Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions (with Fabian Dvorak), R&R at American Economic Journal: Microeconomics, [link].
Abstract Case studies of cartels and recent theory suggest that communication is a key factor for cooperation under imperfect monitoring, where actions can only be observed with noise. We present results from a laboratory experiment which show that communication facilitates cooperation by reducing two types of uncertainty. Pre-play communication reduces strategic uncertainty, which boosts cooperation at the beginning of an interaction. Under perfect monitoring, this is sufficient to reach a high and stable cooperation rate. However, repeated communication is necessary to maintain a high level of cooperation under imperfect monitoring, where players face additional uncertainty about the history of play.
Committee Decision-Making under the Threat of Leaks (with Volker Hahn), [link].
Abstract Leaks are pervasive in politics. Hence, many committees that nominally operate under secrecy de facto operate under the threat that information might be passed on to outsiders. We study theoretically and experimentally how this possibility affects the
behavior of committee members and the decision-making accuracy. Our theoretical analysis generates two major predictions. First, a committee operating under the threat of leaks is equivalent to a formally transparent committee in terms of the probabilities of supporting the adoption of a new policy. Second, the threat of leaks leads to a status-quo bias. In our experimental analysis of a committee with possible leaks, individual behavior is often less strategic than theoretically predicted, which leads to frequent leaks. However, despite these deviations on the individual level, our experiment confirms the two major theoretical predictions.
Contacts Matter: Local Governance and the Targeting of Social Pensions in Bangladesh (with Viola Asri, Kumar Biswas, Urs Fischbacher, Katharina Michaelowa, and Atonu Rabbani), [link].
Abstract We present evidence on the extent and possible causes of mistargeting of a large-scale social-pension program in Bangladesh. The evidence stems from surveys and lab-in-the-field experiments that we ran in eight different unions (municipalities) with three different groups: (i) a random sample of the elderly population (potential beneficiaries), (ii) a random sample of newly selected beneficiaries, and (iii) the local government representatives, who were in charge of the last round of selections. On the one hand, our (pre-registered) analysis suggests that personal relationships are crucial for being selected as a beneficiary, which might indicate corruption. On the other hand, our results strongly suggest that a severe lack of state capacity (e.g., knowledge of the official rules and procedures on the part of the politicians) is the most important reason for the very poor targeting performance of the local governments.
Beliefs about Others: A Striking Example of Information Neglect (with Baiba Renerte, and Irenaeus Wolff), [link].
Abstract In many games of imperfect information, players can make Bayesian inferences about other players’ types based on the information that is contained in their own type. Several behavioral theories of belief-updating even start from the assumption that players project their own type onto others also when it is not rational. We investigate such inferences in a simple laboratory task, in which types are drawn from one out of two states of the world and participants have to guess the type of another participant. We find little evidence for irrational (over-)projection. Instead, between 50% and 70% of the participants in our experiment completely neglect the information contained in their own type and base their choices only on the prior probabilities. Using several experimental interventions, we show that this striking neglect of information is very robust.
Abstract We study the choice of a principal to either delegate a decision to a group of careerist experts, or to consult them individually and keep the decision-making power. Our model predicts a trade-off between information acquisition and information aggregation. On the one hand, the expected benefit from being informed is larger in case the experts are consulted individually. Hence, the experts either acquire the same or a larger amount of information, depending on the cost of information, than in case of delegation. On the other hand, any acquired information is better aggregated in case of delegation, where experts can deliberate secretly. To test the model’s key predictions, we run an experiment. The results from the laboratory confirm the predicted trade-off, despite some deviations from theory on the individual level.
Abstract Many decisions taken in legislatures or committees are subject to lobbying efforts. A seminal contribution to the literature on vote-buying is the legislative lobbying model pioneered by Groseclose and Snyder (1996), which predicts that lobbies will optimally form supermajorities in many cases. Providing the first empirical assessment of this prominent model, we test its central predictions in the laboratory. While the model assumes sequential moves, we relax this assumption in additional treatments with simultaneous moves. We find that lobbies buy supermajorities as predicted by the theory. Our results also provide supporting evidence for most comparative statics predictions of the legislative lobbying model with respect to lobbies’ willingness to pay and legislators’ preferences. Most of these results carry over to the simultaneous-move set-up but the predictive power of the model declines.
