Discussion Papers

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Discussion Paper No. 349
November 11, 2022

Keep Calm and Carry On: The Short- vs. Long-Run Effects of Mindfulness Meditation on (Academic) Performance

Authors:
Lea Kasser (University of Regensburg, CESifo and CEPR)
Mira Fischer (WZB Berlin and IZA)
Vanessa Valero (Loughborough University and CeDEx)
Abstract:
Mindfulness-based meditation practices are becoming increasingly popular in Western societies, including in the business world and in education. While the scientific literature has largely documented the benefits of mindfulness meditation for mental health, little is still known about potential spillovers of these practices on other important life outcomes, such as performance. We address this question through a field experiment in an educational setting. We study the causal impact of mindfulness meditation on academic performance through a randomized evaluation of a well-known 8-week mindfulness meditation training delivered to university students on campus. As expected, the intervention improves students' mental health and non-cognitive skills. However, it takes time before students' performance can benefit from mindfulness meditation: we find that, if anything, the intervention marginally decreases average grades in the short run, i.e., during the exam period right after the end of the intervention, whereas it significantly increases academic performance, by about 0.4 standard deviations, in the long run (ca. 6 months after the end of intervention). We investigate the underlying mechanisms and discuss the implications of our results.
Keywords:
performance; mental health; education; meditation; field experiment
JEL-Classification:
I21; C93; I12; I31
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Discussion Paper No. 348
November 10, 2022

Dynamic Screening with Verifiable Bankruptcy

Authors:
Krähmer, Daniel (University of Bonn)
Strausz, Roland (HU Berlin)
Abstract:
We consider a dynamic screening model where the agent may go bankrupt due to, for example, cash constraints. We model bankruptcy as a verifiable event that occurs whenever the agent makes a per period loss. This leads to less stringent truth-telling constraints than those considered in the existing literature. We show that the weaker constraints do not af- fect optimal contracting in private values settings but may do so with interdependent values. Moreover, we develop a novel method to study private values settings with continuous types and identify a new regularity condition that ensures that the optimal contract is deterministic.
Keywords:
dynamic screening; bankruptcy; verifiability; mean preserving spread
JEL-Classification:
D82; H57
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Discussion Paper No. 347
November 10, 2022

Correlation-Savvy Sellers

Authors:
Strausz, Roland (HU Berlin)
Abstract:
A multi-product monopolist sells sequentially to a buyer who privately learns his valuations. Using big data, the monopolist learns the intertemporal correlation of the buyer’s valuations. Perfect price discrimination is generally unattainable—even when the seller learns the correlation perfectly, has full commitment, and in the limit where the consumption good about which the buyer has ex ante private information becomes insignificant. This impossibility is due to informational externalities which re- quires information rents for the buyer’s later consumption. These rents induce upward and downward distortions, violating the generalized no distortion at the top principle of dynamic mechanism design.
JEL-Classification:
D82; L52
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Discussion Paper No. 346
November 10, 2022

When Transaction-Level Wage Transparency Can Increase Consumer Preference

Authors:
Stich, Lucas (LMU Munich)
Ungemach, Christoph (TU Munich)
Fuchs, Christoph (University of Vienna)
Spann, Martin (LMU Munich)
Abstract:
Firms are usually reluctant to disclose information about the production costs of their goods and services; however, some firms have recently started to disclose cost information to consumers. This research examines the consequences of disclosing transaction-level wage information on consumer preferences. Six experiments, both in field and lab settings across multiple service domains, document that disclosing a service worker’s compensation can increase consumer preference for that firm’s service if the compensation is sufficiently high (i.e., perceived as fair by consumers). This greater preference for services provided in a fair-wage setting is driven by consumers’ feelings of anticipated guilt and higher expectations concerning quality. Available social norms regarding fair compensation and the nature of the service worker (human vs. non- human) are both identified as important boundary conditions of the proposed process. This research offers a first step toward understanding the psychological and behavioral consequences of disclosing transaction-level wage information to consumers, thereby enabling managers to better identify when they should disclose wage information as part of their marketing strategy. This research also informs policy makers on how to encourage social preferences and consumer choices in order to promote fair outcomes for consumers, firms, and workers.
Keywords:
transaction-level wage transparency; social preferences; fairness; pricing; wage inequality
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Discussion Paper No. 345
November 1, 2022

Redistribution and Unemployment Insurance

Authors:
Ferey, Antoine (LMU Munich)
Abstract:
This paper analyzes the interactions between redistribution and unemployment insurance policies and their implications for the optimal design of tax-benefit systems. In a setting where individuals with different earnings abilities are exposed to unemployment risk on the labor market, I characterize the optimal income tax schedule and the optimal unemployment benefit schedule in terms of empirically estimable sufficient statistics. I provide a Pareto-efficiency condition for tax-benefit systems that implies a tight link between optimal redistribution and optimal unemployment insurance: the steeper the profile of income taxes is, the flatter the profile of unemployment benefits should be, and vice versa. Optimal replacement rates are therefore monotonically decreasing with earnings, from 1 at the bottom of the earnings distribution to 0 at the top, and redistribution through unemployment benefits is efficient. Empirical applications show that these interactions between redistribution and unemployment insurance have important quantitative implications.
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Discussion Paper No. 344
October 25, 2022

