Discussion Paper No. 61
November 4, 2021
Who Cares About Social Image?
Author:
Abstract:
This paper experimentally investigates how concerns for social approval relate to intrinsic motivations to purchase ethically. Participants state their willingness-to-pay for both a fair trade and a conventional chocolate bar in private or publicly. A standard model of social image predicts that all participants increase their fair trade premium when facing an audience. We find that the premium is indeed higher in public than in private. This effect, however, is driven by participants who preferred a conventional chocolate bar over a fair trade one in a pre-lab choice. For those who chose the fair trade chocolate bar, public exposure does not change the fair trade premium. This is captured by a generalized model where intrinsic preferences and the concern for social approval are negatively correlated.
Keywords:
image concerns; ethical consumption; fair trade; social approval; experiments;
JEL-Classification:
Download:
Discussion Paper No. 60
Does a Short-Term Increase in Incentives Boost Performance?
Author:
Abstract:
If agents are exposed to continual competitive pressure, how does a short-term variation of the severity of the competition affect agents' performance? In a real-effort laboratory experiment, we study a one-time increase in incentives in a sequence of equally incentivized contests. Our results suggest that a short-term increase in incentives induces a behavioral response but does not boost total performance.
Keywords:
contest; tournament; real-effort; experiment; contract theory; forward-looking;
JEL-Classification:
Download:
Discussion Paper No. 59
Testing Missing At Random Using Instrumental Variables
Author:
Abstract:
This paper proposes a test for missing at random (MAR). The MAR assumption is shown to be testable given instrumental variables which are independent of response given potential outcomes. A nonparametric testing procedure based on integrated squared distance is proposed. The statistic's asymptotic distribution under the MAR hypothesis is derived. In particular, our results can be applied to testing missing completely at random (MCAR). A Monte Carlo study examines finite sample performance of our test statistic. An empirical illustration analyzes the nonresponse mechanism in labor income questions.
Keywords:
C12; C14;
JEL-Classification:
Download:
Discussion Paper No. 58
Nonparametric Estimation in Case of Endogenous Selection
Author:
Abstract:
This paper addresses the problem of estimation of a nonparametric regression function from selectively observed data when selection is endogenous. Our approach relies on independence between covariates and selection conditionally on potential outcomes. Endogeneity of regressors is also allowed for. In the exogenous and endogenous case, consistent two-step estimation procedures are proposed and their rates of convergence are derived. Pointwise asymptotic distribution of the estimators is established. In addition, bootstrap uniform confidence bands are obtained. Finite sample properties are illustrated in a Monte Carlo simulation study and an empirical illustration.
Keywords:
endogenous selection; instrumental variable; sieve minimum distance; regression estimation; inverse problem; inverse probability weighting; convergence rate; asymptotic normality; bootstrap uniform confidence bands;
JEL-Classification:
Download:
Discussion Paper No. 57
The Impact of Social Media on Belief Formation
Author:
Abstract:
Social media are becoming increasingly important in our society and change the way people communicate, how they acquire information, and how they form beliefs. Experts are concerned that the rise of social media may make interaction and information exchange among like-minded individuals more pronounced and therefore lead to increased disagreement in a society. This paper analyzes a learning model with endogenous network formation in which people have different types and live in different regions. I show that when the importance of social media increases, the amount of disagreement in the society first decreases and then increases. Simultaneously people of the same type hold increasingly similar beliefs. Furthermore, people who find it hard to communicate with people in the same region may interact with similar people online and consequently hold extreme beliefs. Finally, I propose a simple way to model people who neglect a potential correlation of signals and show that these people may be made worse off by social media.
Keywords:
social media; network formation; social learning; polarization; homophily; correlation neglect;
JEL-Classification:
Download:
Discussion Paper No. 56
Optimal Cost Overruns: Procurement Auctions with Renegotiation
Author:
Abstract:
Cost overrun is ubiquitous in public procurement. We argue that this can be the result of a constrained optimal award procedure: The procurer awards the contract via a price-only auction and cannot commit not to renegotiate. If cost differences are more pronounced for a fancy than a standard design, it is optimal to fix the standard design ex ante. If renegotiation takes place and the fancy design has higher production costs or the contractor's bargaining position is strong, the final price exceeds the initial price. Moreover, the procurer cannot benefit from using a multi-dimensional auction, i.e., under the optimal scoring auction each supplier proposes the standard design.
Keywords:
auction; cost overrun; procurement; renegotiation;
JEL-Classification:
Download:
Discussion Paper No. 55
The Life-Cycle Dynamics of Exporters and Multinational Firms
Author:
Abstract:
This paper studies the life-cycle dynamics of exporters and multinational enterprises (MNEs). We present a dynamic model of trade and MNE activity in which the mode of serving a market depends on the well-known proximity-concentration tradeoff. We show that the option of performing MNE activities in the model produces life-cycle patterns for exporters that differ from those in an export-only model. Calibrating our model to rich firm-level data from France and Norway, our main quantitative finding is that a reduction in trade costs triggers much larger responses in growth rates and exit rates, for young exporters, in the model with MNEs than in the model without MNEs. We also show that the model is largely consistent with a set of new facts on the joint life-cycle dynamic behavior of exporters and MNEs.
Keywords:
international trade; exporters; multinational firm; markov process; sunk cost; proximity-concentration tradeoff; trade liberalization;
JEL-Classification:
Download:
Discussion Paper No. 54
Testing Consumer Theory: Evidence From a Natural Field Experiment
Author:
Abstract:
We present evidence from a natural field experiment designed to shed light on whether individual behavior is consistent with a neoclassical model of utility maximization subject to budget constraints. We do this through the lens of a field experiment on charitable giving. We find that the behavior of at least 80% of individuals, on both the extensive and intensive margins, can be rationalized within a standard neoclassical choice model in which individuals have preferences, defined over own consumption and their contribution towards the charitable good, satisfying the axioms of revealed preference.
Keywords:
natural field experiment; revealed preference;
JEL-Classification:
Download:
Discussion Paper No. 53
Consumer-Optimal Information Design
Author:
Abstract:
In many trade environments - such as online markets - buyers fully learn their valuation for goods only after contracting. I characterize the buyer-optimal ex-ante information in such environments. Employing a classical sequential screening framework, I find that buyers prefer to remain partially uninformed, since such an information structure induces the seller to set low prices. For the optimal information signal, trade is efficient, and the seller only extracts the static monopoly profit. Further, I fully characterize all possible surplus divisions that can arise in sequential screening for a given prior.
Keywords:
information disclosure; sequential screening; strategic learning; bayesian persuasion; mechanism design;
JEL-Classification:
Download:
Discussion Paper No. 52
Coal and Blood: Industrialization and the Rise of Nationalism in Prussia before 1914
Author:
Abstract:
Industrialization and the rise of nationalism were the two major developments in Germany before the World War I. A novel county-level dataset reveals that industrialization and nationalism measured by membership in the "Kriegervereine'", the biggest civil organization at the time, were negatively correlated. Using coal potential as an IV for identification, I find strong evidence for a causal impact of industrialization on nationalism. In order to detect possible mechanisms, a three stage IV regression model produces strong support that migration and trade union membership were crucial factors that linked industrialization and nationalism.
Keywords:
nationalism; industrialization; Prussia;
JEL-Classification: