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Market outcomes depend on the quality of information available to its participants. We measure the effect of information disclosure on market outcomes using a large-scale field experiment that randomly discloses quality information in wholesale automobile auctions. We argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality. This implies that information disclosure helps match heterogeneous buyers to cars of varying quality, causing both good and bad news to increase competition and revenues. The data confirm these hypotheses. These findings have implications for the design of other markets, including e-commerce, procurement auctions, and labor markets. (JEL C93, D44, D82, L15)

We conduct a social dilemma experiment in which real-world leaders can punish group members as a third party. Despite facing an identical environment, leaders are found to take remarkably different punishment approaches. The different leader types revealed experimentally explain the relative success of groups in managing their forest commons. Leaders who emphasize equality and efficiency see positive forest outcomes. Antisocial leaders, who punish indiscriminately, see relatively negative forest outcomes. Our results highlight the importance of leaders in collective action, and more generally the idiosyncratic but powerful roles that leaders may play, leading to substantial variation in group cooperation outcomes. (JEL C93, D03, O13, Q23)

From the early literature on the role of firm managers (Alchian and Demsetz 1972) to the industrial organisation on contracts and mechanism design (Laont and Martimort 2009), economists have given a lot of attention to find solutions to the imperfect alignment between individuals' incentives and an organisation's collective goals (Prendergast 1999). In that literature a key role of managers is to monitor individuals to reward behaviour aligned with the collective goals and reduce sub- optimal behaviour, such as shirking. How- ever, another strand of literature, since Akerlof (1982), has put forward a vision of reciprocal behaviour between an organisation's leadership and its members: gifts (high wages, recognition) from the organisation are reciprocated by high effort from the members of the organisation. By rewarding individual members (rather than strictly monitoring them), organisations may benefit from greater effort and cohesion. Experimental research in organizational economics has provided mixed results suggesting that agents do react to personal incentives but also that reciprocal behaviour can play a substantial role (Camerer and Weber 2012).

A commonly held view is that laboratory experiments provide researchers with more “control” than natural field experiments. This paper explores how natural field experiments can provide researchers with more control than laboratory experiments. While laboratory experiments provide researchers with a high degree of control in the environment which participants agree to be experimental subjects, when participants systematically opt out of laboratory experiments, the researcher's ability to manipulate certain variables is limited. In contrast, natural field experiments bypass the participation decision altogether due to their covertness, and they allow for a potentially more diverse participant pool within the market of interest.

This paper estimates how experimentally-manipulated experiences with a novel financial product, rainfall index insurance, affect subsequent insurance demand. Using a seven-year panel, we develop three main findings. First, recent experience matters for demand, consistent with overinference from small samples. Second, spillovers also matter, in the sense that the recent payout experience of village co-residents affects insurance demand about as much as one's own recent payout experience. Third, the spillover effect decays as time passes while the effect of one's own experience does not. We discuss implications of this analysis for commercial sustainability of this complicated but promising risk management technology.

We develop a model of households with multiple needs (smoothing shocks, financing investment) and constraints (limited credit, self-control issues) in order to examine the nature of household's financing constraints in a developing country, and the impact of relaxing them. We show that increased access to credit has very different implications for the aggregate model economy depending on its form: asset-financed or cash. We then illustrate how a short-term increase in access to loans leads to very distinct behavior in the short run. The relevance of the model can be evaluated using a field experiment, which we are currently implementing in Uganda.

Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks. Simply providing a safe place to keep money was sufficient to increase health savings, through a mental accounting effect. Adding an earmarking feature was only helpful when funds were put towards emergencies; earmarking for preventative health reduced savings on average, because the liquidity cost of tying up money was too great. Providing social pressure and credit through a ROSCA-based savings scheme had very large effects.

We outline a strategy for distinguishing rank-dependent probability weighting from systematic risk misperceptions in field data. Our strategy relies on singling out a field environment with two key properties: (i) the objects of choice are money lotteries with more than two outcomes; and (ii) the ranking of outcomes differs across lotteries. We first present an abstract model of risky choice that elucidates the identification problem and our strategy. The model has numerous applications, including insurance choices and gambling. We then consider the application of insurance deductible choices and illustrate our strategy using simulated data.

This paper uses data consisting of students' strategically reported preferences and their underlying true preferences to study the course allocation mechanism used at Harvard Business School. We show that the mechanism is manipulable in theory, manipulated in practice, and that these manipulations cause meaningful welfare losses. However, we also find that ex-ante welfare is higher than under the strategyproof and ex-post efficient alternative, the Random Serial Dictatorship. We trace the poor ex-ante performance of RSD to a phenomenon specific to multi-unit assignment, "callousness'. We draw lessons for the design of multi-unit assignment mechanisms and for market design more broadly., info:eu-repo/semantics/published

A vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience. One potential shortcoming of this literature is that market experience is endogenous. This study presents a framed field experiment that exogenously induces market experience. Empirical findings support the premise that market experience, alone, can eliminate an important market anomaly.

