Discussion Paper No. 313
January 21, 2022
House Price Expectations
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This study examines short-, medium-, and long-run price expectations in housing markets. We derive and test six hypothesis about the incidence, formation, and relevance of price expectations. To do so, we use data from a tailored household survey, past sale and rental offerings, satellites, and from an information RCT. As novel findings, we show that price expectations exhibit mean reversion in the long-run. Moreover, we do not find evidence for biases related to individual housing tenure decisions or regret aversion. Confirming existing findings, we show that local market characteristics matter for expectations throughout, as well as aggregate price information. Lastly, we corroborate existing evidence that expectations are relevant for portfolio choice.
Keywords:
housing markets; price expectations;
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Discussion Paper No. 312
January 20, 2022
Intertemporal Consumption and Debt Aversion: A Replication and Extension
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We replicate Meissner (2016) where debt aversion was reported for the first time in an intertemporal consumption and saving problem. While Meissner (2016) uses a German sample, our subjects are US undergraduate students. All of the main findings from the original study replicate with similar effect sizes. Additionally, we extend the original analysis by correlating a new individual index of debt aversion on individual characteristics such as gender, cognitive ability, and risk aversion. The findings suggest that gender and risk aversion are not correlated with debt aversion. However, cognitive ability is positively correlated with debt aversion. Overall, this paper confirms the importance of debt aversion in intertemporal consumption problems and validates the approach of Meissner (2016).
Keywords:
debt aversion; replication; experiment;
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Discussion Paper No. 311
January 18, 2022
Income Contingency and the Electorate’s Support for Tuition
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We show that the electorate’s preferences for using tuition to finance higher education strongly depend on the design of the payment scheme. In representative surveys of the German electorate (N>18,000), experimentally replacing regular upfront by deferred income-contingent payments increases public support for tuition by 18 percentage points. The treatment turns a plurality opposed to tuition into a strong majority of 62 percent in favor. Additional experiments reveal that the treatment effect similarly shows when framed as loan repayments, when answers carry political consequences, and in a survey of adolescents. Reduced fairness concerns and improved student situations act as strong mediators.
Keywords:
tuition; higher education finance; income-contingent loans; voting;
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Discussion Paper No. 310
January 14, 2022
Experimenting with Purchase History Based Price Discrimination: a Comment
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Brokesova, Deck and Peliova [Int. J. Ind. Organ. 37 (2014) 229-237] have shown that comparative static results from two-period behavior-based pricing models hold in laboratory experiments, but they observed significant differences from point predictions. We report findings in conformity with these point predictions throughout a uniform pricing benchmark, a replication of Brokesova, Deck and Peliova’s behavior-based pricing treatment and a follow-up experiment. Reference dependence seems to shift participants’ second-period pricing behavior upwards. A post hoc analysis shows that considering myopic consumers instead of strategic consumers explains a downward shift of first-period prices and rationalizes the findings of Brokesova, Deck and Peliova. Volatile price levels affect price-based welfare measures such as sellers’ profits and customers’ total costs. We show that transport costs serve as a robust welfare measure, alleviating the impact of distorted prices. These findings are relevant for the design of experiments and when assessing the efficiency of experimental markets.
Keywords:
behavior-based price discrimination; pricing experiment;
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Discussion Paper No. 309
January 3, 2022
Can Schools Change Religious Attitudes? Evidence from German State Reforms of Compulsory Religious Education
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We study whether compulsory religious education in schools affects students’ religiosity as adults. We exploit the staggered termination of compulsory religious education across German states in models with state and cohort fixed effects. Using three different datasets, we find that abolishing compulsory religious education significantly reduced religiosity of affected students in adulthood. It also reduced the religious actions of personal prayer, church-going, and church membership. Beyond religious attitudes, the reform led to more equalized gender roles, fewer marriages and children, and higher labor-market participation and earnings. The reform did not affect ethical and political values or non-religious school outcomes.
Keywords:
religious education; religiosity; school reforms;
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Discussion Paper No. 308
December 27, 2021
The Bargaining Trap
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I revisit the Rubinstein (1982) model for the classic problem of price hag- gling and show that bargaining can become a “trap,” where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer’s valuation). This arises when one party is impatient about capturing zero surplus (e.g., Rubinstein’s example of fixed bargaining costs). Augmenting the protocol with unilateral exit options for responding bargainers generally removes the trap.
Keywords:
alternating offers; bargaining; time preferences; haggling costs; outside options;
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Discussion Paper No. 307
December 22, 2021
Strategy-Proof and Envy-Free Random Assignment
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We study the random assignment of indivisible objects among a set of agents with strict preferences. We show that there exists no mechanism which is unanimous, strategy-proof and envy-free. Weakening the first requirement to q-unanimity – i.e., when every agent ranks a different object at the top, then each agent shall receive his most-preferred object with probability of at least q – we show that a mechanism satisfying strategy-proofness, envy-freeness and ex-post weak non-wastefulness can be q-unanimous only for q ≤ n2 (where n is the number of agents). To demonstrate that this bound is tight, we introduce a new mechanism, Random-Dictatorship-cum-Equal-Division (RDcED), and show that it achieves this maximal bound when all objects are acceptable. In addition, for three agents, RDcED is characterized by the first three properties and ex-post weak efficiency. If objects may be unacceptable, strategy-proofness and envy-freeness are jointly incompatible even with ex-post weak non-wastefulness.
Keywords:
random assignment; strategy-proofness; envy-freeness; q-unanimity;
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Discussion Paper No. 306
December 1, 2021
Self-Persuasion: Evidence from Field Experiments at International Debating Competitions
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Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position’s factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarization. We test for this phenomenon in a field setting, at international debating competitions that randomly assign experienced and motivated debaters to argue one side of a topical motion. We find self-persuasion in factual beliefs and confidence in one’s position. Effect sizes are smaller than in the laboratory, but robust to a one-hour exchange of arguments and a ten-fold increase in incentives for accuracy.
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Discussion Paper No. 305
Cursed Consumers and the Effectiveness of Consumer Protection Policies
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We model firms’ quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that cursed consumers are exploited in duopoly markets if firms are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common consumer protection policies that work under monopoly, i.e. mandatory disclosure, third party disclosure and consumer education, may all increase exploitation and decrease welfare. Even where these policies improve overall welfare, they often lead to a reduction in consumer surplus. We show that our conclusions hold in extensions with endogenous quality choice and horizontal differentiation.
Keywords:
naive; cursed; disclosure; consumer protection; labeling; competition;
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Discussion Paper No. 304
Spin Doctors: An Experiment on Vague Disclosure
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Unfavorable news are often delivered under the disguise of vagueness. Our theory-driven laboratory experiment investigates this strategic use of vagueness in voluntary disclosure and asks whether there is scope for policy to improve information transmission. We find that vagueness is profitably deployed by senders to fool those receivers that lack strategic sophistication. Imposing precise disclosure leads to more easily interpretable messages, but results in fewer sender types disclosing at all. Since non- disclosure also systematically misleads naive receivers, the welfare implications of imposing precision are not obvious. However, our model and experiment show that information transmission and the welfare of naive receivers are improved by policies that impose precision. Our results speak to the rules governing firms’ disclosure of quality-relevant information, the disclosure of research findings, and testimonies in a court of law.
Keywords:
communication; naïveté; flexibility; regulation;
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