Why is dishonesty difficult to mitigate? The interaction between descriptive norm and monetary incentive

We examine whether changes in perceived norm of dishonesty can offset the effects of changes in benefit from the dishonest action. We find partial support for the hypothesis in laboratory experiments on lying behavior in a cheap-talk sender-receiver game, conducted in two countries. In the experiments, we vary benefit from lying and shift senders’ norm perception by providing them information on lying from prior sessions. The findings suggest that senders adjust their perceived norm as expected, but they respond to norm in a somewhat self-serving manner. Specifically, when benefit from lying is lowered but senders are induced to believe in a higher norm of lying, they lie significantly more than when norm is not intervened. However, when benefit from lying is raised, our intervention to shift perceived norm of lying downward succeeds in altering senders’ belief as intended, but does not lower lying significantly. The results can be conceived as an indirect evidence of the challenge in curbing dishonesty by reducing private pecuniary gains in a society with a culture of dishonesty, while suggesting that even societies with history of low dishonesty may succumb to dishonesty when pecuniary incentives for dishonesty rise.     

Gambling versus investment: Lay theory and loss aversion

Gambling and investment are two domains that involve financial decisions. The present research investigates people’s lay theories about gambling and investment, and how these lay theories affect loss aversion in these domains. Lay people’s understanding of gambling and investment is often largely based on information that is immediately available to them. Moreover, information about losing money by gambling and earning money through investments are more predominant than information about earning money by gambling and losing money through investments. Hence, we hypothesized and found that people tend to hold lay theories that gambling is more likely to cause losses and less likely to bring gains compared to investment (Study 1); and we observed a stronger loss aversion when the same monetary decision was framed as gambling rather than as an investment (Studies 2 to 6). This domain-framing effect held in both hypothetical and incentivized settings.     

Market economies and pro-social behavior: Experimental evidence from Central Asia

This study seeks to extend the body of knowledge of pro-social behavior in comparative market settings by reporting on a high-stakes ultimatum game and revelation game experiments in two transition economies: Kazakhstan and Uzbekistan. While controlling for cultural differences and framing effects, we find statistically significant differences in fairness and honesty behavior between the two countries. Specifically, subjects in Uzbekistan (in an earlier stage of transition to a market economy) are fairer and more honest than their later-stage Kazakh counterparts. Our experimental findings have implications for the literature on pro-social behavior and market economies, and more generally, on the transmission process between formal and informal institutions.     

Do preference reversals generalise? Results on ambiguity and loss aversion

Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles that incorporate realistic ambiguity in both payoffs and probabilities. In addition, we test a recent explanation of preference reversals by loss aversion, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the valuation task endows subject with a gamble, activating loss aversion. This contrasts with the choice task, where the reference point is pre-experiment wealth. We test this explanation by holding the reference point constant. Our evidence suggests that reversals are only slightly diminished with ambiguity. We find no evidence supporting their explanation by loss aversion.     

Cognitive dissonance, pessimism, and behavioral spillover effects

A two-stage experiment was designed to examine spillover effects of a type of optimism/pessimism. We first exploit cognitive dissonance to induce optimism/pessimism by random assignment of high/low piece rates for performing a task. Subjects receiving the low piece rate are significantly more pessimistic with respect to performance. In Stage 2 individuals participate in an ultimatum game. Pessimistic subjects have significantly lower minimum acceptable offers, though pessimism was randomly generated in an unrelated environment. These results reveal behaviorally and economically important spillover effects - for example, pessimism regarding one’s initial conditions (e.g., living in poverty) may have spillover effects on one’s future labor market outcomes.     

Strategy versus sincerity in mean voting

This paper focuses on the mean vote procedure for choosing the quantity of a public good, a social choice rule that selects the mean of the quantities voted for. The available theoretical models of mean voting give rise to conflicting predictions about the extent of the strategic bias that might arise in the individual vote. An experiment has been run in order to assess whether the participants disclose their (induced) preferences in voting or whether they strategically manipulate their vote, and in the latter case, which variables impact upon the likelihood of strategic bias and to what extent.     

