A01
Heterogeneity of Expectations and Preferences and their Joint Impact on Individual Choices
Discussion Papers

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Discussion Paper No. 333
August 15, 2022

The Dynamics of Behavioral Responses During a Crisis

Authors:
Hartung, Corinna (LMU Munich)
Veramendi, Gregory F. (LMU Munich)
Winter, Joachim (LMU Munich)
Abstract:
This paper investigates the dynamics of behavioral changes during a crisis. We study this in the context of the first year of the Covid-19 pandemic, where behavioral responses were important in mitigating the costs of the pandemic. To identify behavioral responses to unanticipated and transient health risk shocks, we combine high-frequency cellphone mobility data with detailed incidence data in Germany. Using an event-study design on local outbreaks, we find that county-level mobility immediately and significantly decreased by about 2.5% in response to an outbreak independent of non-pharmaceutical interventions. We also find that the reproduction rate decreased by about 17% in response to a local outbreak. Both behavioral responses are quite persistent even after the relative health risk has dissipated. By the time of the second wave, the behavioral response to a second or third shock is small or negligible. Our results demonstrate the importance of (1) integrating behavioral persistence in models used to study behavior and policies that change behavior, (2) the effectiveness of policies that provide high-frequency localized information on health risks, and (3) the potential persistence of behavioral changes after the Covid-19 pandemic has passed.
Keywords:
dynamics; behavioral response; crisis; covid-19
JEL-Classification:
D90; H12; I12; I18
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Discussion Paper No. 299
November 15, 2021

Expectation Management of Policy Leaders: Evidence from COVID-19

Authors:
Haan, Peter (FU Berlin and DIW Berlin)
Peichl, Andreas (LMU Munich and ifo Institute)
Schrenker, Annekatrin (FU Berlin and DIW Berlin)
Weizsäcker, Georg (HU Berlin)
Winter, Joachim (LMU Munich)
Abstract:
This paper studies how the communication of political leaders affects the expectation formation of the public. Specifically, we examine the expectation management of the German government regarding COVID-19-related regulatory measures during the early phase of the pandemic. We elicit beliefs about the duration of these restrictions via a high-frequency survey of individuals, accompanied by an additional survey of firms. To quantify the success of policy communication, we use a regression discontinuity design and study how beliefs about the duration of the regulatory measures changed in response to three nationally televised press conferences by Chancellor Angela Merkel and the Prime Ministers of the German federal states. We find that the announcements of Angela Merkel and her colleagues significantly prolonged the expected duration of restrictions, with effects being strongest for individuals with higher ex-ante optimism.
Keywords:
expectations; belief updating; covid-19; shutdown
JEL-Classification:
D12; D84; H12
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Discussion Paper No. 284
October 17, 2021

Preferences over Taxation of High-Income Individuals: Evidence from a Survey Experiment

Authors:
Engelmann, Dirk (HU Berlin)
Janeba, Eckhard (University of Mannheim)
Mechtenberg, Lydia (University of Hamburg)
Wehrhöfer, Nils (Deutsche Bundesbank)
Abstract:
Mobility of high-income individuals across borders puts pressure on governments to lower taxes. A central tenet of the corresponding textbook argument is that mobile individuals react to tax differentials through migra- tion, and in turn immobile individuals vote for lower taxes. We investigate to which extent this argument is complete. In particular, political ideology may influence voting on taxes. We vary mobility and foreign taxes in a survey experiment within the German Internet Panel (GIP), with more than 3,000 individuals participating. We find that while the treatment effects qualitatively confirm model predictions how voters take mobility of high-income earners into account when choosing domestic taxes, ideology matters: left-leaning high-income individuals choose higher taxes and emigrate less frequently than right-leaning ones. These findings are in line with the comparative- static predictions of a simple model of inequality aversion when the aversion parameters vary with ideology.
Keywords:
taxation; mobility; ideology; survey experiments
JEL-Classification:
D72; F22; H21
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Discussion Paper No. 269
January 14, 2021

Signaling Motives in Lying Games

Author:

Fries, Tilman (WZB Berlin)

Abstract:

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

JEL-Classification:

C91; D82; D90

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Discussion Paper No. 253
August 14, 2020

Face Masks Increase Compliance with Physical Distancing Recommendations during the COVID-19 Pandemic

Author:

Seres, Gyula (HU Berlin)
Balleyer, Anna Helen (University of Groningen)
Cerutti, Nicola (Berlin School of Economics and Law)
Danilov, Anastasia (HU Berlin)
Friedrichsen, Jana (DIW and HU Berlin)
Liu, Yiming (HU and WZB Berlin)
Süer, Müge (HU Berlin)

Abstract:

Governments across the world have implemented restrictive policies to slow the spread of COVID-19. Recommended face mask use has been a controversially discussed policy, among others, due to potential adverse effects on physical distancing. Using a randomized field experiment (N=300), we show that individuals keep a significantly larger distance from someone wearing a face mask than from an unmasked person. According to an additional survey experiment (N=456), masked individuals are not perceived as being more infectious than unmasked ones, but they are believed to prefer more distancing. This result suggests that, in times where mask use is voluntary, wearing a mask serves as a social signal for a preferred greater distance that is respected by others. Our findings provide strong evidence against the claim that mask use creates a false sense of security that would negatively affect physical distancing.

