B05
Incentive Design in the Presence of Social Preferences
Discussion Papers

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. 252
July 27, 2020

Objective Rationality Foundations for (Dynamic) α-MEU

Author:

Frick, Mira (Yale University)
Iijima, Ryota (Yale University)
Le Yaouanq, Yves (LMU Munich)

Abstract:

We show how incorporating Gilboa, Maccheroni, Marinacci, and Schmeidler’s (2010) notion of objective rationality into the α-MEU model of choice under ambiguity (Hurwicz, 1951) can overcome several challenges faced by the baseline model without objective rationality. The decision-maker (DM) has a subjectively rational preference ≥^, which captures the complete ranking over acts the DM expresses when forced to make a choice; in addition, we endow the DM with a (possibly incomplete) objectively rational preference ≥*, which captures the rankings the DM deems uncontroversial. Under the objectively founded α-MEU model, ≥^ has an α-MEU representation and ≥* has a unanimity representation à la Bewley (2002), where both representations feature the same utility index and set of beliefs. While the axiomatic foundations of the baseline α-MEU model are still not fully understood, we provide a simple characterization of its objectively founded counterpart. Moreover, in contrast with the baseline model, the model parameters are uniquely identified. Finally, we provide axiomatic foundations for prior-by-prior Bayesian updating of the objectively founded α-MEU model, while we show that, for the baseline model, standard updating rules can be ill-defined.

Keywords:

ambiguity; α-MEU; objective rationality; updating

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Discussion Paper No. 226
December 18, 2019

From Friends to Foes: National Identity and Collaboration in Diverse Teams

Author:

Laurentsyeva, Nadzeya (LMU Munich)

Abstract:

This project studies collaboration in highly skilled, nationally diverse teams. An unexpected international political conflict makes national diversity more salient among existing and potential team members. I exploit this natural experiment to quantify the role of social, identity-driven, costs for performance and formation of diverse teams. Using microdata from GitHub, the world’s largest hosting platform for software projects, I estimate the causal impacts of a political conflict that burst out between Russia and Ukraine in 2014. I find that the conflict strongly reduced online cooperation between Russian and Ukrainian programmers. The conflict lowered the likelihood that Ukrainian and Russian programmers work in the same team and led to the performance decline of existing joint projects. I provide evidence that the observed effects were not driven by economic considerations. Rather, the conflict activated national identities and shifted programmers’ taste for teammates and projects. My results highlight the role of identity-driven concerns that can distort existing and prevent future collaborations, otherwise profitable from an economic perspective.

Keywords:

teams; diversity; conflict; national identity; open source

JEL-Classification:

D22; D74; F23; F51; J71

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Discussion Paper No. 204
November 29, 2019

Organizing for Entrepreneurship: Field-Experimental Evidence on the Performance Effects of Autonomy in Choosing Project Teams and Ideas

Author:

Boss, Viktoria (TUHH)
Ihl, Christoph (TUHH)
Dahlander, Linus (ESMT Berlin)
Jayaraman, Rajshri (ESMT Berlin and University of Toronto)

Abstract:

Organizations constantly strive to unleash their entrepreneurial potential to keep up with market and technology changes. To this end, they engage employees in practices like corporate crowdsourcing, incubators, accelerators or hackathons. These organizational practices emulate independent “green-field” entrepreneurship by relinquishing hierarchical control and granting employees autonomy in the choices of how to conduct work. We aim to shed light on two such choices that are fundamental in differentiating hierarchical from entrepreneurial modes of organizing work: (1) choosing projects ideas to work on and (2) choosing project teams to work with. Both of these choices are typically pre-determined in hierarchies and self-determined in entrepreneurship. We run a field experiment in an entrepreneurship course carefully designed to disentangle the separate and joint effects of granting autonomy in both choosing teams and choosing ideas compared to a pre-determined base case. Our results show that high autonomy in choosing implies a trade-off between personal satisfaction and objective performance. Self-determined choices along both dimensions promote subjective well-being in a complementary way, but their joint performance impact is diminishing. After ruling out alternative explanations related to differing project qualities and homophilic team choices, the detrimental performance impact of too much choice seems to be related to the implied cognitive burden and overconfidence.

Keywords:

teams; ideation; entrepreneurial performance; field experiment

JEL-Classification:

L23; L26; M5

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Discussion Paper No. 203
November 29, 2019

Menstrual Health, Worker Productivity and Well-being among Female Bangladeshi Garment Workers

Author:

Czura, Kristina (LMU Munich)
Menzel, Andreas (CERGE-EI Prague)
Miotto, Martina ( CERGE-EI Prague )

Abstract:

We conducted a randomised controlled trial (RCT) on a sample of 1,000 female garment workers in three factories in Bangladesh, off ering access to free sanitary pads at work to 500 of the workers. We cross-randomised participation in information sessions for hygienic menstrual health care implemented by an experienced local NGO, and we vary the salience of commonly perceived taboos in the pad collection process. We find e ffects of the free pads and information sessions on self-reported pad use, but not of the taboo variations. We find eff ects on absenteeism and adherence to traditional restrictive and health-adverse taboos surrounding menstruation, but not on worker turnover or self-reported well-being at work.