Does players’ identification affect trust and reciprocity in the lab?

Reputation mechanisms are mainly based on information sharing by traders about private trading experience. Each trader can therefore rely on his own past experience as a trader and on other traders’ past experience. The former is the direct component of the reputation mechanism and the latter the indirect component ( [Bolton et al., 2004a] and [Bolton et al., 2004b]). We design an experiment for isolating the direct component of the reputation system and studying its effect on the level of trust and reciprocity in a population where agents play both roles (trustor and trustee). Our experiment consists on three treatments of a finitely repeated investment game (Berg, Dickhaut, & McCabe, 1995). In the reference treatment there is no reputation mechanism at all, in treatment 1 trustees can build up a direct reputation, and in treatment two players can build up a direct reputation for both roles. We find that trustees’ direct reputation has a positive effect on reciprocity, but does not affect the average trust in the population. Trust is significantly higher only when players can build up a reputation in both roles. We show that the increase in trust is mainly linked to the formation of mutual trust-reciprocity relations.     

Demonstration of power: Experimental results on bilateral bargaining

We test the empirical effectiveness of two theoretical proposals to equilibrate bargaining power in bilateral bargaining. Our experimental design is based on the two-player versions of the multibidding game (Pérez-Castrillo & Wettstein, 2001) and the bid-and-propose game (Navarro & Perea, 2005). Both models build on the ultimatum game and balance parties’ bargaining power by auctioning the role of the proposer in the first stage. We find that proposers learn how to send an acceptable proposal by trial and error, guided by responders’ rejections. The observed behavior stabilizes for the final experimental rounds and the payoff gap between the proposer and the responder seems to close down. However, the strategies chosen by subjects are remarkably different from the theoretical ones.     

Purchase deadline as a moderator of the effects of price uncertainty on search duration

A longstanding theoretical tenet in the economic psychology literature is that consumers respond to greater price uncertainty by increasing search. The generality of this tenet was investigated in the context of a moderating variable, purchase deadline. It was hypothesized that the effect of increased price uncertainty, as reflected by both cross-sectional price variability and longitudinal price variability, was moderated by temporal proximity to a purchase deadline. The hypothesis was tested by analyzing purchase data from a sample of consumers with known purchase deadlines searching for rental trucks. The results indicated that search increased in response to greater price uncertainty for distant deadlines but decreased in response to greater price uncertainty for proximal deadlines.     

Biased decisions concerning productivity increase options

When people judge the time that can be saved by increasing speed they make systematic errors. This was called the time-saving bias by Svenson (2008) which describes that time savings following speed increases of high speeds are overestimated relative to time savings following increases of low speeds. The present contribution tested the hypothesis that the time-saving bias would predict unaided decisions about productivity. The results showed that the predicted bias distorted decisions both when productivity increase of a factory was measured in units produced per hour and when it was measured in number of units produced per man-year. When productivity was increased from an initial low production speed, the relative gain (e.g., in number of less workers needed for the same production) was underestimated in comparison with gains obtained when productivity was increased from an initial high productivity.     

How income and tax rates provoke cheating – An experimental investigation of tax morale

Anecdotal evidence suggests that tax morale diminishes with income and with levels of taxation. We designed an experiment that enables identification of causal effects. Subjects carry out a sequence of real effort tasks. The income earned varies with individual differences in effort (combined with variances related to skill or luck) and with the exogenously given length of the tasks. For each task, subjects privately roll a die, whose value determines the tax rate, which is then reported by subjects. This provides subjects with an incentive to cheat. Tax morale diminishes with higher effort, which might find ethical justification, but also with longer tasks, which would not. We implement treatments that vary the range of taxation. Contrary to widespread belief, participants’ tax morale is invariant to these treatments. Our findings are best explained by a psychological force that tempts rich people to cheat more. This force does not seem to be related to fairness ideals that are prominent in theories of distributional justice nor to absolute levels of taxation.     

Gender differences in team work and team competition

We study whether the gender performance gap is affected by the gender composition of teams. A real-effort experiment is employed with wages based either on the team’s performance, or on the outcome of a competition between teams. We find that, relative to a single-sex environment, gender diversity increases the gender performance gap with team pay whereas it decreases the gap with team competition. The results show that there can be a tension between the objective to maximize overall performance and to minimize gender inequality.     

Reward the lucky? An experimental investigation of the impact of agency and luck on bonuses

We examine the impact of agency and luck on bonuses in a two player, two stage controlled laboratory experiment. In the first stage, Player A makes an investment decision on behalf of Player B. In the second stage, Player B makes a dictator allocation for each possible outcome from the investment. We compare dictator giving (bonuses) across outcomes and with a control treatment in which the stage 1 outcomes are determined randomly. We do not find that luck is rewarded with higher bonuses. However, we do find a general tendency to respond to agency with reduced bonuses and, in particular, a significant tendency to reduce bonuses to agents who are unlucky. Additionally, we find that those who are more risk tolerant are less likely to give no bonus under agency but not in the control.     

Gender differences in willingness to compete: The role of public observability

A recent literature emphasizes that gender differences in the labor market may in part be driven by a gender gap in willingness to compete. However, whereas experiments in this literature typically investigate willingness to compete in private environments, real world competitions often have a more public nature, which introduces potential social image concerns. If such image concerns are important, and men and women differ in the degree to which they want to be seen as competitive, making tournament entry decisions publicly observable may further exacerbate the gender gap. We test this prediction using a laboratory experiment (N = 784) that varies the degree to which the decision to compete, and its outcome, is publicly observable. We find that public observability does not alter the magnitude of the gender gap in willingness to compete in an economically or statistically significant way.     

The efficacy of tables versus graphs in disrupting dark networks: An experimental study

An agent tasked with disrupting a dark (covert and illegal) network must first be presented with information about the organization's structure. This paper uses a behavioral experiment to test in a stylized dark network disruption setting whether an agent makes a better disruption choice when the information is displayed in a table or a graph format. We find that subjects make decisions more quickly when presented with graphs, but that subjects perform weakly better with tables. An important lesson is that the display should explicitly distinguish non-existent links from potential links of unknown status.     

Regret aversion and the reluctance to exchange lottery tickets

The current research finds that people are willing to forego a direct material gain, if that protects them from future regrets. In two experiments participants endowed with a lottery ticket were offered to exchange their ticket for another ticket from the same lottery. Even though they could receive a bonus for exchanging, many participants chose not to do so. Experiment 1 finds that a manipulation that prevented the anticipation of regret by offering the ticket in a sealed envelope made more participants exchange their ticket. Experiment 2 finds that an increased potential of regret over not-exchanging made more participants exchange as well. In both experiments the effect of the manipulation on choices is mediated by anticipated regret. The experiments show that people are willing to forego a material gain to prevent future regrets and that the reluctance to exchange lottery tickets is (partly) caused by regret aversion.     

Trust games: A meta-analysis

We collect data from 162 replications of the Berg, Dickhaut, and McCabe Investment game (the “trust” game) involving more than 23,000 participants. We conduct a meta-analysis of these games in order to identify the effect of experimental protocols and geographic variation on this popular behavioral measure of trust and trustworthiness. Our findings indicate that the amount sent in the game is significantly affected by whether payment is random, and whether play is with a simulated counterpart. Trustworthiness is significantly affected by the amount by which the experimenter multiplies the amount sent, whether subjects play both roles in the experiment, and whether the subjects are students. We find robust evidence that subjects send less in trust games conducted in Africa than those in North America.