Discussion Paper No. 480
December 15, 2023
When Protection Becomes Exploitation: The Impact of Firing Costs on Present-Biased Employees
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Employment protection harms early-career employees without benefitting them in later career stages (Leonardi and Pica, 2013). We demonstrate that this pattern can result from employers exploiting na¨ıve present-biased employees. Employers offer a dynamic contract with low early-career wages, an unattractive intermediate qualification stage, and high end-of-career wages. Upon reaching the qualification stage, present-biased employees exchange future wages for immediate rewards on an alternative career path – a choice unanticipated by their previous, na¨ıve, self. Thus, employers never pay high future wages. Firing costs help employers indicate that they will not oust employees instead of making promised payments, enabling early-career wage cuts.
Keywords:
employment protection laws; present bias; dynamic contracting;
JEL-Classification:
D21; D90; J33; K31; M52;
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Discussion Paper No. 479
December 13, 2023
Do We Talk Too Much?
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We consider the trade-off between talking and listening in a laboratory experiment where two team members need to coordinate on the use of an information channel. Each team member indicates their preference to “talk” and share her own information with her teammate, or to “listen” and obtain knowledge of the teammate’s information. The nature of the information varies across treatments. For stylized urns-and-balls treatments, we formalize a version of the “hard-easy effect” of over- and under-confidence: players talk more in situations where information is relatively precise – not only for the talker but also for the listener. Indeed we find that a more precise information structure induces a higher talking frequency, with a difference of 5 percentage points, relative to a baseline of 48 percent. The game-theoretic equilibrium, with rational expectations, predicts no such treatment effect. In treatments where information arises from real-world contexts, the hard-easy effect on the talking frequency is even stronger, at about 13 percentage points, relative to a baseline of about 38 percent.
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JEL-Classification:
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Discussion Paper No. 478
Public Appeals and Collective Crisis Mitigation
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Arrivals of crises often trigger public appeals by policy leaders, attempting to motivate crisis-mitigating behaviors. We run a controlled experiment among a general-population sample to investigate the impact of such appeals and of their tonality. Varying the language, an identical content of the appeal—a plea to contribute to mitigating a crisis—is formulated with either positive or negative wordings. Relative to the case with no appeal, both types of appeals successfully raise contributions, each by about 20 percent. A separate sample of policy-makers is presented with our design and asked to estimate the effect of the appeals. They correctly predict the effect of the positively worded appeal but fail to predict the effect of the negatively worded one.
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JEL-Classification:
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Discussion Paper No. 477
Attempting to Detect a Lie: Do We Think it Through?
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Game-theoretic analyses of communication rely on beliefs – especially, the receiver’s belief about the truth status of an utterance and the sender’s belief about the reaction to the utterance – but research that provides measurements of such beliefs is still in its infancy. Our experiment examines the use of second-order beliefs, measuring belief hierarchies regarding a message that may be a lie. In a two-player communication game between a sender and a receiver, the sender knows the state of the world and has a transparent incentive to deceive the receiver. The receiver chooses a binary reaction. For a wide set of non-equilibrium beliefs, the reaction and the receiver’s second-order belief should dissonate: she should follow the sender’s statement if and only if she believes that the sender believes that she does not follow the statement. The opposite is true empirically, constituting a new pattern of inconsistency between actions and beliefs.
Keywords:
strategic information transmission; lying; higher-order beliefs;
JEL-Classification:
D01; D83;
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Discussion Paper No. 476
Overcoming Time Inconsistency with a Matched Bet: Theory and Evidence from Exercising
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This paper introduces the matched-bet mechanism. The matched bet is an easily applicable and strictly budget-balanced mechanism that aims to help people overcome time-inconsistent behavior. I show theoretically that offering a matched bet helps both sophisticated and naive procrastinators to reduce time-inconsistent behavior. A field experiment on exercising confirms the theoretical predictions: offering a matched bet has a significant positive effect on gym attendance. Self-reported procrastinators are significantly more likely to take up the matched bet. Overall, the matched bet proves a promising device to help people not to procrastinate.
