Discussion Papers

Discussion Paper No. 148
March 18, 2019

Peer Effects of Ambition

Authors:

Albert, Philipp (WZB Berlin)
Kübler, Dorothea (WZB Berlin)
Silva-Goncalves, Juliana (University of Sydney)

Abstract:

Ambition as the desire for personal achievement is an important driver of behavior. Using laboratory experiments, we study the role of social influence on ambition in two distinct domains of achievement, namely performance goals and task complexity. In the first case, participants set themselves a performance goal for a task they have to work on. The goal is associated with a proportional bonus that is added to a piece rate if the goal is reached. In the second case, they choose the complexity of the task, which is positively associated with the piece rate compensation and effort. In both cases we test whether observing peer choices influences own choices. We find strong evidence of peer effects on performance goals. In contrast, we find no support for peer effects on the choice of task complexity.

Keywords:

peer effects; ambition; goal setting; task difficulty; laboratory experiment

JEL-Classification:

C91; D83; D91; I24; M05

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Discussion Paper No. 147
March 11, 2019

Metric and Scale Effects in Consumer Preferences for Environmental Benefits

Author:
Pleshcheva, Vlada (Institut für Marketing Humboldt-Universität zu Berlin)
Abstract:

The present study investigates how the framing of information on the environmental impact of vehicles affects consumers’ preferences for identical improvements in carquality. In online choice experiments, the effects of two metrics (fuel consumption vs. CO2 emissions) and three scales of one metric (CO2 in kg/km vs. g/km vs. g/100km) are examined. First, from a technical perspective, fuel consumption (FC) and CO2 emissions are linearly connected by a constant factor and are thus isomorphic indescribing the environmental friendliness of a car. Second, rescaling identical informa-tion should not change consumer decisions. However, as this study demonstrates, the type of information presented to consumers significantly affects consumers’ valuation of environmental benefits from a reduction in FC or CO2. The study’s contribution lies in quantifying the differences in consumers’ preferences for two measures of the same information that have not been previously directly compared. Additionally, the differences in the framing effects are explored for diesel and gasoline vehicles. The estimation accounts for heterogeneity in the tastes, environmental attitudes and knowledge of the respondents. The insights of this study serve to guide policy makers and carmanufacturers on how to present information on car offers.

Keywords:
choice architecture; environmental impact; framing effects; vehicle choice
JEL-Classification:
D12; D90; M31; Q51
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Discussion Paper No. 146
March 11, 2019

Incentives, Search Engines, and the Elicitation of Subjective Beliefs: Evidence From Representative Online Survey Experiments

Authors:
Grewenig, Elisabeth (ifo Institute)
Lergetporer, Philipp (ifo Institute)
Werner, Katharina (ifo Institute)
Woessmann, Ludger (ifo Institute and LMU Munich)
Abstract:

A large literature studies subjective beliefs about economic facts using unincentivized survey questions. We devise randomized experiments in a representative online survey to investigate whether incentivizing belief accuracy affects stated beliefs about average earnings by professional degree and average public school spending. Incentive provision does not impact earnings beliefs, but improves school-spending beliefs. Response patterns suggest that the latter effect likely reflects increased online-search activity. Consistently, an experiment that just encourages search-engine usage produces very similar results. Another experiment provides no evidence of experimenter-demand effects. Overall, results suggest that incentive provision does not reduce bias in our survey-based belief measures.

Keywords:
beliefs; incentives; online search; survey experiment
JEL-Classification:
D83; C83; C90
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Discussion Paper No. 145
February 27, 2019

The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition

Authors:

Lergetporer, Philipp (ifo Institute at the University of Munich)
Woessmann, Ludger (ifo and LMU Munich)

Abstract:

Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate (N > 19,500). The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed as loan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.

Keywords:

tuition; higher education; political economy; survey experiments; information; earnings premium; income-contingent loans; voting

JEL-Classification:

I22; H52; D72; D83

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Discussion Paper No. 144
February 27, 2019

Job Creation in Tight and Slack Labor Markets

Authors:
Buchheim, Lukas (LMU Munich)
Watzinger, Martin (LMU Munich)
Wilhelm, Matthias (LMU Munich)
Abstract:

Do investment programs create more jobs in tight or in slack labor markets? We study this question using data from a large, long-term photovoltaic investment scheme in Germany. Comparing counties with high and low unemployment both over time and across space, we find that photovoltaic installations created at least twice as many jobs in slack than in tight labor markets. Our results suggest that the differences in job-creation are not driven by changes in the composition or prices of investment, capital-labor substitution, or regional migration. This leaves crowding-out as the most plausible mechanism.

