Discussion Paper No. 269
November 10, 2021
Signaling Motives in Lying Games
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This paper studies the implications of agents signaling their moral type in a lying game. In the theoretical analysis, a signaling motive emerges where agents dislike being suspected of lying and where some types of liars are more stigmatized than others. The equilibrium prediction of the model can explain experimental data from previous studies, in particular on partial lying, where some agents dishonestly report a non payoff-maximizing report. I discuss the relationship with previous theoretical models of lying that conceptualize the image concern as an aversion to being suspected of lying. The second half of the paper tests the theoretical predictions in an experiment. In contrast to previous literature, the experimental results show no evidence that image concerns influence lying behavior in the laboratory.
Keywords:
lying; image concerns; honesty; experiment;
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Discussion Paper No. 268
All-Pay Competition with Captive Consumers
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We study a game in which two firms compete in quality to serve a market consisting of consumers with different initial consideration sets. If both firms invest below a certain threshold, they only compete for those consumers already aware of their existence. Above this threshold, a firm is visible to all and the highest investment attracts all consumers. On the one hand, the existence of initially captive consumers introduces an anti-competitive element: holding fixed the behavior of its rival, a firm with a larger captive segment enjoys a higher payoff from not investing at all. On the other hand, the fact that a firm’s initially captive consumers can still be attracted by very high quality introduces a pro-competitive element: a high investment becomes more profitable for the underdog when the captive segment of the dominant firm increases. The share of initially captive consumers therefore has a non-monotonic effect on the investment levels of both firms and on consumer surplus. We relate our findings to competition cases in digital markets.
Keywords:
consideration set; regulation; all-pay auction; endogenous prize; digital markets;
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Discussion Paper No. 267
Focusing Climate Negotiations on a Uniform Common Commitment Can Promote Cooperation
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International cooperation on the reduction of greenhouse gas emissions, disarmament, or free trade needs to be negotiated. The success of such negotiations depends on how they are designed. In the context of international climate change policy, it has been proposed [e.g., Weitzman J of the Association of Environmental and Resource Economists (2014)] that shifting the negotiation focus to a uniform common commitment (such as a uniform minimum carbon price) would lead to more ambitious cooperation. Yet, a proof-of-concept for this important claim is lacking. Based on game theoretical analyses, we present experimental evidence that strongly supports this conjecture. In our study, human subjects negotiate contributions to a public good. Subjects differ in their benefits and costs of cooperation. Participation in the negotiations and all commitments are voluntary. We consider treatments in which agreements are enforceable, and treatments in which they have to be self-enforcing. In both situations, negotiating a uniform common commitment is more successful in promoting cooperation than negotiating individual commitments (as in the Paris agreement) and complex common commitments that tailor the commitment to the specific situation of each party (as attempted with the Kyoto protocol). Furthermore, as suggested by our model, a uniform common commitment benefits most from being enforced.
Keywords:
cooperation; negotiation design; common commitment; reciprocity; climate policy;
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Discussion Paper No. 266
A Model United Nations Experiment on Climate Negotiations
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Weitzman (2014) proposed that focusing international climate negotiations on a uniform carbon price is more effective than Paris style negotiations in achieving ambitious climate action. We put this hypothesis to an experimental test by simulating international negotiations on climate change in collaboration with Model United Nations associations. This novel experimental format combines some of the advantages of lab and field experiments. Our results show that negotiating a common commitment on a uniform carbon price yields significantly higher emissions reductions, more participation, and more equal contributions than individual commitments to a non-binding common goal à la Paris.
Keywords:
climate negotiations; negotiation design; model united nations; uniform carbon price;
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Discussion Paper No. 265
Truly Standard-Essential Patents? A Semantics-Based Analysis
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Standard-essential patents (SEPs) have become a key element of technical coordination in standard-setting organizations. Yet, in many cases, it remains unclear whether a declared SEP is truly standard-essential. To date, there is no automated procedure that allows for a scalable and objective assessment of SEP status. This paper introduces a semantics-based method for approximating the standard essentiality of patents. We provide details on the procedure that generates the measure of standard essentiality and present the results of several validation exercises. In a first empirical application we illustrate the measure's usefulness in estimating the share of true SEPs in firm patent portfolios for several mobile telecommunication standards. We find firm-level differences that are statistically significant and economically substantial. Furthermore, we observe a general decline in the average share of presumably true SEPs between successive standard generations.
