Papers - Natural

Craig E Landry, Andreas Lange, John A List, Michael K Price, Nicholas G Rupp

Cited by*: 4 Downloads*: 0

Several recent laboratory experiments have shown that the use of explicit incentives--such as conditional rewards and punishment--entail considerable "hidden" costs. The costs are hidden in the sense that they escape our attention if our reasoning is based on the assumption that people are exclusively self-interested. This study represents a first attempt to explore whether, and to what extent, such considerations affect equilibrium outcomes in the field. Using data gathered from nearly 3000 households, we find little support for the negative consequences of control in naturally-occurring labor markets. In fact, even though we find evidence that workers are reciprocal, we find that worker effort is maximized when we use conditional--not unconditional--rewards to incent workers.

Amanda Kowalski

Cited by*: 4 Downloads*: 6

I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization.

Orana Bandiera, Iwan Barankay, Imran Rasul

Cited by*: 4 Downloads*: 14

We document the establishment and evolution of a cooperative norm among workers using evidence from a natural field experiment on a leading UK farm. Workers are paid according to a relative incentive scheme under which increasing individual effort raises a worker's own pay but imposes a negative externality on the pay of all co-workers, thus creating a rationale for cooperation. As a counterfactual, we analyze worker behavior when workers are paid piece rates and thus have no incentive to cooperate. We find that workers cooperate more as their exposure to the relative incentive scheme increases. We also find that individual and group exposure are substitutes, namely workers who work alongside colleagues with higher exposure cooperate more. Shocks to the workforce in the form of new worker arrivals disrupt cooperation in the short term but are then quickly integrated into the norm. Individual exposure, group exposure, and the arrival of new workers have no effect on productivity when workers and paid piece rates and there is no incentive to cooperate.

John A List

Cited by*: 4 Downloads*: 3

This study examines data drawn from the game show Friend or Foe?, which is similar to the classic prisoner's dilemma tale: partnerships are endogenously determined, players work together to earn money, after which, they play a one-shot prisoner's dilemma game over large stakes: varying from $200 to (potentially) more than $22,000. If one were to conduct such an experiment in the laboratory, the cost to gather the data would be well over $350,000. The data reveal several interesting insights; perhaps most provocatively, they suggest that even though the game is played in front of an audience of millions of viewers, there is some evidence consistent with a model of discrimination. The observed patterns of social discrimination are unanticipated, however. For example, there is evidence consistent with the notion that certain populations have a general "distaste" for older participants.

Il-Horn Hann, Kai-Lung Hui, Yee-Lin Lai, S.Y.T. Lee, I.P.L. PNG

Cited by*: 4 Downloads*: 4

Using a field experiment, we investigate whether, and if so, how spam is targeted. By comparing the spam rates among a set of synthetic email accounts, we find that spam is targeted to clients of particular email providers, users who declared interest in particular products or services, and consumer segments that are relatively more likely to make online purchases.

Alec Brandon, Paul J Ferraro, John A List, Robert D Metcalfe, Michael K Price, Florian Rundhammer

Cited by*: 4 Downloads*: 95

This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.

Craig E Landry, Andreas Lange, John A List, Michael K Price, Nicholas G Rupp

Cited by*: 3 Downloads*: 1

An important dialogue between theorists and experimentalists over the past few decades has raised the study of the interaction of psychological and economic incentives from academic curiosity to a bona fide academic field. One recent area of study within this genre that has sparked interest and debate revolves around the "hidden costs" of conditional incentives. This study overlays randomization on a naturally-occurring environment in a series of temporally-linked field experiments to advance our understanding of the economics of charity and test if such "costs" exist in the field. This approach permits us to examine why people initially give to charities, and what factors keep them committed to the cause. Several key findings emerge. First, there are hidden benefits of conditional incentives that would have gone undetected had we maintained a static theory and an experimental design that focused on short run substitution effects rather than dynamic interactions. Second, we can reject the pure altruism model of giving. Third, we find that public good provision is maximized in both the short and long run by using conditional, rather than unconditional, incentives.

Omar Azfar, Clifford Zinnes

Cited by*: 3 Downloads*: 20

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. We designed an experiment to test these hypotheses using a "prospective randomized evaluation procedure" (PREP). We then apply PREP to training programs as typically funded by donors of economic development assistance. We randomly assigned 274 participating entrepreneurs in the Philippines to one of 26, simultaneous, one-day, training classes in marketing. Trainers were given cash incentives based on the average score of their "students" on a standardized test containing an alternative number of questions, which were randomly assigned to each class. We then examined outcomes based on student satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes. We conclude with ways to improve our approach as well as with a discussion of the implications for using prospective randomized evaluation for improving the evaluation of donor projects.