Keywords:

menstrual health; taboos; productivity; export manufacturing

JEL-Classification:

O14; O15; O35; M54; J32; J81

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Discussion Paper No. 196
November 4, 2019

Do Performance Ranks Increase Productivity? Evidence from a Field Experiment

Author:

Ashraf, Anik (LMU Munich)

Abstract:

Can a firm increase its workers' eff ort by introducing competition through performance-based ranking? On one hand such ranking can increase eff ort because of individuals' desire for status from high ranks, but on the other, it can demotivate them or make them wary of outperforming peers. This paper disentangles the e ffects of demotivation, social conformity, and status associated with ranking through a randomized experiment at a Bangladeshi sweater factory. Treated workers receive monthly information on their relative performance either in private or in public. Both a simple theoretical framework and empirical evidence from the field show that workers' intrinsic desire to be good at work induces privately ranked workers to increase eff ort upon receiving positive feedback, but they get demotivated and decrease e ffort upon receiving negative feedback. Public ranking lead to lower net eff ort relative to private ranking because of a strong preference not to outperform friends. The negative e ffects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers.

Keywords:

peer effects; productivity; rank incentives

JEL-Classification:

D23; J53; O15

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Discussion Paper No. 190
October 16, 2019

Complexity and Distributive Fairness Interact in Affecting Compliance Behavior

Author:

Bellemare, Charles (Université Laval)
Deversi, Marvin (LMU Munich)
Englmaier, Florian (LMU Munich)

Abstract:

Filing income tax returns or insurance claims often requires that individuals comply with complex rules to meet their obligations. We present evidence from a laboratory tax experiment suggesting that the effects of complexity on compliance are intrinsically linked to distributive fairness. We find that compliance remains largely una ffected by complexity when income taxes are distributed to a morally justi fied charity. Conversely, complexity signi ficantly amplifi es non-compliance when income taxes appear wasted as they are distributed to a morally dubious charity. Our data further suggest that this non-compliance pattern is facilitated through the ambiguity that evolves from mostly unstrategic fi ling mistakes.

Keywords:

complexity; compliance; distributive fairness; experiment

JEL-Classification:

C91; D01; D91; H26

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Discussion Paper No. 178
August 7, 2019

Managerial Payoff and Gift-Exchange in the Field

Authors:

Englmaier, Florian (LMU Munich)
Leider, Steve (University of Michigan)

Abstract:

We conduct a field experiment where we vary both the presence of a gift-exchange wage and the effect of the worker's effort on the manager's payoff. Results indicate a strong complementarity between the initial wage-gift and the agent's ability to "repay the gift". We control for differences in ability and reciprocal inclination and show that gift-exchange is more effective with more reciprocal agents. We present a principal-agent model with reciprocal subjects that motivates our findings. Our results help to reconcile the conflicting evidence on the efficacy of gift-exchange outside the lab.

Keywords:

incentives; field experiments; gift-exchange; reciprocity

JEL-Classification:

C91; J33; M52

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Discussion Paper No. 173
July 30, 2019

Boolean Representations of Preferences under Ambiguity

Authors:

Frick, Mira (Yale University)
Iijima, Ryota (Yale University)
Le Yaouanq, Yves (LMU Munich)

Abstract:

We propose a class of multiple-prior representations of preferences under ambiguity where the belief the decision-maker (DM) uses to evaluate an uncertain prospect is the outcome of a game played by two conflicting forces, Pessimism and Optimism. The model does not restrict the sign of the DM's ambiguity attitude, and we show that it provides a unified framework through which to characterize different degrees of ambiguity aversion, as well as to represent context-dependent negative and positive ambiguity attitudes documented in experiments. We prove that our baseline representation, Boolean expected utility (BEU), yields a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni and Marinacci, 2004), which drops uncertainty aversion from maxmin expected utility (Gilboa and Schmeidler, 1989), while extensions of BEU allow for more general departures from independence.

Keywords:

multiple priors; ambiguity; dual-self models

JEL-Classification:

D81

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Discussion Paper No. 164
July 3, 2019

An Economic Model of the Meat Paradox

Authors:

Hestermann, Nina (University of St Andrews)
Le Yaouanq, Yves (LMU Munich)
Treich, Nicolas (Toulouse School of Economics and INRA)

Abstract:

Many individuals have empathetic feelings towards animals but frequently consume meat. We investigate this "meat paradox" using insights from the literature on motivated reasoning in moral dilemmata. We develop a model where individuals form self-serving beliefs about the suffering of animals caused by meat consumption in order to alleviate the guilt associated with their dietary choices. The model makes several specific predictions: in particular, it predicts a positive relationship between individuals' taste for meat and their propensity to engage in self-deception, a high price elasticity of demand for meat, and a causal effect of prices and aggregate consumption on individual beliefs.

Keywords:

motivated reasoning; moral dilemmata; self-deception; meat paradox; meat price-elasticity; animal welfare

JEL-Classification:

D72; D81; D83; D84; Z13

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