perceived to be large, charities may lose out on donations. We develop a nonparametric test for the presence of these general nuisance costs and conduct a large-scale field experiment to show that costs to give are sizable and impactful. Potential donors were offered a 5:1 fixed match if their donation met or exceeded a minimum amount (e.g. $1, $5 or $10). Absent nuisance costs, the probability of donating should decrease as the minimum amount increases. We find the opposite. Eliminating these costs would double donations in our sample.
"A General Revealed Preferences Test of Quasi-Linear Preferences: Theory and Experiments," with Mikhail Freer, Experimental Economics, 26(3), 673-696
[link to paper] We provide a generalized revealed preference test for quasilinear preferences. The test applies to nonlinear budget sets and non-convex preferences as those found in taxation and nonlinear pricing contexts. We study the prevalence of quasilinear preferences in a laboratory real-effort task experiment with nonlinear wages. The experiment demonstrates the empirical relevance of our test. We find support for either convex (non-separable) preferences or quasilinear preferences but weak support for the hypothesis of both quasilinear and convex preferences.
"Sleep Restriction Increases Coordination Failure," with David Dickinson, Journal of Economic Behavior and Organization, 200(358-378).
[link to paper] When group outcomes depend on minimal effort (e.g., disease containment, work teams, or group hunt success), a classic coordination problem exists. Using a well-established paradigm, we examine how a common cognitive state (insufficient sleep) impacts coordination outcomes. Our data indicate that insufficient sleep increases coordination failure costs, which suggests that the sleep or, more generally, cognitive composition of a group might determine its ability to escape from a trap of costly miscoordination and wasted cooperative efforts. These findings are first evidence of the potentially large externality of a commonly experienced biological state (insufficient sleep) that has infiltrated many societies.
"Strategic Uncertainty and Equilibrium Selection in Stable Matching Mechanisms: Experimental Evidence," with Ahrash Dianat, Experimental Economics, 4(4), 1365-1389.
[link to paper] We present experimental evidence on the interplay between strategic uncertainty and equi- librium selection in stable matching mechanisms. In particular, we apply a version of risk- dominance to compare the riskiness of “truncation” against other strategies that secure against remaining unmatched. By keeping subjects’ ordinal preferences fixed while changing their cardinal representation, our experimental treatments vary the risk-dominant predic- tion. We find that both truth-telling and truncation are played more often when they are risk-dominant. In both treatments, however, truncation strategies are played more often in later rounds of the experiment. Our results also shed light on several open questions in market design
"Room Composition Effects and Risk Taking by Gender,"
with Greg Leo and Ragan Petrie, 2020, Experimental Economics, 23(3), 895-911.
with Greg Leo and Ragan Petrie, 2020, Experimental Economics, 23(3), 895-911.
[link to paper] We present evidence of a direct social context effect on decision-making under un- certainty: the gender composition of those in the room when making individual risky decisions significantly alters choices even when the actions or presence of others are not payoff relevant. In our environment, decision makers do not know the choices made by others, nor can they be inferred from the experiment. We find that women become more risk taking as the proportion of men in the room increases, but the behavior of men is unaffected by who is present. We discuss some potential mechanisms for this result and conjecture it is driven by women being aware of the social context and imitating the expected behavior of others. Our results imply that the environment in which individ- ual decisions are made can change expressed preferences and that aggregate behavior may be context dependent.
"Bargaining in the Field," with Ragan Petrie, 2020, in
Handbook of Experimental Game Theory, Monica Capra, Rachel Croson, Mary Rigdon and Tanya Rosenblatt, eds., Edward Elgar.
Handbook of Experimental Game Theory, Monica Capra, Rachel Croson, Mary Rigdon and Tanya Rosenblatt, eds., Edward Elgar.
An important determinant of bargaining outcomes is the outside options available to individuals. In markets, outside options are largely determined by equilibrium forces outside the control of individual bargainers. In this chapter, we discuss bargaining in markets, illustrate theoretical issues that arise in this environment, discuss identification issues and present empirical evidence from bargaining field experiments in a taxi market.
"Nonparametric utility theory in strategic settings: Revealing preferences and beliefs from proposal-response games," with Phil Cross and Mikhail Freer, 2019, Games and Economic Behavior. 115, pp. 60-82.
[link to paper] We explore the conditions under which behavior in a strategic setting can be rationalized as the best response to some belief about other players’ behavior. We show that a restriction on preferences, which we term quasi-monotonicity, provides such a test for a family of ultimatum games. Preferences are quasi-monotone if an agent prefers an allocation that improves her payoff at least as much as that of others. In an experiment, we find that 94% of the proposers make choices that are arbitrarily close to quasi-monotone preferences and beliefs. We also find that 65% of the responders’ choices are consistent with quasi-monotone preferences and that 90% of the responders make inconsistent choices in no more than 5% of the decision problems. Subjects whose choices are consistent with quasi-monotone preferences as proposers are also more likely to make choices that are consistent with quasi-monotone preferences as responders and to believe that others act as if they have quasi-monotone preferences. Finally, we find little support for the convexity of preferences.
"Discount Rates of Children and High School Graduation," with Jeff Jordan and Ragan Petrie, 2019, The Economic Journal. 129(619), 1153-1181.
[link to paper] We present direct evidence that children who are unwilling to wait for a larger reward and instead prefer a small one earlier (i.e. they have a higher discount rate) are less likely to graduate from high school. Using an incentivized experiment to measure the discount rates of 878 children, we find large effects on human capital accumulation – a one standard deviation increase in the discount rate decreases the probability of graduating from high school by four percentage points. Importantly, the impact of a child’s discount rate is distinct from behavioral problems (e.g. disciplinary referrals), academic achievement, risk attitudes, demographics and household environment. Consistent with the existence of non- pecuniary costs to finishing high school, impatient children with poor academic achievement are significantly less likely to graduate than impatient children with high achievement.
"Children's Rationality, Risk Attitudes and Field Behavior,"
with Jeff Jordan and Ragan Petrie, 2018, European Economic Review. 102, 62-81.
with Jeff Jordan and Ragan Petrie, 2018, European Economic Review. 102, 62-81.
[link to paper] We investigate the relationship between risk attitudes, choice consis- tency and field behavior of children by conducting economic experiments with 1,275 8th graders. Choices are not completely consistent with any of the economic theories we consider, however, they are not random either. We use our experimental data to structurally estimate risk preferences and correct for decision error. Using a measure constructed from the estimates and individual choices, we find that risk preferences do predict future field behavior. Children who are more risk averse are less likely to receive disciplinary referrals one and two years after the experiment and are more likely to complete high school, even controlling for economic rationality, family back- ground, scholarly achievement and past misbehavior. Accounting for decision error turns out to be important as a simple aggregate measure of risk is not found to be correlated with field behavior.
"Revealed Differences," with Mikhail Freer, 2018, Journal of Economic Behavior and Organization, 145, 202-212.
[link to paper] Two individuals are said to be revealed different if their joint deci- sions are more distant from rationality than either of their individual decisions taken separately. We show that the revealed different relation can be used to identify preference types and therefore to evaluate the heterogeneity of preferences in a com- pletely nonparametric way. Using experimental data from a random sample of the Dutch population, we find that 1,182 individuals can be divided into 131 different preference types, men’s preferences are more heterogeneous than and different from women’s preferences and measured heterogeneity is reduced as stricter definitions of rationality are used.
"Sleepiness, Choice Consistency and Risk Preferences,"
with David Dickinson and Ragan Petrie, 2017, Theory and Decision, 82(1), 41-73.
with David Dickinson and Ragan Petrie, 2017, Theory and Decision, 82(1), 41-73.
[link to paper] We investigate the consistency and stability of individual risk preferences by manipulating cognitive resources. Participants are randomly assigned to an experiment session at a preferred time of day relative to their diurnal preference (circadian matched) or at a non- preferred time (circadian mismatched) and choose allocations between two risky assets (using the Choi et al., 2007, design). We find that choices of circadian matched and mismatched subject are statistically similar in terms of satisfying basic requirements for preference consistency. However, mismatched subjects tend to choose riskier asset bundles.
"Truncation Strategies in Two-Sided Matching Markets: Theory and Experiment," with Ahrash Dianat, 2016, Games and Economic Behavior, 98, 180-196.
[link to paper] We investigate strategic behavior in a centralized matching clearinghouse based on the Gale- Shapley deferred acceptance algorithm. To do so, we conduct a laboratory experiment to test whether agents strategically misrepresent their preferences by submitting a “truncation” of their true preferences. Our experimental design uses a restricted environment in which subjects always have a best-response in truncation strategies. We find that subjects do not truncate their preferences more often when truncation is profitable. They do, however, truncate less often when truncation is dangerous - that is, when there is a risk of “over-truncating” and remaining unmatched. Our findings suggest that eliminating profitable opportunities for strategic behavior may not be sufficient to induce participants to report their true preferences.
"Negative Campaigning, Fundraising and Voter Turnout: A Field Experiment," with Jared Barton and Ragan Petrie, 2016, Journal of Economic Behavior and Organization, 121, 99-113.