Keywords:
patents; standards; standard essentiality; standard-setting organizations;
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Discussion Paper No. 264
The Effect of Self-Control on Borrowing: Experimental Evidence
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This paper examines the effect of reduced self-control on debt-taking in a laboratory experiment. We manipulate self-control using an ego depletion task and show that it is effective. Following the ego depletion task, participants can anonymously buy hot drinks on credit. We find no significant average effects, but find that treated individuals that have low financial literacy are more likely to buy drinks. We complement our experimental analysis with survey evidence that suggests that people with low self-control have more problems with the repayment of consumption debt, but this relationship is, in line with the experimental results, weaker for individuals with high financial literacy.
Keywords:
debt; consumption; borrowing; self-control; ego depletion;
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Discussion Paper No. 263
Decisions and Performance Under Bounded Rationality: A Computational Benchmarking Approach
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This paper presents a novel approach to analyze human decision-making that involves comparing the behavior of professional chess players relative to a computational benchmark of cognitively bounded rationality. This benchmark is constructed using algorithms of modern chess engines and allows investigating behavior at the level of individual move-by-move observations, thus representing a natural benchmark for computationally bounded optimization. The analysis delivers novel insights by isolating deviations from this benchmark of bounded rationality as well as their causes and consequences for performance. The findings document the existence of several distinct dimensions of behavioral deviations, which are related to asymmetric positional evaluation in terms of losses and gains, time pressure, fatigue, and complexity. The results also document that deviations from the benchmark do not necessarily entail worse performance. Faster decisions are associated with more frequent deviations from the benchmark, yet they are also associated with better performance. The findings are consistent with an important influence of intuition and experience, thereby shedding new light on the recent debate about computational rationality in cognitive processes.
Keywords:
cognitively bounded rationality; benchmark computing; artificial intelligence; decision quality; decision time;
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Discussion Paper No. 262
National Identity and the Integration of Second-Generation Immigrants
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This paper studies the effect of immigrants' national identity on integration in an inter-generational context. Economic theory predicts that the origin country identity of immigrants affects their children's integration through its effects on social network choices and incentives to invest in country-specific human capital. Yet, it is difficult to identify these effects empirically due to potential endogeneity. The empirical analysis of this paper relies on a novel IV strategy inspired by the epidemiological approach, and exploits rich survey data from the U.S. Results show that children whose parents are strongly attached to their origin country have less contact to natives and develop a stronger origin country identity. Consistent with the theoretical argument, they speak English less frequently and more poorly, and perform worse in school compared to peers whose parents are less attached to their origin country. Additional results from the CPS suggest that there exist negative long-term effects on labor market outcomes.
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Discussion Paper No. 261
Understanding the Response to High-Stakes Incentives in Primary Education
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This paper studies responses to high-stakes incentives arising from early ability tracking. We use three complementary research designs exploiting differences in school track admission rules at the end of primary school in Germany’s early ability tracking system. Our results show that the need to perform well to qualify for a better track raises students’ math, reading, listening, and orthography skills in grade 4, the final grade before students are sorted into tracks. Evidence from self-reported behavior suggests that these effects are driven by greater study effort but not parental responses. However, we also observe that stronger incentives decrease student well-being and intrinsic motivation to study.
Keywords:
student effort; tracking; incentives;
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Discussion Paper No. 260
November 9, 2021
COVID-19 and Educational Inequality: How School Closures Affect Low- and High-Achieving Students
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In spring 2020, governments around the globe shut down schools to mitigate the spread of the novel coronavirus. We argue that low-achieving students may be particularly affected by the lack of educator support during school closures. We collect detailed time-use information on students before and during the school closures in a survey of 1,099 parents in Germany. We find that while students on average reduced their daily learning time of 7.4 hours by about half, the reduction was significantly larger for low-achievers (4.1 hours) than for high-achievers (3.7 hours). Low-achievers disproportionately replaced learning time with detrimental activities such as TV or computer games rather than with activities more conducive to child development. The learning gap was not compensated by parents or schools who provided less support for low-achieving students. The reduction in learning time was not larger for children from lower-educated parents, but it was larger for boys than for girls. For policy, our findings suggest binding distance-teaching concepts particularly targeted at low-achievers.
Keywords:
educational inequality; COVID-19; low-achieving students; home schooling; distance teaching;
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