Income Misperception and Populism

Authors:
Albers, Thilo Nils Hendrik (HU Berlin)
Kersting, Felix (HU Berlin)
Kosse, Fabian (University of Würzburg)
Abstract:
We propose that false beliefs about the own current economic status are an important factor for explaining populist attitudes. Along with the subjects' receptiveness to right-wing populism, we elicit their perceived relative income positions in a representative survey of German households. We find that people with pessimistic beliefs about their income position are more attuned to populist statements. Key to understanding the misperception-populism relationship are strong gender differences in the mechanism: Misperception triggers income dissatisfaction for both men and women, but the former are much more likely to channel their discontent into affection for populist ideas.
Keywords:
perception; income; populism
JEL-Classification:
D63; D72; D91; P16
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Discussion Paper No. 343
October 24, 2022

The Impact of Uncertainty on Customer Satisfaction

Authors:
Back, Camila (LMU Munich)
Spann, Martin (LMU Munich)
Abstract:
Customer satisfaction is an important metric to predict customer behavior and as a result firms' profitability. Expectations of a product's performance serve as a reference point against which customers evaluate their satisfaction with the products' actual performance. However, what is the effect of uncertainty in expectations? This paper develops a novel theoretical model of satisfaction, in which expectations reflect distributions of individual beliefs about performance outcomes. Based on this model, uncertainty shifts subjective reference points upward. That is, uncertainty increases the performance level at which customers switch from being dissatisfied to being satisfied. Furthermore, uncertainty has an attenuating effect on both positive and negative deviations of actual performance from subjective reference points. Put differently, a bad performance feels less bad and a good performance feels less good when it is expected, compared with unexpected. The authors find support for the model's predictions in an experimental study on product delivery as well as a field study based on online reviews. In addition, the authors develop a model-based tool that predicts the effect of uncertainty on customer satisfaction across different customizable scenarios. The paper's results carry implications for firms' communication, customer valuation and recovery strategies.
Keywords:
customer satisfaction; uncertainty; probabilistic beliefs; prospect theory
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Discussion Paper No. 342
October 11, 2022

The Effect of Preferential Admissions on the College Participation of Disadvantaged Students: The Role of Pre-College Choices

Authors:
Tincani, Michela M. (UCL and CEPR)
Kosse, Fabian (University of Würzburg and briq)
Miglino, Enrico (UCL)
Abstract:
Exploiting the randomized expansion of preferential college admissions in Chile, we show they increased admission and enrollment of disadvantaged students by 32%. But the intended beneficiaries were nearly three times as many, and of higher average ability, than those induced to be admitted. The evidence points to students making pre-college choices that caused this divergence. Using linked survey-administrative data, we present evidence consistent with students being averse to preferential enrollment, misperceiving their abilities, and having social preferences towards their friends (although social preferences did not mediate the admission impacts). Simulations from an estimated structural model suggest that aversion to the preferential channel more than halved the enrollment impacts, by inducing some to forgo preferential admission eligibility, and that students' misperceptions worsened the ability-composition of college entrants, by distorting pre-college investments into admission qualifications. The results demonstrate the importance of understanding high school students' preferences and beliefs when designing preferential admissions.
Keywords:
preferential college admissions; experimental policy evaluation; subjective beliefs; dynamic choice model
JEL-Classification:
I2; D8
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Discussion Paper No. 341
October 10, 2022

The Breakup of the Bell System and its Impact on US Innovation

Authors:
Watzinger, Martin, (University of Muenster and CEPR)
Schnitzer, Monika (LMU Munich and CEPR)
Abstract:
We analyze the effects of the 1984 breakup of the Bell System on the rate, diversity, and direction of US innovation. In the antitrust case leading to the breakup, AT&T, the holding company of the Bell System, was accused of using exclusionary practices against competitors. The breakup was intended to end these practices. After the breakup, the scale and diversity of telecommunications innovation increased. Total patenting by US inventors related to telecommunications increased by 19%, driven by companies unrelated to the Bell System. Patenting by Bell's successor companies decreased, but not the number of top inventions.
Keywords:
antitrust; innovation; diversity; exclusionary practices
JEL-Classification:
O30; K21; L40
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Discussion Paper No. 340
September 30, 2022

Filling the Gap: The Consequences of Collaborator Loss in Corporate R&D

Authors:
Poege, Felix (Boston University and IZA)
Gaessler, Fabian (Universitat Pompeu Fabra and MPI)
Hoisl, Karin (MPI, University of Mannheim and Copenhagen Business School)
Harhoff, Dietmar (MPI, LMU Munich and CEPR)
Dorner, Matthias (Institute for Employment Research, Nuremberg)
Abstract:
We examine how collaborator loss affects knowledge workers in corporate R&D. We argue that such a loss affects the remaining collaborators not only by reducing their team-specific capital (as argued in the prior literature) but also by increasing their bargaining power over the employer, who is in need of filling the gap left by the lost collaborator to ensure the continuation of R&D projects. This shift in bargaining power may, in turn, lead to benefits, such as additional resources or more attractive working conditions. These benefits can partially compensate for the negative effect of reduced team-specific capital on productivity and influence the career trajectories of the remaining collaborators. We empirically investigate the consequences of collaborator loss by exploiting 845 unexpected deaths of active inventors. We find that inventor death has a moderate negative effect on the productivity of the remaining collaborators. This negative effect disappears when we focus on the remaining collaborators who work for the same employer as the deceased inventor. Moreover, this group is more likely to be promoted and less likely to leave their current employer.
Keywords:
collaboration; mobility; innovation; inventors; patents; teams
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