Discussion Paper No. 505
May 23, 2024
Do Narratives about Psychological Mechanisms Affect Public Support for Behavioral Policies?
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Abstract:
Behavioral policy, such as leveraging defaults, is increasingly employed by governments worldwide, but has sometimes faced public backlash, which limits political feasibility. We conducted a survey experiment with a large, representative sample to explore how the narrative describing the psychological mechanism by which a default rule impacts a socially significant outcome affects public approval. Respondents are presented with a vignette in which an unemployed person follows a default to participate in further training. We experimentally vary the narrative about his reasons for doing so. Compared to the baseline condition in which no information on the psychological mechanism is provided, voluntary ignorance, involuntary ignorance, perceived social expectations and perceived social pressure each reduce policy approval. These factors also lead to more negative perceptions of the default rule's impact on the decision maker’s welfare and autonomy. The benign mechanism of deliberate endorsement, however, does not significantly raise approval or perceptions. We show that these findings hold irrespective of assumed preferences and discuss their practical implications.
Keywords:
behavioral policy; public support; psychological mechanisms; default rule;
JEL-Classification:
D91; D83; I31; J68;
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Discussion Paper No. 504
Principled Mechanism Design with Evidence
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We cast mechanism design with evidence in the framework of Myerson (1982), whereby his generalized revelation principle directly applies and yields standard notions of incentive compatible direct mechanisms. Their specific nature depends on whether the agent's (verifiable) presentation of evidence is contractually controllable, however. For deterministic implementation, we show that, in general, such control has value, and we offer two independent conditions under which this value vanishes, one on evidence (WET) and another on preferences (TIWO). Allowing for fully stochastic mechanisms, we also show how randomization generally has value and clarify to what extent this value vanishes under the common assumption of evidentiary normality (NOR). While, in general, the value of control extends to stochastic implementation, neither control nor randomization have any value if NOR holds together with WET or TIWO.
Keywords:
mechanism design; revelation principle; evidence; verifiable information; value of control; value of randomization;
JEL-Classification:
D82;
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Discussion Paper No. 503
April 18, 2024
The Double Dividend of Nudges
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Nudge-based policies are an important instrument for many policymakers. Based on a laboratory experiment featuring a dual-task paradigm, we examine the effects of two common types of nudge interventions—the simplification of complex decisions and the implementation of high-quality defaults. We find that these interventions do not only improve choices in the targeted domain, but also yield substantial positive indirect effects on non-targeted domains. The latter emerge through a reallocation of cognitive resources. Furthermore, the relative importance of direct and indirect effects varies systematically across the population. Evaluations that focus only on the targeted domain therefore significantly underestimate the interventions’ overall effectiveness and provide a biased assessment of their distributional consequences.
Keywords:
nudges; default options; administrative burden; limited attention; limited cognitive resources; behavioral economics; laboratory experiment;
JEL-Classification:
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Discussion Paper No. 502
April 10, 2024
An Axiomatization of the Random Priority Rule
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We study the problem of assigning indivisible objects to agents where each is to receive one object. To ensure fairness in the absence of monetary compensation, we consider random assignments. Random Priority, also known as Random Serial Dictatorship, is characterized by symmetry, ex-post efficiency and probabilistic (Maskin) monotonicity -- whenever preferences change so that a given deterministic assignment is ranked weakly higher by all agents, the probability of that assignment being chosen should be weakly larger. Probabilistic monotonicity implies strategy-proofness for random assignment problems and is equivalent on a general social choice domain; for deterministic rules it coincides with Maskin monotonicity.
Keywords:
random assignment; random priority; random serial dictatorship; ex-post efficiency ; probabilistic monotonicity; maskin monotonity ;
JEL-Classification:
C70; C78; D63;
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Discussion Paper No. 501
April 9, 2024
The Effect of an Ad Ban on Retailer Sales: Insights from a Natural Experiment
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Advertising bans typically target products that deceive consumers in ways that can threaten their physical and mental health. An alternative policy objective might seek environmental protection through a ban on print advertising. Such measures would profoundly affect grocery retailers relying on printed leaflets to communicate weekly promotions. We measure the causal effect of banning advertising on retail performance by studying a temporary advertising ban implemented in a German federal state during the COVID-19 pandemic. The ban resulted in the suspension of all print advertising by grocery retailers, and the exogenous variation in advertising created by this natural experiment serves as our identification strategy. We apply difference-in-differences regressions to data from a national grocery retailer and find that the ban resulted in a 6% sales decrease in the treated state compared with an adjacent state. GfK Household Panel data reveals no effect of the advertising ban on the market level but a negative impact on retailers offering and advertising weekly promotional product assortments. We study the sensitivity of these results to the COVID pandemic and find that neither changes in COVID-19 incidence, vaccination rates, nor customers’ mobility moderate the ad ban effect. The findings offer practical insights for regulators and retailers regarding the impact of ad bans and the value of advertising.