[link to paper] Why do candidates risk alienating voters by engaging in negative campaigning? One answer may lie in the large empirical literature indicating that negative messages are more effec- tive than positive messages in getting individuals to do many things, including voting and purchasing goods. Few contributions to this literature, however, gather data from a field environment with messages whose tone has been validated. We conduct field experiments in two elections for local office which test the effect of confirmed negative and positive letters sent to candidates’ partisans on two measurable activities: donating to the candi- date and turning out to vote. We find that message tone increases partisan support in ways that may help explain the persistence of negative campaigning. Negative messages are no better than positive messages at earning the candidates donations, but negative messages yield significantly higher rates of voter turnout among the candidates’ partisans relative to positive messages. Positive messages, however, are not neutral relative to no message.
“The impact of internet search tools on airline customers' search and purchase behaviors,” with S. Hotle, L. Garrow and M. Higgins, 2015, Transportation Research Part A: Policy and Practice, 82, 1-16.
[link to paper] Airlines frequently use advance purchase ticket deadlines to segment consumers. Few empirical studies have investigated how individuals respond to advance purchase deadli- nes and price uncertainties induced by these deadlines. We model the number of searches (and purchases) for specific search and departure dates using an instrumental variable approach that corrects for price endogeneity. Results show that search and purchase behaviors vary by search day of week, days from departure, lowest offered fares, variation in lowest offered fares across competitors, and market distance. After controlling for the presence of web bots, we find that the number of consumer searches increases just prior to an advance purchase deadline. This increase can be explained by consumers switching their desired departure dates by one or two days to avoid higher fares that occur immedi- ately after an advance purchase deadline has passed. This reallocation of demand has sig- nificant practical implications for the airline industry because the majority of revenue management and scheduling decision support systems currently do not incorporate these behaviors.
"Fundraising Through Online Social Networks: a Field Experiment on Peer-to-Peer Solicitation," with Ragan Petrie and Clarence Wardell, 2014, Journal of Public Economics, 114, 29-35.
[link to paper] Two main reasons why people donate to charity are that they have been asked and asked by someone they care about. One would therefore expect that charitable organizations could benefit from peer-to-peer fundraising if they were able to persuade donors to do so for them. However, little is known on the costs and benefits of asking donors to fundraise. We investigate this by implementing a field experiment embedded in an online giving organization's web page. In our experiment, donors who have completed an online transaction were randomly asked to share having donated by posting on their Facebook (FB) wall or by sending a private message to a friend on FB. To further explore the impact of incentives on the willingness to fundraise, donors were also assigned to one of three treatments in which the organization added either $0, $1 or $5 in the donor's name in exchange for sharing the information. We have several findings: (1) Donors respond to incentives: larger add-on donations increase the willingness to post having made a donation. (2) Nuisance costs may be important: willingness to post is over two times higher among those already logged into FB. (3) The type of ask matters: willingness to post via one's wall or via a private message is different. (4) There are benefits to incentivizing peer-to-peer fundraising in increased new donations.
"What Persuades Voters? A Field Experiment on Political Campaigning," with Jared Barton and Ragan Petrie, 2014, The Economic Journal, 124(574), F293-F326.
[link to paper] Political campaigns spend millions of dollars each voting cycle on persuading voters, and it is well established that these campaigns do affect voting decisions. What is less understood is what element of campaigning—the content of the message or the delivery method itself— sways voters, a question that relates back to how advertising works generally. We use a field experiment in a 2010 general election for local office to identify the persuasive mechanism behind a particular form of campaigning: candidate door-to-door canvassing. In the experiment, the candidate either canvassed a household or left literature without meeting the voters. In addition, the literature either contained information on the candidate or on how to vote. Our main results are that voters are persuaded by personal contact (the delivery method), but we find no evidence supporting the importance of messages in political persuasion. In our setting, personal contact seems to work, not through social pressure, as has been found in other research on persuasion, but by providing a costly or verifiable signal of quality.
"Lost in the Mail: A Field Experiment on Crime," with Ragan Petrie, Maximo Torero and Angelino Viceisza, 2013, Economic Inquiry, 52(1), 285-303.
[link to paper] Stealing, shirking and opportunistic behavior in general can create barriers to the development of markets. The costs associated with such behavior are shared by both firms and individuals and can be large enough to even prevent the initiation of trade. Measurement of these costs is difficult because information is not available for transactions that fail to occur. We use a field experiment to identify opportunistic crime in a task that is important and relevant for trade: the delivery of mail. Without a reliable system for transporting goods, trade and on-line commerce is severely hampered. We subtly manipulate the content and information available in mail sent to households across neighborhoods that vary by income, and we detect high levels of shirking and stealing. Eighteen percent of the mail never arrived at its destination, and significantly more was lost if there was even a slight hint of something additional inside the envelope. Our results demonstrate the importance of transaction costs created by crime and that not all populations are equally affected. Middle income neighborhoods suffer the most.
"Gender Differences in Bargaining Outcomes: A Field Experiment on Discrimination," with Ragan Petrie, Maximo Torero and Lise Vesterlund, 2013, Journal of Public Economics, 99, 35-482.
[link to paper] Relying on a commonly used fixed-offer bargaining script we examine gender differences in bargaining outcomes in a highly competitive and frequently used market: the taxi market in Lima, Peru. Our bargaining script secures that only the seller can change prices and terminate negotiations, thus we are able to examine differences in the seller’s entire path of negotiation and in the reservation price at which they are willing to trade. We find that male and female passengers who use the same bargaining script are not treated equally. Men face higher initial prices, final prices, and rejection rates. These differences are consistent with male drivers being more reluctant to give-in to demanding negotiations by male passengers, and with male passengers being perceived as having high valuations. To identify whether taste-based or statistical discrimination drives the inferior treatment of men we conduct an experiment where passengers send a signal on valuation before negotiating. The signal eliminates gender differences and the response is shown only to be consistent with statistical discrimination. Thus in the limiting case of a highly competitive market with experienced traders, we do not find evidence of taste-based discrimination, the differential observed is however consistent with statistical discrimination.
"The Today and Tomorrow of Kids: Time Preferences and Educational Outcomes of Children," with Paul Ferraro, Jeff Jordan and Ragan Petrie, 2011, Journal of Public Economics, 95(11-12), 377-1385.
[link to paper] We experimentally investigate the distribution of children's time preferences along gender and racial lines. We find that boys are more impatient than girls and black children are more impatient than white children. Black boys have the highest discount rates of all groups. Most importantly, we show that impatience has a direct correlation with behavior that is predictive of economic success. An increase of one standard deviation in the discount rate is associated with an increase in the number of disciplinary referrals that a child has the following school year by 14%. Our results suggest that impatience might play an important role in determining the success of performance incentive programs for school children.
"Moral Hazard and Reciprocity" with Greg Leo, 2010, Southern Economic Journal, 77(2), 271-281.
[link to paper] We investigate the motives behind reciprocal behavior by making selfish acts anonymous and not common knowledge. In one treatment, subjects were assigned to the role of proposer or responder and played a trust game with random matching for 20 rounds. In a second treatment, the modified game, the procedures were the same, but responders were allowed to choose with only 80% probability. With 20% probability, responders were restricted to keep any money passed. Only responders knew whether they were restricted or not. We find that the behavior of responders is different in this modified trust game. The fact that responders can hide selfish acts generates more selfish behavior. This in turn makes proposers less likely to pass money to responders. thereby destroying trust. W e find important session eflects in the standard trust game but less so in the modified game. O ur experiments show that information conveyed in actions is important to subjects' decisions.
"Trustworthiness and Social Capital in South Africa: Analysis of Actual Living Standards Data and Artefactual Field Experiments," with Michael Carter, 2011, Economic Development and Cultural Change, 59(4), 695-722.
[link to paper] This paper measures trustworthiness using an experimental protocol designed to distinguish this social norm from purely altruistic preferences. Experimental participants were drawn from South African households sur- veyed by a longitudinal living standards survey. This procedure not only permits analysis of the impact of experimentally measured social norms on real world outcomes, it also provides a rich array of data that can be used to control for initial conditions and prior possibilities that might be spuriously correlated with norms. Interestingly, altruism has more robust e§ects on living standards than does trustworthiness. This Önding moti- vates a deeper reconsideration on how trusts works, especially in societies like South Africaís where the boundaries of trust are likely to be tightly circumscribed by a history of social exclusion and segregation.
"Discrimination in the Lab: Does Information Trump Appearance?" with Ragan Petrie, 2010, Games and Economic Behavior, 68(1), 50-59.
[link to paper] Using a laboratory experiment, we find evidence consistent with statistical discrimination in a public good and group formation game. In the game, payoff relevant information is presented to subjects, thereby making it costly to discriminate when choosing group members. We find that behavior is correlated with race and people use race to predict behavior. However, race only matters when information on behavior is absent. These results are further confirmed when incentives are in place to encourage behavior that is counter to stereotypes. Not all subjects discriminate in the same way, suggesting unfamiliarity and some in-group, out-group bias. Overall, the evidence points to a lack of information rather than discriminatory preferences.