Keywords:

COVID-19; health policy; compliance; face masks; risk compensation; field experiment

JEL-Classification:

C93; D09; I12

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Discussion Paper No. 239
April 29, 2020

Starke Erwartungsreaktionen auf Angela Merkels Covid-Erklärungen

Author:

Haan, Peter (DIW Berlin)
Peichl, Andreas (LMU Munich & ifo Institute)
Schrenker, Annekatrin (DIW Berlin)
Weizsäcker, Georg (HU Berlin)
Winter, Joachim (LMU Munich)

Abstract:

Wir führen hochfrequente Befragungen der in Deutschland lebenden Personen durch und erheben die Erwartungen zur Dauer der Covid-bedingten Beschränkungen des öffentlichen Lebens. In einer ersten Analyse der Daten finden wir Hinweise, dass zwei in den Erhebungszeitraum fallenden öffentlichen Auftritte von Bundeskanzlerin Angela Merkel die Erwartungen stark beeinflussen. Insbesondere messen wir nach Merkels Pressekonferenz vom 15.4.2020 eine deutlich pessimistische Bewegung der Erwartungen und die beabsichtigten Konsumausgaben der Haushalte sinken zeitgleich. Die Ergebnisse legen nahe, dass die deutsche Politik über die Möglichkeit eines sehr wirksamen Erwartungsmanagements verfügt.

Keywords:

ökonomische Erwartungen; Covid-Shutdown

JEL-Classification:

D12; D84

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Discussion Paper No. 237
April 21, 2020

Second-Chance Offers and Buyer Reputation: Theory and Evidence on Auctions with Default

Author:

Engelmann, Dirk (HU Berlin)
Frank, Jeff (Royal Holloway, University of London)
Koch, Alexander K. (Aarhus University)
Valente, Marieta (University of Minho)

Abstract:

Winners in online auctions frequently fail to complete purchases. Major auction platforms therefore allow “second-chance” offers, where the runner-up bidder pays his own bid price, and they let sellers leave negative feedback on buyers who default. We show theoretically that (i) all else equal, the availability of second-chance offers reduces bids; (ii) sellers have no incentive to exclude bidders, even if they are nearly certain to default; (iii) buyer reputation systems reward bidders with a reputation for defaulting, counter to the idea of deterring such behavior. Our auction experiments support these predictions and provide insights on their practical relevance.

Keywords:

auctions; default; reputation; second-chance offers

JEL-Classification:

D44; C91; L14; D83

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Discussion Paper No. 235
April 6, 2020

Inducing Cooperation with Emotion – Who Is Affected?

Author:

Gärtner, Manja (DIW Berlin)
Tinghög, Gustav (Linköping University)
Västfjäll, Daniel (Linköping University)

Abstract:

We study the effects of dual processing differences that arise from the state level (through experimental manipulation of the decision mode), the trait level (using individual difference measures of the decision mode), and their interaction on cooperative behavior. In a survey experiment with a representative sample of the Swedish population (N = 1,828), we elicited the individuals’ primary decision mode and experimentally varied whether individuals could rely on their preferred mode or were induced to rely either on emotion or reason. Cooperation was measured across a series of commonly used and incentivized games (prisoner’s dilemma game, public goods game, trust game, dictator game). At the state level, our results show that average cooperation rates increased when emotions were induced rather than reason. At the trait level, our results show that individual decision modes and cooperation rates were not correlated when subjects could rely on their primary mode, but traits interacted with our processing manipulation: Experimentally inducing emotions increased cooperation among individuals who otherwise rely primarily on reason, but not among individuals who already rely primarily on emotion. These findings suggest that individuals integrate their traits with emotion-based states by substituting their trait rather than enhancing it. Thus, who is affected by emotions in their decision to cooperate crucially depends on state-trait interactions at the point of decision.

Keywords:

cooperation; intuition; emotion; reason; experiment

JEL-Classification:

C71; C91; D91

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Discussion Paper No. 234
April 6, 2020

Do Legal Standards Affect Ethical Concerns of Consumers?

Author:

Danz, David (University of Pittsburgh & WZB Berlin)
Engelmann, Dirk (HU Berlin)
Kübler, Dorothea (WZB Berlin & TU Berlin)

Abstract:

To address the impact of regulation on ethical concerns of consumers, we study the example of minimum wages. In our experimental market, consumers have monopsony power, firms set prices and wages, and workers are passive recipients of a wage payment. We find that the majority of consumers occasionally deviate from their self-interest and that markets with such consumers exhibit substantially higher wages. Consumers implement fair allocations using two distinct strategies: they split their demand equally between firms, or they buy all units from the firm with the higher price and higher wage. The two strategies can be captured by maximin preferences and indirect reciprocity in Charness and Rabin’s (2002) reciprocal fairness model. Introducing a minimum wage in a market raises average wages despite its significant crowding out effects on consumers’ fairness concerns. Abolishing a minimum wage crowds in consumer fairness concerns, but crowding in is not sufficient to avoid overall negative effects on workers’ wages.

Keywords:

fairness; consumer behavior; minimum wage; crowding out; experimental economics

JEL-Classification:

C72; C92; D83; D84

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Discussion Paper No. 221
December 18, 2019

Inattention and Switching Costs as Sources of Inertia in Medicare Part D

Author:

Heiss, Florian (University of Düsseldorf)
McFadden, Daniel (University of California, Berkeley)
Winter, Joachim (LMU Munich)
Wuppermann, Amelie (University of Halle-Wittenberg)
Zhou, Bo (University of Southern California, Los Angeles)

Abstract:

Consumers’ health plan choices are highly persistent even though optimal plans change over time. This paper separates two sources of inertia, inattention to plan choice and switching costs. We develop a panel data model with separate attention and choice stages, linked by heterogeneity in acuity, i.e., the ability and willingness to make diligent choices. Using data from Medicare Part D, we find that inattention is an important source of inertia but switching costs also play a role, particularly for low-acuity individuals. Separating the two stages and allowing for heterogeneity is crucial for counterfactual simulations of interventions that reduce inertia.

Keywords:

medicare; prescription drugs; health insurance demand; dynamic discrete choice

JEL-Classification:

I13; D12; J14; C25

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