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How do people attribute responsibility when an outcome is not caused by an individual but results from a decision chain involving several people? We study this question in an experiment, in which five voters sequentially decide on how to distribute money between them and five recipients. The recipients can reward or punish each voter, which we use as measures of responsibility attribution. In the aggregate, we find that responsibility is attributed mostly according to the voters' choices and the pivotality of the decision, but not for being the initial voter. On the individual level, we find substantial heterogeneity with three overall patterns: Little to no responsibility attribution, pivotality-driven, and focus on choices. These patterns are similar when praising voters for good outcomes and blaming voters for bad outcomes. [ABSTRACT FROM AUTHOR]

We experimentally test a model of public good bargaining due to Bowen et al. (Am Econ Rev 104:2941–2974, 2014) and compare two institutions governing bargaining over public good allocations. The setup involves two parties negotiating the distribution of a fixed endowment between a public good and each party’s individual account. Parties attach either high or low weight to the public good and the difference in these weights reflects the degree of polarization. Under discretionary bargaining rules, the status quo default allocation to the group account (in the event of disagreement) is zero while under the mandatory bargaining rule it is equal to the level last agreed upon. The mandatory rule thus creates a dynamic relationship between current decisions and future payoffs, and our experiment tests the theoretical prediction that the efficient level of public good is provided under the mandatory rule while the level of public good funding is at a sub-optimal level under the discretionary rule. Consistent with the theory, we find that proposers (particularly those attaching high weight to the public good) propose significantly greater allocations to the public good under mandatory rules than under discretionary rules and this result is strengthened with an increase in polarization. Still, public good allocations under mandatory rules fall short of steady state predictions, primarily due to fairness concerns that prevent proposers from exercising full proposer power.

When applying to a university, students and their parents devote considerable time acquiring information about university programs in order to form preferences. We explore ways to reduce wasteful information acquisition, that is, to help students avoid acquiring information about out‐of‐reach schools or universities, using a market design approach. Focusing on markets where students are ranked by universities based on exam scores, we find that, both theoretically and experimentally, a sequential serial dictatorship mechanism leads to higher student welfare than a direct serial dictatorship mechanism. This is because the sequential mechanism informs students about which universities are willing to admit them, thereby directing their search. Our experiments also show that the sequential mechanism has behavioral advantages because subjects deviate from the optimal search strategy less frequently than under the direct mechanism. Furthermore, providing historical cutoff scores under the direct mechanism can increase student welfare, especially when the information costs are high, although the observed effect is weaker than that of a sequential mechanism. [ABSTRACT FROM AUTHOR]

Law-breaking activities within firms are widespread but difficult to uncover, making whistleblowing by employees desirable. We investigate if and how monetary incentives and expectations of social approval or disapproval from the public, and their interactions, affect an employee’s decision to blow the whistle when the social damage from the reported misbehavior is more or less salient. Our analysis also has implications for the design and management of firms’ internal whistleblowing channels. This paper was accepted by Yan Chen, decision analysis.

In a college admission mechanism, students are often matched with colleges by using a noisy signal of their true abilities (e.g., their exam scores). The matching outcome thus may be imperfect in terms of ex-ante fairness, which suggests matching students with higher ability to better colleges. To achieve ex-ante fairness, we consider constraining student choice over colleges, by designing treatments with different constraint levels under the Boston and Serial Dictatorship mechanisms, with preference submission before or after the exam. Constraining student choice increases the probability of achieving ex-ante fairness under the Boston and Serial Dictatorship mechanisms with preference submission before the exam, compared with unconstrained mechanisms and mechanisms with preference submission after the exam. However, the probability of achieving highly unfair matching is also increased, resulting in a riskier matching outcome. Learning the game or providing students with recommended equilibrium strategies can decrease this risk and further increase ex-ante fairness.

We investigate how risk aversion (RA) shapes the informative content of prices in an experimental asset market, where traders are sorted according to their RA. RA should induce steeper individual demands and, under its most common parametrizations, drive equilibrium prices closer to revealing the state. Results support the prediction on individual demands, but not the prediction on prices, which do not vary with RA and are close to the risk‐neutral benchmark. This purported conflict is due to traders, particularly the more risk‐averse ones, conveying into prices only part of their information. [ABSTRACT FROM AUTHOR]

This paper experimentally investigates how inter- and intragroup heterogeneity (related to individual cooperative preferences) influences intergroup coordination. Coordination incentives are implemented through an intergroup rank-order competition. A pre-competition phase determines how individual heterogeneity is distributed across groups within an organisation. Two treatments are compared: a horizontal-heterogeneity treatment (H-Hetero, baseline), where individual differences are randomly distributed within and between groups, and a vertical-heterogeneity treatment (V-Hetero), in which groups are internally homogeneous but differ considerably from each other. In contrast to expectations, I find that vertical (intergroup) heterogeneity, when being accompanied by intragroup homogeneity, does not reduce the ability of groups to coordinate and keeps overall performance at very high levels. Indeed, subjects react more strongly to the coordination/competition incentives in vertically heterogenous organisations. Further analysis suggests that group dynamics are mainly driven by a positive orientation towards inequality (distributional preferences) of the members of the initially least cooperative groups, and their non-conditional cooperative behaviour. These results have implications for the design of group-based incentives and governance in organisations and societies. [ABSTRACT FROM AUTHOR]

