A06
Educational Choices, Market Design, and Student Outcomes
Discussion Papers

Discussion Paper No. 179
August 7, 2019

How to Avoid Black Markets for Appointments with Online Booking Systems

Authors:

Hakimov, Rustamdjan (University of Lausanne)
Heller, Christian-Philipp (NERA Consulting)
Kübler, Dorothea (WZB Berlin)
Kurino, Morimitsu (Keio University Tokyo)

Abstract:

Allocating appointment slots is presented as a new application for market design. We consider online booking systems that are commonly used by public authorities to allocate appointments for driver's licenses, visa interviews, passport renewals, etc. We document that black markets for appointments have developed in many parts of the world. Scalpers book the appointments that are offered for free and sell the slots to appointment seekers. We model the existing first-come-first-served booking system and propose an alternative system. The alternative system collects applications for slots for a certain time period and then randomly allocates slots to applicants. We investigate the two systems under conditions of low and high demand for slots. The theory predicts and lab experiments confirm that scalpers profitably book and sell slots under the current system with high demand, but that they are not active in the proposed new system under both demand conditions.

Keywords:

market design; online booking system; first come first served; scalping

JEL-Classification:

C92; D47

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Discussion Paper No. 170
July 30, 2019

Belief Updating: Does the ‘Good-News, Bad-News’ Asymmetry Extend to Purely Financial Domains?

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Abstract:

Bayes' statistical rule remains the status quo for modeling belief updating in both normative and descriptive models of behavior under uncertainty. Some recent research has questioned the use of Bayes' rule in descriptive models of behavior, presenting evidence that people overweight 'good news' relative to 'bad news' when updating ego-relevant beliefs. In this paper, we present experimental evidence testing whether this 'good-news, bad-news' effect is present in a financial decision making context (i.e. a domain that is important for understanding much economic decision making). We find no evidence of asymmetric updating in this domain. In contrast, in our experiment, belief updating is close to the Bayesian benchmark on average. However, we show that this average behavior masks substantial heterogeneity in individual updating. We find no evidence in support of a sizeable subgroup of asymmetric updators.

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Discussion Paper No. 169
July 30, 2019

Confidence and Career Choices: An Experiment

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Abstract:

Confidence is often seen as the key to success. Empirical evidence about how such beliefs about one's abilities causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one's own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. An exogenous increase in confidence leads to an increase in subjects' propensity to choose payment schemes that depend heavily on ability. This is detrimental for low ability workers. Policy implications are discussed.

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Discussion Paper No. 167
July 30, 2019

The Formation of Prosociality: Causal Evidence on the Role of Social Environment

Authors:

Kosse, Fabian (LMU Munich)
Deckers, Thomas (University of Bonn)
Pinger, Pia (University of Bonn)
Schildberg-Hörisch, Hannah (DICE)
Falk, Armin (University of Bonn)

Abstract:

This study presents descriptive and causal evidence on the role of social environment for the formation of prosociality. In a first step, we show that socio-economic status (SES) as well as the intensity of mother-child interaction and mothers' prosocial attitudes are systematically related to elementary school children's prosociality. In a second step, we present evidence on a randomly-assigned variation of the social environment, providing children with a mentor for the duration of one year. Our data include a two-year follow-up and reveal a significant and persistent increase in prosociality in the treatment relative to the control group. Moreover, enriching the social environment bears the potential to close the observed gap in prosociality between low and high SES children. A mediation analysis of the observed treatment effect suggests that prosociality develops in response to stimuli in the form of prosocial role models and intense social interactions.

Keywords:

formation of preferences; prosociality; social preferences; trust; social inequality

JEL-Classification:

D64; C90

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Discussion Paper No. 166
July 26, 2019

Socio-Economic Status and Inequalities in Children’s IQ and Economic Preferences

Authors:

Falk, Armin (University of Bonn)
Kosse, Fabian (LMU Munich)
Pinger, Pia (University of Bonn)
Schildberg-Hörisch, Hannah (DICE)
Deckers, Thomas (University of Bonn)

Abstract:

This paper explores inequalities in IQ and economic preferences between children from high and low socio-economic status (SES) families. We document that children from high SES families are more intelligent, patient and altruistic, as well as less risk-seeking. To understand the underlying causes and mechanisms, we propose a framework of how parental investments as well as maternal IQ and economic preferences influence a child's IQ and preferences. Within this framework, we allow SES to influence both the level of parental time and parenting style investments, as well as the productivity of the investment process. Our results indicate that disparities in the level of parental investments hold substantial importance for SES gaps in economic preferences and, to a lesser extent, IQ. In light of the importance of IQ and preferences for behaviors and outcomes, our findings offer an explanation for social immobility