Keywords:
local employment multiplier; state-dependent multiplier
JEL-Classification:
E24; E62; J23; R23
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Discussion Paper No. 143
February 27, 2019

Persistence and Activation of Right-Wing Political Ideology

Authors:

Cantoni, Davide (LMU Munich and CESifo)
Hagemeister, Felix (LMU Munich)
Westcott, Mark (Vivid Economics)

Abstract:

We argue that a long-run cultural persistence of right-wing ideology can explain the recent rise of right-wing populism. Shifts in the supply of party platforms can interact with this existing demand, and give rise to patterns of historical persistence. We study the context of Germany in the 2017 federal election, when the emergence of the AfD offered voters a populist right-wing option, with little social stigma attached. We show that municipalities that expressed strong support for the Nazi party in 1933 are more likely to vote for the AfD now, but not in 2013, when the AfD was a more moderate, fiscally conservative party. Using opinion surveys, we show that these dynamics are not generated by a concurrent demand shift: political attitudes do not shift sharply to the right in the municipalities with a history of Nazi support.

Keywords:

persistence; culture; right-wing ideology; germany

JEL-Classification:

D72; N44; P16

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Discussion Paper No. 142
February 23, 2019

Equilibria Under Knightian Price Uncertainty

Authors:

Beissner, Patrick (ANU)
Riedel, Frank (IMW Bielefeld University)

Abstract:

We study economies in which agents face Knightian uncertainty about state prices. Knightian uncertainty leads naturally to nonlinear expectations. We introduce a corresponding equilibrium concept with sublinear prices and prove that equilibria exist under weak conditions. In general, such equilibria lead to Pareto inefficient allocations; the equilibria coincide with Arrow-Debreu equilibria only if the values of net trades are ambiguity-free in the mean. In economies without aggregate uncertainty, inefficiencies are generic. We introduce a constrained efficiency concept, uncertainty-neutral efficiency, equilibrium allocations under price uncertainty are efficient in this constrained sense. Arrow-Debreu equilibria turn out to be non-robust with respect to the introduction of Knightian uncertainty.

Keywords:

JEL-Classification:

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Discussion Paper No. 141
March 8, 2019

The Moderating Effect of Fuel Prices On the Market Value of Fuel Efficiency, Driving Intensity, and Co2 Emissions

Authors:

Pleshcheva, Vlada (Institute for Marketing Humboldt-University Berlin)
Klapper, Daniel (Institute for Marketing Humboldt-University Berlin)

Abstract:

In the current paper, we quantify the effect that fuel prices have on vehicle prices' responsiveness to fuel economy. We apply a hedonic price model to the German automobile market by using data on detailed technical specifications of high-sales vehicles of three sequential model years. In the contribution to previous research, our specification enables us to distinguish between consumers' valuation of fuel economy versus their reaction to changes in fuel prices. Two sources of changes in consumers' willingness-to-pay for better fuel economy are discussed - changes in the budget for driving a car and changes in capital investments in better car quality. We also discuss the subsequent changes in the optimal driving intensity and the resulting carbon dioxide emissions. Differences in the effects are studied for various car makes of both diesel and gasoline engines.

Keywords:

co2 emissions; fuel economy; fuel prices; hedonic regression

JEL-Classification:

D12; L62; Q41; Q51

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Discussion Paper No. 140
February 27, 2019

On Factors of Consumer Heterogeneity in (Mis)Valuation of Future Energy Costs: Evidence for the German Automobile Market

Authors:
Pleshcheva, Vlada (HU Berlin)
Klapper, Daniel (HU Berlin)
Dannewald, Till (Wiesbaden Business School)
Abstract:

In this paper, we first recover the individual valuation of expected future fuel costs at the time of a car purchase and then explore how various factors relate to the recovered consumer undervaluation of fuel savings (on average, consumers' willingness-to-pay for a €1 reduction in fuel costs is below €0.20).

Keywords:
energy-efficiency paradox; hedonic discrete choice model; vehicle purchase; willingness-to-pay
JEL-Classification:
D12; D90; M31; Q51
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Discussion Paper No. 139
February 23, 2019

Learning About One’s Self

Authors:

Le Yaouanq, Yves (LMU Munich)
Schwardmann, Peter (LMU Munich)

Abstract:

How can naivete about present bias persist despite experience? To answer this question, our experiment investigates participants' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naivete cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms.

Keywords:

naivete; present bias; learning

JEL-Classification:

D83; D90

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