"On the Preferences of Principals and Agents," with Ragan Petrie and Maximo Torero, 2010, Economic Inquiry, 48(2), 266-273.
[link to paper] One of the reasons why market economies are able to thrive is that they exploit the willingness of entrepreneurs to take risks that laborers might prefer to avoid. Markets work because they remunerate good judgment and punish mistakes. Indeed, modern contract theory is based on the assumption that principals are less risk averse than agents. We investigate if the risk preferences of entrepreneurs are different from those of laborers by implementing experiments with a random sample of the population in a fast-growing, small-manufacturing, economic cluster. As assumed by theory, we find that entrepreneurs are more likely to take risks than hired managers. These results are robust to the inclusion of a series of controls. This lends support to the idea that risk preferences is an important determinant of selection into occupations. Finally, our lotteries are good predictors of financial decisions, thus giving support to the external validity of our risk measures and experimental methods
"Revealing Preferences for Fairness in Ultimatum Bargaining," with James Andreoni and Ragan Petrie, 2009, Korean Economic Review, 25(1), 35-64
[link to paper] The ultimatum game has been the primary tool for studying bargain- ing behavior in recent years. However, not enough information is gathered in the ultimatum game to get a clear picture of respondersíutility functions. We analyze a convex ultimatum game in which respondersícan ìshrinkîan o§er as well as to accept or reject it. This allows us to observe enough about respondersípreferences to estimate utility functions. We then successfully use data collected from convex ultimatum games to predict behavior in standard games. Our analysis reveals that rejections can be ìrationalizedîwith neo-classical preferences over own- and other-payo§ that are convex, nonmonotonic, and regular. These Öndings present a precise benchmark for models of fairness and bargaining.
"Of Mice and Men: Within Gender Variation in Strategic Behavior." with Phil Cross, 2008, Games and Economic Behavior, 64, 421-432.
[link to paper] We study behavioral differences across and within genders in a family of ultimatum and dictator games. We find these differences are due not only to altruistic preferences but also beliefs about the strategic behav- ior of others. The behavior of men in strategic situations is not significantly more aggressive than women on average. But this average masks wide variation in intra-gender behavior. In particular, a sizable minor- ity of males are “mice,” behaving timidly in strategic environments. Our experimental design shows that the standard ultimatum game can mask significant inter- and intra-gender differences in strategic behavior. These behavioral patterns in strategic environments are shown to be correlated with preferences for altruism in non-strategic settings. Such gender differences could well manifest themselves in real-world large-stakes transactions, such as salary negotiations.
"Morals, Markets and Mutual Insurance: Using Economic Experiments to Study Recovery from Hurricane Mitch."
with Michael Carter, 2005, in C. Barrett, eds. The Social Economics of Poverty: On Identities, Communities, Groups and Networks, New York: Routledge.
with Michael Carter, 2005, in C. Barrett, eds. The Social Economics of Poverty: On Identities, Communities, Groups and Networks, New York: Routledge.
[link to paper] Hurricane Mitch devastated rural communities in Honduras in 1998. While many of these communities received some inflow of external aid, the absence of insurance contracts and the thinness of capital markets meant that most households had to rely either on their own resources to engi- neeer an economic recovery, or on resources that they could broker through social relationships. Using a suite of economic experiments designed to gauge the norms of altruism and trust within these rural communities, this paper explores this latter mechanism of recovery. Econometric analysis of the experimental data gives evidence of durable community norms that arereinforcedbyendogenousesocialinteractions. Theanalysisalsoshows that these community norms played a strong, but uneven role in facili- tating recovery from Hurricane Mitch, assisting most strongly a favored subset of households. While thus establishing the importance of moral norms, the analysis here warns against naive the presumption all commu- nity members are equally well-seved by social mechanisms of insurance and recovery.
"What do Bargainers' Preferences Look Like? Exploring a Convex Ultimatum Game."with James Andreoni and Ragan Petrie, 2003, American Economic Review, 93(3), 672-685.
[link to paper] The ultimatum game, by its all-or-nothing nature, makes it dificult to discern what kind of preferences may be generating choices. We explore a game that convexifies the decisions, allowing us a better look at the indifference curves of bargainers while maintaining the subgame-perfect equilibrium. We conclude that bargainers' preferences are convex and regular but not always monotonic. Money-maximization is the sole concern for about half of the subjects, while the other half reveal a preference for fairness. We also found, unexpectedly, the importance of risk aver- sion among money-maximizing proposers, which in turn generates significant bargaining power for fair-minded responders
"The Role of Husbands and Wives in Farm Technology Choice." with Lydia Zepeda, 1997, American Journal of Agricultural Economics, 79(2), 583-588. [link to paper]