Keywords:
monetary incentives; market design; field experiment; health behavior;
JEL-Classification:
C93; D47; D90; I12;
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Discussion Paper No. 475
Should Individuals Choose their Own Incentives? Evidence from a Mindfulness Meditation Intervention
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Traditionally, incentives to promote behavioral change are assigned rather than chosen. In this paper, we theoretically and empirically investigate the alternative approach of letting people choose their own incentives from a menu of increasingly challenging and rewarding options. When individuals are heterogeneous and have private information about their costs and benefits, we theoretically show that leaving them the choice of incentives can improve both adherence and welfare. We test the theoretical predictions in a field experiment based on daily meditation sessions. We randomly assign some participants to one of two incentive schemes and allow others to choose between the two schemes. As predicted, participants sort into schemes in (partial) agreement with the objectives of the policy maker. However, in contrast to our prediction, participants who could choose complete significantly fewer sessions than participants that were randomly assigned. Since the results are not driven by poor selection, we infer that letting people choose between incentive schemes may bring in psychological effects that discourage adherence.
Keywords:
monetary incentives; dynamic incentives; field experiment; mental health;
JEL-Classification:
C09; D03; D08; I01;
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Discussion Paper No. 474
Breaking the Silence: Group Discussions, and the Adoption of Welfare-Improving Technologies
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Social pressure and stigma can hinder the adoption of available technologies, especially in the context of sensitive health issues. We run a field experiment on the take-up of menstrual products in Bangladesh and test a discussion-based intervention in a work setting. We vary participation in group discussions designed to break the silence around menstruation, where colleagues share their personal experiences. We find positive effects on the willingness to pay for a known menstrual product (sanitary pads) and on the adoption of a new technology (anti-bacterial menstrual underwear). Our results show changes in restrictive social norms around purchasing the products and lower perceived stigma around menstruation in general.
Keywords:
social norms; social pressure; stigma; technology adoption; group discussions; menstrual health management; menstrual hygiene; adverse health behavior;
JEL-Classification:
D91; I12; I15; O12;
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Discussion Paper No. 473
Gendered Access to Finance: The Role of Team Formation, Idea Quality, and Implementation Constraints in Business Evaluations
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We analyze gender discrimination in entrepreneurship finance. Access to finance is crucial for entrepreneurial success, yet constraints for women are particularly pronounced. We structurally unpack whether loan officers evaluate business ideas and implementation constraints differently for male and female entrepreneurs, both as individual entrepreneurs or in entrepreneurial teams. In a lab-in-the-field experiment with Ugandan loan officers, we document gender discrimination of individual female entrepreneurs, but no gender bias in the evaluation of entrepreneurial teams. Our results suggest that the observed bias is not driven by animus against female entrepreneurs but rather by differential beliefs about women’s entrepreneurial ability or implementation constraints in running a business. Policies aimed at team creation for start-up enterprises may have an additional benefit of equalizing access to finance and ultimately stimulating growth.
Keywords:
access to finance; gender bias; entrepreneurship; lab-in-the-field;
JEL-Classification:
C930; G210; J160; L250; L260; O160;
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Discussion Paper No. 472
December 9, 2023
Are Women Less Effective Leaders than Men? Evidence from Experiments Using Coordination Games
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We study whether one reason behind female underrepresentation in leadership is that female leaders are less effective at coordinating followers’ actions. Two experiments using coordination games investigate whether female leaders are less successful than males in persuading followers to coordinate on efficient equilibria. In these settings, successful coordination hinges on higher-order beliefs about the leader’s capacity to convince followers to pursue desired actions, making beliefs that women are less effective leaders potentially self-confirming. We find no evidence that such bias impacts actual leadership performance, precisely estimating the absence of a gender leadership gap. We further show that this result is surprising given experts’ priors.
Keywords:
gender; coordination games; leadership; experiment;
JEL-Classification:
D23; C72; C92; J1;
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Discussion Paper No. 471
Motivated Procrastination
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Traditionally, economic models have attributed procrastination to present bias. However, procrastination may also arise when individuals derive anticipatory utility from holding motivated, overly optimistic beliefs about the workload they need to complete. This study provides a rigorous empirical test for this notion of `motivated procrastination'. In a longitudinal experiment over four weeks, individuals have to complete a cumbersome task of unknown length. They are exposed to exogenous variation in i) their expectation regarding their workload and ii) scope for motivated reasoning. We find that scope for motivated reasoning allows workers to hold substantially more optimistic beliefs and identify a causal link between the exogenous variation in beliefs and the deferral of work to the future. This systematic belief-based delay of work (motivated procrastination) turns out to be robust to accounting for decision-makers' time preferences and emotional responses, and looms largest for decision makers who tend to not acquire information that may include negative news.
Keywords:
anticipatory utility; beliefs; memory; motivated cognition; procrastination; real effort; task allocation;
JEL-Classification:
C91; D83; D84; D90; D91;