Discussion Paper No. 508
July 31, 2024
Measuring Preferences for Algorithms
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Abstract:
We suggest a simple method to elicit individual preferences for algorithms. By altering the monetary incentives for ceding control to the algorithm, the menu-based approach allows for measuring, in particular, the degree of algorithm aversion. Using an experiment, we elicit preferences for algorithms in an environment with measurable performance accuracy under two conditions|the absence and the presence of information about the algorithm's performance. Providing such information raises subjects' willingness to rely on algorithms when ceding control to the algorithm is more costly than trusting their own assessment. However, algorithms are still underutilized.
Keywords:
algorithm aversion; delegation; experiment; preferences;
JEL-Classification:
C91; D83; D91;
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Discussion Paper No. 498
February 23, 2024
The Strategic Value of Data Sharing in Interdependent Markets
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Abstract:
Large, generalist, technology firms—so-called “big-tech” firms—powerful in their primary market, routinely enter secondary markets consisting of specialist firms. Naturally, one might expect a specialist firm to be fiercely protective of its data as a way to maintain its market position in the secondary market. Counter to this intuition, we demonstrate that a specialist firm willingly shares its market data with an intruding tech generalist. We do so by developing a model of crossmarket competition in which data collected via consumer usage in each market is a factor of product quality in both markets. We show that a specialist firm shares its data to strategically create co-dependence between the two firms, thereby softening competition and transforming the generalist firm from a traditional competitor into a co-opetitor. For the generalist intruder, data from the specialist firm substitute for its own investments in product quality in the secondary market. As such, the act of sharing data makes the intruder a stakeholder in the valuable data collected by the specialist, and consequently in the specialist’s continued success. Moreover, while the firms benefit from data sharing, consumers can be worse off from the weaker price competition and lower investments in innovation. Our results have managerial and policy implications, notably on account of backlash against data collection and the market power of big tech firms.
Keywords:
data-driven quality improvements; externalities; co-opetition; data sharing;
JEL-Classification:
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Discussion Paper No. 476
December 13, 2023
Overcoming Time Inconsistency with a Matched Bet: Theory and Evidence from Exercising
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Abstract:
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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Abstract:
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. 471
December 9, 2023
Motivated Procrastination
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Abstract:
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;
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Discussion Paper No. 468
November 30, 2023
The Effect of Incentives in Non-Routine Analytical Team Tasks
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Abstract:
Despite the prevalence of non-routine analytical team tasks in modern economies, little is understood regarding how incentives influence performance in these tasks. In a series of field experiments involving more than 5,000 participants, we investigate how incentives alter behavior in teams working on such a task. We document a positive effect of bonus incentives on performance, even among teams with strong intrinsic motivation. Bonuses also transform team organization by enhancing the demand for leadership. Exogenously increasing teams' demand for leadership results in performance improvements comparable to those seen with bonus incentives, rendering it as a likely mediator of incentive effects.
Keywords:
team work; bonus; incentives; leadership; non-routine; exploration;
JEL-Classification:
C92; C93; J33; D03; M52;
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Discussion Paper No. 466
November 29, 2023
Commitment Requests Do Not Affect Truth-Telling in Laboratory and Online Experiments
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Using a standard cheating game, we investigate whether the request to sign a no-cheating declaration affects truth-telling. Our design varies the content of a no-cheating declaration (reference to ethical behavior vs. reference to possible sanctions) and the type of experiment (online vs. offline). Irrespective of the declaration's content, commitment requests do not affect truth-telling, neither in the laboratory nor online. The inefficacy of commitment requests appears robust across different samples and does not depend on psychological measures of reactance.
Keywords:
cheating; lying; truth-telling; compliance; commitment; no-cheating rule; no-cheating declaration; commitment request;
JEL-Classification:
C91; C93; D03;
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Discussion Paper No. 464
November 27, 2023
Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism
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Abstract:
For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this suggests that the current standard of financing projects may be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS.
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JEL-Classification:
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Discussion Paper No. 460
November 21, 2023
Cournot Meets Bayes-Nash: A Discontinuity in Behavior in Finitely Repeated Duopoly Games
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Abstract:
We conduct a series of Cournot duopoly market experiments with a high number of repetitions and fixed matching. Our treatments include markets with (a) complete cost symmetry and complete information, (b) slight cost asymmetry and complete information, and (c) varying cost asymmetries and incomplete information. For the case of complete cost symmetry and complete information, our data confirm the well-known result that duopoly players achieve, on average, partial collusion. However, as soon as any level of cost asymmetry or incomplete information is introduced, observed average individual quantities are remarkably close to the static Bayes-Nash equilibrium predictions.
Keywords:
Cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics;
JEL-Classification:
D43; L13; C72; C92;
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Discussion Paper No. 410
July 18, 2023
Does Unfairness Hurt Women? The Effects of Losing Unfair Competitions
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How do men and women differ in their persistence after experiencing failure in a competitive environment? We tackle this question by combining a large online experiment (N=2,086) with machine learning. We find that when losing is unequivocally due to merit, both men and women exhibit a significant decrease in subsequent tournament entry. However, when the prior tournament is unfair, i.e., a loss is no longer necessarily based on merit, women are more discouraged than men. These results suggest that transparent meritocratic criteria may play a key role in preventing women from falling behind after experiencing a loss.
Keywords:
competitiveness; gender; fairness; machine learning; online experiment;
JEL-Classification:
C90; D91; J16; C14;