Keywords:
advertising effectiveness; advertising ban; sustainability; natural experiment; retailing;
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Discussion Paper No. 500
March 24, 2024
Misperceived Effectiveness and the Demand for Psychotherapy
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While psychotherapy has been shown to be effective in treating depression, take-up remains low. In a sample of 1,843 depressed individuals, we document that effectiveness concerns are top-of-mind when respondents consider the value of therapy. We then show that the average respondent underestimates the effectiveness of therapy and that an information treatment correcting this misperception increases participants’ incentivized willingness to pay for therapy. Information affects therapy demand by changing beliefs rather than by shifting attention. Our results suggest that information interventions that target the perceived effectiveness of therapy are a potent tool in combating the ongoing mental health crisis.
Keywords:
mental health; depression; psychotherapy; beliefs; effectiveness; information policy;
JEL-Classification:
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Discussion Paper No. 499
Depression Stigma
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Throughout history, people with mental illness have been discriminated against and stigmatized. Our experiment provides a new measure of perceived depression stigma and then investigates the causal effect of perceived stigma on help-seeking in a sample of 1,844 Americans suffering from depression. A large majority of our participants overestimate the extent of stigma associated with depression. In contrast to prior correlational evidence, lowering perceived social stigma through an information intervention leads to a reduction in the demand for psychotherapy. A mechanism experiment reveals that this information increases optimism about future mental health, thereby reducing the perceived need for therapy.
Keywords:
depression; stigma; information; psychotherapy;
JEL-Classification:
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Discussion Paper No. 498
February 23, 2024
The Strategic Value of Data Sharing in Interdependent Markets
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Large, generalist, technology firms—so-called “big-tech” firms—powerful in their primary market, routinely enter secondary markets consisting of specialist firms. Naturally, one might expect a specialist firm to be fiercely protective of its data as a way to maintain its market position in the secondary market. Counter to this intuition, we demonstrate that a specialist firm willingly shares its market data with an intruding tech generalist. We do so by developing a model of crossmarket competition in which data collected via consumer usage in each market is a factor of product quality in both markets. We show that a specialist firm shares its data to strategically create co-dependence between the two firms, thereby softening competition and transforming the generalist firm from a traditional competitor into a co-opetitor. For the generalist intruder, data from the specialist firm substitute for its own investments in product quality in the secondary market. As such, the act of sharing data makes the intruder a stakeholder in the valuable data collected by the specialist, and consequently in the specialist’s continued success. Moreover, while the firms benefit from data sharing, consumers can be worse off from the weaker price competition and lower investments in innovation. Our results have managerial and policy implications, notably on account of backlash against data collection and the market power of big tech firms.
Keywords:
data-driven quality improvements; externalities; co-opetition; data sharing;
JEL-Classification:
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Discussion Paper No. 497
February 21, 2024
Interview Sequences and the Formation of Subjective Assessments
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Interviewing is a decisive stage of most processes that match candidates to firms and organizations. This paper studies how and why a candidate’s interview outcome depends on the other candidates interviewed by the same evaluator. We use large-scale data from high-stakes admission and hiring processes, where candidates are quasi-randomly assigned to evaluators and time slots. We find that the individual assessment decreases as the quality of other candidates assigned to the same evaluator increases. The influence of the previous candidate stands out, leading to a negative autocorrelation in evaluators’ votes of up to 40% and distorting final admission and hiring decisions. Our findings are in line with a contrast effect model where evaluators form a benchmark through associative recall. We assess potential changes in the design of interview processes to mitigate contrasting against the previous candidate.
Keywords:
hiring; interviewing; contrast effect; memory;
JEL-Classification:
D91; J20; M51;
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Discussion Paper No. 496
February 16, 2024
From Couch to Poll: Media Content and The Value of Local Information
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We document the importance of local information in mass media for the political engagement of citizens and accountability of politicians. We study this in the context of Canada, where until 1958, competition in television markets was suppressed—Canadians received either public or private television content, but never both. While public television provided national-level informational content, private television content was distinctly local and more politically relevant to voters. We find that the introduction of television reduced voter turnout, but that this effect is exclusive to public television districts. Our findings qualify existing knowledge about the political effects of the rollout of new media, by allowing the informational content to vary while holding the media type constant. We support this argument with evidence from parliamentary debates: politicians from districts with private television are more likely to speak and act on behalf of their constituents in Parliament. Our findings thus suggest that politicians are held accountable by relevant media content.
Keywords:
JEL-Classification:
D72; L82; N42;