John A List, Michael K Price

Cited by*: 3 Downloads*: 6

This study showcases the usefulness of field experiments to the study of environmental and resource economics. Our focus pertains to work related to field experiments in the area of 'behavioral' environmental and resource economics. Within this rubric, we discuss research in two areas: those that inform i) benefit cost analysis and ii) conservation of resources. Within each realm, we show how field experiments have been able to test the relevant theories, provide important parameters to construct new theories, and guide policymakers. We conclude with thoughts on how field experiments can be used to deepen our understanding of important areas within environmental and resource economics.

John Gibson, David McKenzie, Steven Stillman

Cited by*: 3 Downloads*: 13

People migrate to improve their well-being, whether through an expansion of economic and social opportunities or a reduction in persecution. Yet a large literature suggests that migration can be a very stressful process, with potentially negative impacts on mental health reducing the net benefits of migration. However, to truly understand the effect of migration on mental health one must compare the mental health of migrants to what their mental health would have been had they stayed in their home country. The existing literature is not able to do this and typically settles for comparing the mental health of migrants to that of natives in the destination country, which takes no account of any pre-existing differences between these groups. This paper overcomes the selection problems affecting previous studies of the effect of migration on mental health by examining a migrant lottery program. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the mental health effects of migration to be obtained by comparing the mental health of migrants who were successful applicants in the lottery to the mental health of those who applied to migrate under the quota, but whose names were not drawn in the lottery. Migration is found to lead to improvements in mental health, particularly for women and those with poor mental health in their home country.

Fuhai Hong, Tanjim Hossain, John A List

Cited by*: 3 Downloads*: 35

Exploiting findings that losses loom larger than gains, studies have shown that framing manipulations can increase productivity of workers. Using a natural field experiment that exogenously manipulates wage bonuses within contests in a Chinese high-tech manufacturing facility, we show that how loss aversion affects worker behavior critically depends on the incentive scheme as well as the framing manipulation. Four sets of two identical teams competed against each other to win a bonus given to the team, within a set, with the higher average hourly productivity over the week. In each set, the bonus was framed as a reward or gain for one team and as a punishment or loss for the other. Average weekly productivity was slightly higher under the loss treatment, but this increase was statistically insignificant. However, the team under the loss treatment was at least 35% more likely to win the contest. As teams' payoffs are based on relative productivity under a contest, framing effect is much stronger in terms of relative productivity. Finally, workers seemingly responded to the bonus by increasing the quality of production as well as quantity-defect rate fell as productivity increased.

Nava Ashaf, Dean S Karlan, Wesley Yin

Cited by*: 3 Downloads*: 9

Informal lending and savings institutions exist around the world, and often include regular door-to-door deposit collection of cash. Some banks have adopted similar services in order to expand access to banking services in areas that lack physical branches. Using a randomized control trial, we investigate determinants of participation in a deposit collection service and evaluate the impact of offering the service for micro-savers of a rural bank in the Philippines. Of 137 individuals offered the service in the treatment group, 38 agreed to sign-up, and 20 regularly used the service. Take-up is predicted by distance to the bank (a measure of transaction costs of depositing without the service) as well as being married (a suggestion that household bargaining issues are important). Those offered the service saved 188 pesos more (which equates to about a 25% increase in savings stock) and were slightly less likely to borrow from the bank.

Alan S Gerber

Cited by*: 3 Downloads*: 10

This article reports the results of several field experiments designed to measure campaign effects in partisan contests. The findings suggest incumbent campaigns failed to increase incumbent vote share, whereas the challenger campaign was effective. To understand these and other results, the incumbent's optimal spending strategy was analyzed theoretically. The analysis reveals that if incumbents maximize their probability of victory rather than vote share, campaigns by typical incumbents are expected to produce only minimal improvement in incumbent vote share. The analysis also explains how returns to campaign spending vary with the competitiveness of the election, how incumbent spending can improve the incumbent's probability of victory yet have only minimal effect on incumbent vote share, and why rational spending plans might decrease the sponsor's expected vote. This article demonstrates the wide scope of application for field experiments and provides an example of how experimental findings can serve as a catalyst for generating theories.

John A List, Michael Margolis, Jason F Shogren

Cited by*: 3 Downloads*: 0

Evidence suggests the calibration of hypothetical and actual behavior is good-specific. We examine whether clustering commodities into mutual categories can reduce the burden. While we reject a common calibration across sets of commodities, a sport-specific calibration function cannot be rejected.

John A List, Daniel M Sturm

Cited by*: 3 Downloads*: 1

In this paper we explore to what extent secondary policy issues are influenced by electoral incentives. We develop a political agency model in which a politician decides on both a frontline policy issue, such as the level of public spending, and a secondary policy issue, such as environmental policy. The model shows under which conditions the incumbent finds it worthwhile to manipulate the secondary policy to attract additional votes to his platform. We test the predictions of the model using state-level panel data on Gubernatorial environmental policy choices over the years 1960-2000. In contrast to the popular view that choices on secondary policy instruments are largely determined by lobbying, we find strong effects of electoral incentives on environmental policy.

Irma Machielse, Danielle Timmermans, Peter Wakker

Cited by*: 3 Downloads*: 28

This paper presents a field study into the effects of statistical information concerning risks on willingness to take insurance, with special attention being paid to the usefulness of these effects for the clients (the insured). Unlike many academic studies, we were able to use in-depth individual interviews of a large representative sample from the general public (N = 476). The statistical information that had the most interesting effects, "individual own past-cost information," unfortunately enhanced adverse selection, which we could directly verify because the real health costs of the clients were known. For a prescriptive evaluation this drawback must be weighted against some advantages: a desirable interaction with risk attitude, increased customer satisfaction, and increased cost awareness. Descriptively, ambiguity seeking was found rather than ambiguity aversion, and no risk aversion was found for loss outcomes. Both findings, obtained in a natural decision context, deviate from traditional views in risk theory but are in line with prospect theory. We confirmed prospect theory's reflection at the level of group averages but falsified it at the individual level.

Tanjim Hossain, John Morgan

Cited by*: 3 Downloads*: 8

We conducted 80 auctions on eBay. Forty of these auctions were for various popular music CDs while the remaining 40 auctions were for video games for Microsoft's Xbox gaming console. The revenue equivalence theorem states that any auction form having the same effective reserve price yields the same expected revenue. The effective reserve price on eBay consists of three components: the opening bid amount, the secret reserve amount, and the shipping and handling charge to keep the overall reserve level fixed. We set no secret reserve price and varied the opening bid and the shipping and handling charge to keep the overall reserve level fixed. When the effective reserve was $4, auctions with a low opening bid and high shipping charges attracted more bidders, earlier bidding, and yielded higher revenue than those with a high opening bid and low shipping charges. The same results hold only for Xbox games under the $8 effective reserve. Unlike the other treatments, where the reserve represents less than 30% of the retail price of the item, for CDs, the $8 effective reserve represents over 50% of the retail price of the item. In this treatment, we find no systematic difference in the number of bidders attracted to the auction or revenues as a function of how the effective reserve is allocated between opening bid and shipping charges. We show that these results can be accounted for by bounded-rational bidding behavior.

Jing Cai, Adam Szeidl

Cited by*: 3 Downloads*: 38

We organize regular business meetings for randomly selected managers of young Chinese firms to study the effect of business networks on firm performance. We randomize 2,800 managers into several groups that hold monthly meetings for one year, and a "no-meetings" control group. We find that: (1) The meetings increase firm revenue by 7.8 percentage points, and also significantly increase profit, a management score, employment, and the number of business partners; (2) These effects persist one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibit higher growth. We exploit additional interventions to document concrete channels: (4) Peers share exogenous business-relevant information, particularly when they are not competitors, showing that the meetings facilitate learning; (5) Managers create more business partnerships in the regular than in other one-time meetings, showing that the meetings improve firm-to-firm matching.

Philip Oreopoulos, Uros Petronijevic

Cited by*: 3 Downloads*: 25

Recent studies show that programs offering structured, one-on-one coaching and tutoring tend to have large effects on the academic outcomes of both high school and college students. These programs are often costly to implement and difficult to scale, however, calling into question whether making them available to large student populations is feasible. In contrast, interventions that rely on technology to maintain low-touch contact with students can be implemented at large scale and minimal cost but with the risk of not being as effective as one-on-one, in-person assistance. In this paper, we test whether the effects of coaching programs can be replicated at scale by using technology to reach a larger population of students. We work with a sample of over four thousand undergraduate students from a large Canadian university, randomly assigning students into one of the following three interventions: (i) a one-time online exercise designed to affirm students' values and goals; (ii) a text messaging campaign that provides students with academic advice, information, and motivation; and (iii) a personal coaching service, in which students are matched with upper-year undergraduate coaches. We find large positive effects from the coaching program, as coached students realize a 0.3 standard deviation increase in average grades and a 0.35 standard deviation increase in GPA. In contrast, we find no effects from either the online exercise or the text messaging campaign on any academic outcome, both in the general student population and across several student subgroups. A comparison of the key features of the text messaging campaign and the coaching service suggests that proactively and regularly initiating conversations with students and working to establish trust are important design features to incorporate in future interventions that use technology to reach large populations of students.

James Andreoni, Michael Callen, Karrar Hussain, Muhammad Yasir Khan, Charles Sprenger

Cited by*: 3 Downloads*: 7

We use structural estimates of time preferences to customize incentives for a sample of polio vaccinators during a series of door-to-door vaccination drives in Pakistan. Our investigation proceeds in three stages. First, we measure time preferences using intertemporal allocations of vaccinations. Second, we derive the mapping between these structural estimates and individually optimal incentives given a specific policy objective. Third, we experimentally evaluate the effect of matching contract terms to individual discounting patterns in a subsequent experiment with the same vaccinators. This exercise provides a test of the specific point predictions given by structural estimates of time preference. We document present bias among vaccinators and find that tailored contracts achieve the intended policy objective of smoothing intertemporal allocations of effort.