We explore the use of social comparison theory as a natural mechanism to increase contributions to an online movie recommendation community by investigating the effects of social information on user behavior in an online field experiment. We find that, after receiving behavioral information about the median user's total number of movie ratings, users below the median demonstrate a 530% increase in the number of monthly movie ratings, while those above the median decrease their monthly ratings by 62%. Movements from both ends converge towards the median, indicating conformity towards a newly-established social norm in a community where such a norm had been absent. Furthermore, the social information has a more dramatic effect on those below the median, suggesting an interaction between conformity and competitive preferences. When given outcome information about the average user's net benefit score from the system, consistent with social preference theory, users with net benefit scores above average contribute 94% of the new updates in the database. In both treatments, we find a highly significant Red Queen Effect.

The controversy over how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use, either by targeting distribution to high-use households (a screening effect), or by stimulating use psychologically through a sunk-cost effect. We develop a methodology for separating these two effects. We implement the methodology in a field experiment in Zambia using door-to-door marketing of a home water purification solution. We find evidence of economically important screening effects. By contrast, we find no consistent evidence of sunk-cost effects. (JEL C93, D12, I11, M31, O12)

This study examines why people initially give to charities, why they remain committed to the cause, and what factors attenuate these influences. Using an experimental design that links donations across distinct treatments separated in time, we present several results. For example, previous donors are more likely to give, and contribute more, than other donor types. Yet, how previous donors were acquired is critical: agents initially attracted by an economic mechanism are more likely to continue giving than agents attracted by a nonmechanism fac tor. From a methodological viewpoint, our study showcases the benefit of moving beyond an experimental design that focuses on short-run substitution effects. (JEL C93, D64, D82, H41, L31, Z12) Charitable giving has historically been linked to religious activities. Dating at least to ancient Egypt, religious gifts were believed to ensure a just reward in the afterlife. Charitable fund-raising has taken on a much broader role in the past several centuries. In the Western world, near the mid 1800s, it was recognized that individuals and corporations could play a part in financing nonprofit agencies with the introduction of new fund-raising techniques. The most innovative techniques can be traced to the Young Men's Christian Association, an organization founded in London in 1844 as a response to unhealthy social conditions arising near the end of the Industrial Revolution.1 Numerous nonprofit agencies quickly followed, setting in motion the vibrant industry of today. In the United States alone, the American Association of Fundraising Counsel estimates that annual giving now exceeds two percent of GDP. Increased individual wealth, an aging popula tion, and recent devolutionary trends across governments worldwide combine to set the stage for continued rapid growth in the sector. This presents fund-raisers, who typically rely on rules of thumb rather than hard scientific evidence, with a unique opportunity. Most commentators, how ever, view the industry as lacking an appropriate understanding of the economic underpinnings to take full advantage of this prospect. Fund-raising consultant Tony Kneer (The Economist, July 31st, 2004) highlights this belief by noting that "There is an extraordinary amount of money

We conduct a field experiment in which highly-ranked chess players play the centipede game in a natural setting. This game represents one of the main paradoxes of backward induction. In the experiment two players alternately are faced with the decision of either taking an exponentially growing pile of money and ending the game, or letting the other player make the decision. The player who decides to stop the game takes the larger portion of the pile, and the other player gets the remaining amount. All standard equilibrium concepts dictate that the player who decides first must stop the game immediately. There is vast experimental evidence, however, that this rarely occurs. Contrary to this evidence our results show that 69% of chess players stop the game immediately. When we restrict attention to chess Grandmasters this percentage escalates to 100%. We also conduct standard laboratory experiments where college students and chess players play ten repetitions of the game. We find that chess players playing versus other chess players rapidly converge to the equilibrium outcome, whereas students playing versus other students systematically depart from it. However, when students play against chess players the occurrence of the backward induction outcome increases tenfold.

Social learning has attracted increasing attention in the economics literature. The general concept of social learning encompasses many mechanisms through which individuals may learn from others. In particular, it includes the mechanism in which individuals learn from each other through direct (formal or informal) communications; it also includes the mechanism of obser vational learning where the behavior of individuals is influenced by their observation of other people’s choices because of the information contained therein. 1 Convincing empirical evidence about the importance of observational learning is not only relevant for the theoretical literature in economics; it also has policy implications. The key differ ence between direct communications and observational learning as channels of social learning lies in whether temporal, spatial, and social proximity among individuals is important for learn ing to occur. Observational learning can take place as long as the underlying decision problems faced by individuals are similar; in contrast, learning from others via direct communications requires individuals to be close in time, space, and social distance. As a result, if a policy maker wants to, say, expedite the adoption of an advantageous technology, an information campaign about the technology’s popularity among other groups of agents will be effective if observational learning is important, but will not be effective if, instead, direct communication is the main channel of social learning.

We conducted a natural field experiment to explore the effect of price changes on charitable contributions. To operationalize our tests, we examine whether an offer to match contributions to a non-profit organization changes the likelihood and amount that an individual donates. Direct mail solicitations were sent to over 50,000 prior donors. We find that the match offer increases both the revenue per solicitation and the probability that an individual donates. While comparisons of the match treatments and the control group consistently reveal this pattern, larger match ratios (i.e., $3:$1 and $2:$1) relative to smaller match ratios ($1:$1) had no additional impact. The results have clear implications for practitioners in the design of fundraising campaigns and provide avenues for future empirical and theoretical work on charitable giving. Further, the data provide an interesting test of important methods used in cost-benefit analysis.