We explore the role of interbank network structure and premature liquidation costs for the likelihood of financial contagions in a laboratory experiment. We consider complete versus incomplete networks of banks linked together by interbank deposits, and we further vary premature liquidation costs. Subjects play the role of depositors deciding whether or not to withdraw funds from their interconnected bank. We find that when liquidation costs are high, a complete network structure is significantly less vulnerable to financial contagions than an incomplete network structure. However, when liquidation costs are low, network structure is less important for the frequency of financial contagions.

We design a field experiment to study the behavior of farmers under alternative electricity subsidies for extracting groundwater in Mexico. The paper proposes a model for the extraction of groundwater over multiple periods, and then examines the effectiveness of three policy interventions: elimination, reduction, and decoupling. Results from a field experiment conducted in the city of León, Guanajuato, México, show that all the three proposed policy interventions sustain positive effects on the pumping level: elimination has the largest effect, whereas reduction results in only a marginal effect on the rate of groundwater extraction. Decoupling proves to be a viable policy, as it produces an effect similar to elimination while reducing possibly undesirable political implications. We then compare these results with a laboratory experiment conducted with US undergraduate students, and report significant differences between the laboratory and field studies.

This paper experimentally investigates the provision of real-time feedback about school assignments during the preference reporting period in three widely employed mechanisms: deferred acceptance, top trading cycles, and the Boston mechanism. Adaptive models predict that greater sensitivity to tentative assignments during the reporting period will produce more equilibrium assignments in all three mechanisms. Consistent with adaptive predictions, real-time assignment feedback consistently increased equilibrium assignments but did not increase truthful reporting. These findings suggest that providing feedback about assignments during the preference reporting period could help student assignment mechanisms more reliably achieve policy goals. [ABSTRACT FROM AUTHOR]

Pervasive energy subsidies for groundwater pumping pose a challenge to policy makers around the world, who have to cope with lower water tables due to increased reliance on groundwater resources for irrigation. The present paper outlines a laboratory experiment aimed to study the groundwater extraction decisions of stakeholders under alternative subsidy structures. We propose a model and a methodology for testing the implications of the model and the modifications of energy subsidies for irrigation. We analyze the performance of two traditional policy interventions—elimination and reduction of subsidy—and then analyze a novel policy: decoupling the subsidy from the electricity rate by replacing it with a lump sum transfer. Our results suggest that the rate of water extraction and the level of water in the aquifer may significantly be improved by altering the subsidy structure. An important finding for policy makers is that the decoupling leads to outcomes similar to those of eliminating the subsidy, however, with fewer political economy conflicts.

Pervasive energy subsidies for groundwater pumping pose a challenge to policy makers around the world, who have to cope with lower water tables due to increased reliance on groundwater resources for irrigation. The present paper outlines a laboratory experiment aimed to study the groundwater extraction decisions of stakeholders under alternative subsidy structures. We propose a model and a methodology for testing the implications of the model and the modifications of energy subsidies for irrigation. We analyze the performance of two traditional policy interventions—elimination and reduction of subsidy—and then analyze a novel policy: decoupling the subsidy from the electricity rate by replacing it with a lump sum transfer. Our results suggest that the rate of water extraction and the level of water in the aquifer may significantly be improved by altering the subsidy structure. An important finding for policy makers is that the decoupling leads to outcomes similar to those of eliminating the subsidy, however, with fewer political economy conflicts.

Decision makers in positions of power often make unobserved choices under risk and uncertainty. In many cases, they face a trade-off between maximizing their own payoff and those of other individuals. What inferences are made in such instances about their choices when only outcomes are observable? We conduct two experiments that investigate whether outcomes are attributed to luck or choices. Decision makers choose between two investment options, where the more costly option has a higher chance of delivering a good outcome (that is, a higher payoff) for the group. We show that attribution biases exist in the evaluation of good outcomes. On average, good outcomes of decision makers are attributed more to luck as compared to bad outcomes. This asymmetry implies that decision makers get too little credit for their successes. The biases are exhibited by those individuals who make or would make the less prosocial choice for the group as decision makers, suggesting that a consensus effect may be shaping both the belief formation and updating processes. [ABSTRACT FROM AUTHOR]