Keywords:

socio-economic status; time preferences; risk preferences; altruism; experiments with children; origins of preferences; human capital

JEL-Classification:

C90; D64; D90; D81; J13; J24; J62

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Discussion Paper No. 158
May 31, 2019

Decentralizing Centralized Matching Markets: Implications From Early Offers in University Admissions

Authors:

Grenet, Julien (Paris School of Economics)
He, Yinghua (Rice University)
Kübler, Dorothea (WZB Berlin Social Science Center)

Abstract:

The matching literature commonly rules out that market design itself shapes agent preferences. Underlying this premise is the assumption that agents know their own preferences at the outset and that preferences do not change throughout the matching process. Under this assumption, a centralized matching market can often outperform a decentralized one. Using a quasi-experiment in Germany's university admissions, we provide evidence against this assumption. We study a centralized clearinghouse that implements the early stages of the university-proposing Gale-Shapley deferred-acceptance mechanism in real time, resembling a decentralized market with continuous offers, rejections, and acceptances. With data on the exact timing of every decision, we show that early offers are more likely to be accepted than (potential) later offers, despite early offers not being made by more desirable universities. Furthermore, early offers are only accepted after some time rather than immediately. These results and direct survey evidence are consistent with a model of information acquisition: it is costly for students to learn about universities and accepting a university that turns out to be inferior causes regret. We discuss and rule out some alternative hypotheses. Our findings motivate a hybrid mechanism that balances centralization and decentralization. By allowing sequential learning, it improves welfare, especially in markets with substantial learning costs.

Keywords:

centralized matching market; gale-shapley deferred acceptance mechanism; university admissions; early offers; information acquisition

JEL-Classification:

C78; D47; I23; D81; D83

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Discussion Paper No. 153
April 30, 2019

Experiments On Matching Markets: A Survey

Authors:

Hakimov, Rustamdjan (WZB Berlin)
Kübler, Dorothea (WZB Berlin)

Abstract:

The paper surveys the experimental literature on matching markets. It covers house allocation, school choice, and two-sided matching markets such as college admissions. The main focus of the survey is on truth-telling and strategic manipulations by the agents, on the stability and efficiency of the matching outcome, as well as on the distribution of utility.

Keywords:

experiments; matching markets; survey

JEL-Classification:

C92; D47; D83

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Discussion Paper No. 152
April 15, 2019

Earn More Tomorrow: Overconfident Income Expectations and Consumer Indebtedness

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Abstract:

This paper examines whether biased income expectations due to overconfidence lead to higher levels of debt-taking. In a lab experiment, participants can purchase goods by borrowing against their future income. We exogenously manipulate income expectations by letting income depend on relative performance in hard and easy quiz tasks. We successfully generate biased income expectations and show that participants with higher income expectations initially borrow more. Overconfident participants scale back their consumption after feedback. However, at the end of the experiment they remain with higher debt levels, which represent real financial losses. To assess the external validity, we nd further evidence for the link between overcondence and borrowing behavior in a representative survey (GSOEP-IS).

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Discussion Paper No. 151
April 8, 2019

Obviousness Around the Clock

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Abstract:

Li (2017) supports his theoretical notion of obviousness of a dominant strategy with experimental evidence that bidding is closer to dominance in the dynamic ascending-clock than the static second-price auction (private values). We replicate his experimental study and add three intermediate auction formats to decompose this behavioral improvement into cumulative effects of (1) seeing an ascending-price clock (after bid submission), (2) bidding dynamically on the clock and (3) getting drop-out information. Li's theory predicts dominance to become obvious through (2) dynamic bidding. We find no significant behavioral effect of (2). However, both (1) and (3) are highly significant.

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Discussion Paper No. 150
March 26, 2019

Effects of Timing and Reference Frame of Feedback
Evidence From a Field Experiment

Authors:

Fischer, Mira (WZB Berlin)
Wagner, Valentin (University of Mainz)

Abstract:

Information about past performance has been found to sometimes improve and sometimes worsen subsequent performance. Two factors may help to explain this puzzle: which aspect of one's past performance the information refers to and when it is revealed. In a field experiment in secondary schools, students received information about their absolute rank in the last math exam (level feedback), their change in ranks between the second-last and the last math exam (change feedback), or no feedback. Feedback was given either 1-3 days (early) or immediately (late) before the final math exam of the semester. Both level feedback and change feedback significantly improve students' grades in the final exam when given early and tend to worsen them when given late. The largest effects are found for negative change feedback and are concentrated on male students, who adjust their ability beliefs downwards in response to feedback.

Keywords:

timing of feedback; type of feedback; beliefs; education; field experiment

JEL-Classification:

D83; D91; I21

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