Discussion Paper No. 450
November 13, 2023
Asymmetric Models of Sales
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Abstract:
We broaden and develop the classic captive-and-shopper model of sales. Firstly, we allow for asymmetric marginal costs as well as asymmetric captive audiences. These asymmetries jointly determine the identities of the two or more firms we find compete (via randomized sales) to serve shoppers. In a leading case, the prices paid by shoppers fall following a cost rise for the firm that serves most of them. Secondly, we study asymmetric price adjustment opportunities via a two-stage game in which firms may cut but not raise their initial prices. In this setting (and in scenarios with risk aversion or endogenous move order) we predict the play of pure strategies and that a unique firm serves the shoppers. Despite the different pricing predictions across games, firms’ profits are equivalent. Welfare properties depend on whether firm asymmetry is predominantly on the supply side (costs) or on the demand side (captive audiences). Thirdly, we allow firms to choose production technologies via process innovations. One firm innovates distinctly more than others, attains a lower marginal cost, and ultimately serves the shoppers. We connect the distinctive asymmetric pattern of innovations to demand-side asymmetries and the shape of technology opportunity.
Keywords:
model of sales; captives; shoppers; price dispersion; clearinghouse models;
JEL-Classification:
D43; L11; M3;
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Discussion Paper No. 449
The Persistent Effect of Competition on Prosociality
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Abstract:
We present the first causal evidence on the persistent impact of enduring competition on prosociality. Inspired by the literature on tournaments within firms, which shows that competitive compensation schemes reduce cooperation in the short-run, we explore if enduring exposure to a competitive environment persistently attenuates prosociality. Based on a large-scale randomized intervention in the education context, we find lower levels of prosociality for students who just experienced a 2-year competition period. 4-year follow-up data indicate that the effect persists and generalizes, suggesting a change in traits and not only in behavior.
Keywords:
prosociality; competition; cooperation; social skills; socio-emotional skills; tournaments; comparative pay; incentive schemes;
JEL-Classification:
D64; C90;
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Discussion Paper No. 448
November 9, 2023
Mimicking the Opposition: Bismarck's Welfare State and the Rise of the Socialists
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Abstract:
This paper examines the consequences of a government mimicking the policy of its competitor by studying the introduction of the welfare state in 19th century Germany. The reform conducted by the conservative government targeted blue-collar workers and aimed to reduce the success of the socialist party. The result based on a difference-in-differences design shows that the socialist party benefited in elections due to the reform. The analysis of the mechanism points to the socialist's issue ownership by strengthening its reform orientation, which voters followed. The results are not driven by other political and economic channels related to the reform.
Keywords:
welfare state; socialism; government; opposition; issue ownership; voting behavior; Germany;
JEL-Classification:
D74; H53; I38; N44; P16;
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Discussion Paper No. 447
Reputational Concerns and Advice-Seeking at Work
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We examine the impact of reputational concerns on seeking advice. While seeking can improve performance, it may affect how others perceive the seeker's competence. In an online experiment with white-collar professionals (N=2,521), we test how individuals navigate this tradeoff and if others' beliefs about competence change it. We manipulate visibility of the decision to seek and stereotypes about competence. Results show a sizable and inefficient decline in advice-seeking when visible to a manager. Higher-order beliefs about competence cannot mediate this inefficiency. We find no evidence that managers interpret advice-seeking negatively, documenting a misconception that may hinder knowledge flows in organizations.
Keywords:
advice-seeking; reputational concerns; stereotypes; higher-order beliefs; knowledge flows; experiment;
JEL-Classification:
D16; D21; D83; D91; M51;
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Discussion Paper No. 446
Round-Number Effects in Real Estate Prices: Evidence from Germany
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Abstract:
Round numbers affect behavior in various domains, e.g., as prominent thresholds or focal points in bargaining. In line with earlier findings, residential real estate transactions in Germany cluster at round-number prices, but there are also interesting (presumably cultural) differences. We extend our analysis to the commercial real estate market, where stakes are even higher and market participants arguably more experienced. For the same type of object, professionals cluster significantly less on round-number prices compared to non-professionals. We employ machine learning and show that transactions of family homes and condominiums at round-number prices are 2–7% above their hedonic values.