Abstract In many situations, statements are non-binding and people can lie strategically for their own benefit – political campaigns and sales marketing are obvious examples. Since individuals differ with respect to their willingness to lie, the level of lying and thus the credibility of statements will crucially depend on who self-selects into such situations. We study self-selection into cheap talk in the concrete setting of a two-stage political competition model and test its key predictions in the lab. At the entry stage, potential candidates compete in a contest to become their party’s candidate in an election. At the election stage, the nominated candidates campaign by making promises to voters. Confirming the model’s key prediction, we find in the experiment that dishonest people over-proportionally self-select into the political raceand thereby lower voters’ welfare.
Abstract We investigate the potential of transparency to influence committee decision-making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently and test the model’s key predictions in a laboratory experiment.The model’s predictions are largely borne out – transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts.
Abstract People benefit from being perceived as trustworthy. Examples include sellers trying to attract buyers, or candidates in elections trying to attract voters. In a laboratory experiment using exchange games, in which the trustor can choose the trustee, we study whether trustees can signal their trustworthiness by giving to charity. Our results show that donors are indeed perceived as more trustworthy and they are selected significantly more often as interaction partners. As a consequence of this sorting pattern, relative payoffs to donors and non-donors differ substantially with and without partner choice. However, we do not find donors to be significantly more trustworthy than non-donors. Our findings suggest that publicly observable generosity, such as investments in corporate social responsibility or donations to charity during a political campaign, can induce perceptions of trustworthiness and trust.
Abstract Do employees work harder if their job has the right mission? In a laboratory labor market experiment, we test whether subjects provide higher effort if they can choose the mission of their job. We observe that subjects do not provide higher effort than in a control treatment. Surprised by this finding, we run a second experiment in which subjects can choose whether they want to work on a job with their preferred mission or not. A subgroup of agents (roughly one third) is willing to do so even if this option is more costly than choosing the alternative job. Moreover, we find that these subjects provide substantially higher effort. These results suggest that some workers can be motivated by missions and that selection into mission-oriented organizations is an important factor to explain empirical findings of lower wages and high motivation in these organizations.
Abstract Non-governmental organizations and other non-profit organizations attract workers who strongly identify themselves with their missions. We study whether these “good guys” are more trustworthy, and how such pronounced group identities affect trust and trustworthiness within the groups and towards out-groups. We find that subjects who strongly identify themselves with a non-profit mission are more trustworthy in a minimal group setting but also harshly discriminate against out-groups when subjects are grouped by the missions they identify themselves with.
Abstract It has been shown that psychological predispositions to benefit others can motivate human cooperation and the evolution of such social preferences can be explained with kin or multi-level selection models. It has also been shown that cooperation can evolve as a costly signal of an unobservable quality that makes a person more attractive with regard to other types of social interactions. Here we show that if a proportion of individuals with social preferences is maintained in the population through kin or multi-level selection, cooperative acts that are truly altruistic can be a costly signal of social preferences and make altruistic individuals more trustworthy interaction partners in social exchange. In a computerized laboratory experiment, we test whether altruistic behavior in the form of charitable giving is indeed correlated with trustworthiness and whether a charitable donation increases the observing agents’ trust in the donor. Our results support these hypotheses and show that, apart from trust, responses to altruistic acts can have a rewarding or outcome-equalizing purpose. Our findings corroborate that the signaling benefits of altruistic acts that accrue in social exchange can ease the conditions for the evolution of social preferences.
The Effectiveness of Inputs in Primary Education: Insights from Recent Student Surveys for Sub-Saharan Africa (with Katharina Michaelowa and Annika Wechtler), Journal of Development Studies, 45, 1545-1578, 2009, [link].
Abstract With SACMEQ and PASEC there are now two large data bases available on student achievement, socio-economic background and school and teacher characteristics in both anglophone and francophone sub-Saharan Africa. A joint analysis of PASEC and SACMEQ in a common education production function framework allows us to estimate the impact of educational inputs on student achievement in 21 sub-Saharan African countries and to compare our results with those of earlier empirical studies for education systems in Africa and other world regions. In our analysis we focus on school equipment, teacher quality and class organisation. The issue of teacher and student incentives cannot be adequately addressed with the given data. Our results are based on a traditional retrospective analysis of student achievement in PASEC and SACMEQ countries. In contrast to the ‘nothing works’ result from most industrialized countries’ studies we find robust positive correlations of achievement test scores and the possession of textbooks and negative correlations with teaching in shifts. The most striking result is the weak or even absent correlation of achievement test scores and teacher education and professional training. However, some differences between francophone and anglophone education systems can be observed in this context if differences in the sampling methodology are duly taken into account.