We conduct a laboratory experiment to investigate how different deliberative structures of varying inclusiveness affect collective decisions in the presence of economic conflict. An electorate consists of two groups, one informed and one uninformed about an uncertain state of the economy. This state affects payoffs differently for the two groups. We study three deliberative structures that vary in how the uninformed are included in pre-vote communication. Compared with a setting without any communication, we find that communication in all three deliberation treatments leads to more frequent votes for the efficient policies. The most inclusive deliberative structure motivates more truthfulness, more trust, more cooperativeness (i.e. refraining from protest votes), and more votes for the efficient policies, than the least inclusive structure. However, comparison among the deliberation treatments reveals that the most inclusive deliberative structure is not the one that generates the highest degree of truthfulness. The dynamics of communication lead to a general deterioration of truth-telling and cooperativeness, reinforced by the use of disrespectful and uncooperative language. [ABSTRACT FROM AUTHOR]

Given the growing prevalence of catastrophic events and health epidemics, policymakers are increasingly searching for effective strategies to encourage firms to invest in resilience rather than relying on insurance or government assistance. Too often, however, resilience research focuses on decisions made by firms and emergency planners in the context of "one-off" events. We extend this research by examining resilience decision making in the more realistic context of repeated catastrophic events. Using a population of professional managers of middle market firms and a university experimental economics subject pool, we conduct a series of controlled experiments on the decision to invest in inventories to improve firm resilience to repeated catastrophic events. While existing economic and supply chain resilience research has focused on resilience in terms of avoiding some magnitude of economic losses, existing research omits a focus on the probability of those losses. Controlled experiments can evaluate the influence of probability more effectively than observational data by better controlling for magnitude and more easily accounting for repeated events. We find that decision makers are less likely to make resilience investments when a disaster has recently occurred. We further find that advisory information alone is insufficient to motivate resilience investments by firms. It must be substantiated by a history of advisory accuracy. However, we find that this effect is heavily moderated by the type of advisory information provided; we find that firm managers are much more likely to trust precautionary advice. [ABSTRACT FROM AUTHOR]

The main contribution of this paper lies in applying Adam Smith's moral theory to explain how some actions become jointly recognized as socially appropriate while others do not, and how these jointly recognized rules affect actual behavior. To illustrate the strength of Smith's theory, we apply it to the norm-elicitation method by Krupka and Weber (2013) among a representative sample to explain how different elicited social norms vary across “giving” and “taking” contexts in the dictator game.

We replicate and extend the social history treatment of the Berg, Dickhaut, and McCabe (1995) investment game, to further document how the reporting of financial history influences how laboratory societies organize themselves over time. We replicate Berg et al. (1995) by conducting a No History and a Financial History session to determine whether a report summarizing the financial transactions of a previous experimental session will significantly reduce entropy in the amounts sent by Investors and returned by Stewards in the investment game, as Berg et al. (1995) found. We extend Berg et al. (1995) in two ways. First, we conduct a total of five sessions (one No History and four Financial History sessions). Second, we introduce Shannon's (1948) measure of entropy from information theory to assess whether the introduction of financial transaction history reduces the amount of dispersion in the amounts invested and returned across generations of players. Results across sessions indicate that entropy declined in both the amounts sent by Investors and the percentage returned by Stewards, but these patterns are weaker and mixed compared to those in the Berg et al. (1995) study. Additional research is needed to test how initial conditions, path dependencies, actors' strategic reasoning about others' behavior, multiple sessions, and communication may mediate the impact of financial history. The study's multiple successive Financial History sessions and entropy measure are new to the investment game literature.

In a competitive business environment, dishonesty can pay. Self-interested executives and managers can have incentive to shade the truth for personal gain. In response, the business community has considered how to commit these executives and managers to a higher ethical standard. The MBA Oath and the Dutch Bankers Oath are examples of such a commitment device. The question we test herein is whether the oath can be used as an effective form of ethics management for future executives/managers—who for our experiment we recruited from a leading French business school—by actually improving their honesty. Using a classic Sender-Receiver strategic game experiment, we reinforce professional identity by pre-selecting the group to which Receivers belong. This allows us to determine whether taking the oath deters lying among future managers. Our results suggest "yes and no." We observe that these future executives/managers who took a solemn honesty oath as a Sender were (a) significantly more likely to tell the truth when the lie was detrimental to the Receiver, but (b) were not more likely to tell the truth when the lie was mutually beneficial to both the Sender and Receiver. A joint product of our design is our ability to measure in-group bias in lying behavior in our population of subjects (comparing behavior of subjects in the same and different business schools). The experiment provides clear evidence of a lack of such bias. [ABSTRACT FROM AUTHOR]

We experimentally implement a dynamic public‐good problem, where the public good in question is the dynamically evolving information about agents' common state of the world. Subjects' behavior is consistent with free‐riding because of strategic concerns. We also find that subjects adopt more complex behaviors than predicted by the welfare‐optimal equilibrium, such as noncut‐off behavior, lonely pioneers, and frequent switches of action. [ABSTRACT FROM AUTHOR]