Keywords:
round-number effects; focal points; residential real estate; commercial real estate; housing prices; machine learning;
JEL-Classification:
D01; D91; C78; R31;
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Discussion Paper No. 445
The Efficacy of Tournaments for Non-Routine Team Tasks
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Abstract:
Tournaments are often used to improve performance in innovation contexts. Tournaments provide monetary incentives but also render teams' identity and image concerns salient. We study the effects of tournaments on team performance in a non-routine task and identify the importance of these behavioral aspects. In a field experiment (n>1,700 participants), we vary the salience of team identity, social image concerns, and whether teams face monetary incentives. Increased salience of team identity does not improve performance. Social image motivates the top performers. Additional monetary incentives improve all teams' outcomes without crowding out teams' willingness to explore or perform similar tasks again.
Keywords:
team work; tournaments; rankings; incentives; identity; image concerns; innovation; exploration; natural field experiment;
JEL-Classification:
C93; D90; J24; J33; M52;
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Discussion Paper No. 444
Deceptive Communication: Direct Lies vs. Ignorance, Partial-Truth and Silence
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Abstract:
In cases of conflict of interest, people can lie directly or evade the truth. We analyse this situation theoretically and test the key behavioural predictions in a novel sender-receiver game. We find senders prefer to deceive through evasion rather than direct lying, more so when evasion is a partial-truth. This is because they do not want to deceive others nor be seen as deceptive. Receivers are sensitive to the deceptive language and more likely to act in senders’ favour when these lie directly. Our findings suggest dishonesty is more prevalent and costlier than previous best estimates focusing on direct lies.
Keywords:
JEL-Classification:
C91; D82; D91;
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Discussion Paper No. 443
Getting it Right: Communication, Voting, and Collective Truth Finding
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Abstract:
We conduct an experiment in which groups are tasked with evaluating the truth of a set of politically relevant facts and statements, and we investigate whether communication improves information aggregation and the accuracy of group decisions. Our findings suggest that the effect of communication depends on the underlying accuracy of individual judgments. Communication improves accuracy when individuals tend to be incorrect, but diminishes it when individuals are likely to be correct ex ante. We also find that when groups vote independently without communicating, subjects update their beliefs in a manner consistent with interpreting others' votes as mildly informative signals, but not when they communicate beforehand. The chat analysis suggests that group members use communication to present their knowledge of related facts and to engage in interactive reasoning. Moreover, the volume of both types of communication increases with item difficulty.
Keywords:
collective decisions; voting; communication;
JEL-Classification:
D70; D72; D83;
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Discussion Paper No. 442
November 5, 2023
Fairness in Matching Markets: Experimental Evidence
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We investigate fairness preferences in matching mechanisms using a spectator design. Participants choose between the Boston mechanism or the serial dictatorship mechanism (SD) played by others. In our setup, the Boston mechanism generates justified envy, while the strategy-proof SD ensures envy-freeness. When priorities are merit-based, many spectators prefer the Boston mechanism, and this preference increases when priorities are determined by luck. At the same time, there is support for SD, but mainly when priorities are merit-based. Stated voting motives indicate that choosing SD is driven by concerns for envy-freeness rather than strategy-proofness, while support for the Boston mechanism stems from the belief that strategic choices create entitlements.
Keywords:
matching markets; school choice; voting; Boston mechanism; sincere agents; justified envy;
JEL-Classification:
D47; C92; I24; D74;
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Discussion Paper No. 440
October 30, 2023
Logic Mill - A Knowledge Navigation System
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Abstract:
Logic Mill is a scalable and openly accessible software system that identifies semantically similar documents within either one domain-specific corpus or multi-domain corpora. It uses advanced Natural Language Processing (NLP) techniques to generate numerical representations of documents. Currently it leverages a large pre-trained language model to generate these document representations. The system focuses on scientific publications and patent documents and contains more than 200 million documents. It is easily accessible via a simple Application Programming Interface (API) or via a web interface. Moreover, it is continuously being updated and can be extended to text corpora from other domains. We see this system as a generalpurpose tool for future research applications in the social sciences and other domains.
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JEL-Classification: