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First published online: 15 May 2020 Positive feedback about the outcome of volunteers' prosocial actions is often thought to help motivate continued volunteers' engagement. In the context of blood donations, various collection systems have begun to provide blood donors feedback on successful utilization of their blood donation. An experiment conducted by the main NGO that supports the collection of blood in Italy studies how such feedback affects subsequent blood donations. From a sample of over 8'000 blood donors, we find that providing feedback of successful utilization decreases donations. Though surprising, these results are consistent with theoretical models in which individuals engage in prosocial behavior to sustain a positive self-image : feedback about the outcome of a recent donation can act as reminders that boost self-image and reduce the need for re-engaging soon in prosocial activities. Interestingly for policy, we also show that combining the feedback with an explicit request to sign up for a new donation can eliminate, but not overturn, the negative effect of the feedback. (C) 2020 Elsevier B.V. All rights reserved.

Theories of expectations-based reference-dependent preferences have provided a critical modeling innovation, incorporating a structured theory of the formation of reference points. An important prediction of these models is a monotone response in behavior to changes in expectations. To test such models we conduct a real-effort experiment manipulating expectations and examining consequences on effort provision. In contrast to the theory, we document substantial nonmonotonicities in the effort response to changing expectations. Our results provide some evidence on the limitations of expectations-based reference dependence. (JEL: D81, D84, D12, D03)

Does social recognition motivate repeat contributors? We conduct large-scale experiments among members of Italy's main blood donors association, testing social recognition both through social media and in peer groups. We experimentally disentangle visibility concerns, peer comparisons and simple ask effects, and we study how exposure to different norms of behavior affects giving. Overall, asking increases giving by 20.4 percent. However, a simple ask to donate is at least as effective as asks that emphasize social recognition. Using peer groups, we show that visibility concerns do not generate additional donations, and we find that donations respond weakly and non-monotonically to social norms of giving. In an original study and two subsequent replications, we find no evidence that donors give blood for the prospect of their donations being observed by others on social media. Overall, our findings caution against over-reliance on social recognition to promote good citizenship.

We propose a novel experiment that prevents social learning, thus allowing us to disentangle the underlying mechanisms of social influence. Subjects observe their peer’s incentives, but not their behavior. We find evidence of conformity: When individuals believe that incentives make others contribute more, they also increase their contributions. Conformity is driven by individuals who feel socially close to their peer. However, when incentives are not expected to raise their peer’s contributions, participants reduce their own contributions. Our data are consistent with an erosion of norm adherence when prosocial behavior of the social reference is driven by extrinsic motives, and cannot be explained by incentive inequality or altruistic crowding out. These findings show scope for social influence in settings with limited observability and offer insights into the mediators of conformity.

The provision of feedback about individual electricity consumption is a widely used approach to promote pro-environmental behavior. This form of feedback typically invokes social comparisons by informing households about their aggregate electricity consumption relative to others. While previous research has shown that aggregate consumption feedback translates into significant energy savings, the potential for further reductions may remain untapped because households lack knowledge about their appliance energy consumption patterns. In this paper, we present evidence from a field experiment, where we provide residents with feedback about their electricity consumption, specific to a high-energy use appliance (i.e. air-conditioner). We provide the relevant social norm information by varying the reference group of each resident. We find that our appliance-specific feedback is a powerful tool to curb electricity consumption. Residents significantly reduce their average air-conditioning usage by 17\% in our treatment groups. Notwithstanding, our effects are not driven by comparative feedback with respect to different reference groups. We interpret this as encouraging evidence to promote the use of appliance-specific feedback to realize energy savings.

This paper investigates the role of biased health perceptions as a potential driving force of risky health behaviors. We define absolute and relative health perception biases, illustrate their measurement in surveys and provide evidence on their relevance. Next, we decompose the theoretical effect into its extensive and intensive margin: When the extensive margin dominates, people (wrongly) believe they are healthy enough to "afford" unhealthy behavior. Finally, using three population surveys, we provide robust empirical evidence that respondents who overestimate their health are less likely to exercise and sleep enough, but more likely to eat unhealthily and drink alcohol daily.

This paper investigates the role of biased health perceptions as driving forces of risky health behavior. We define absolute and relative health perception biases, illustrate their measurement in surveys and provide evidence on their relevance. Next, we decompose the theoretical effect into its extensive and intensive margin: When the extensive margin dominates, people (wrongly) believe they are healthy enough to "afford" unhealthy behavior. Finally, using three population surveys, we provide robust empirical evidence that respondents who overestimate their health are less likely to exercise and sleep enough, but more likely to eat unhealthily and drink alcohol daily.

This project examines the role of heterogeneity in gain-loss attitudes for identifying models of expectations-based reference dependence (Koszegi and Rabin, 2006, 2007) (KR). Different gain-loss attitudes lead to different signs for KR comparative statics. Failure to account for the known heterogeneity in gain-loss attitudes is a central confounding factor challenging prior tests of the KR model conducted under the assumption of universal loss aversion. We document heterogeneous treatment effects over gain-loss types in both an initial experiment and an exact replication. Recognizing heterogeneity over types allows us to both recover the KR model’s central predictions, and account for inconsistency across prior empirical tests.

Background: Roughly one quarter of short-term temporary deferrals (STTD) of blood donors are low-hemoglobin deferrals (LHD), i.e. STTD due to a hemoglobin (Hb) value falling below a cutoff of 125 g/L for female and 135 g/L for male donors. Since voluntarily donating blood is a prosocial activity, donors may perceive deferral as social exclusion, which can cause social pain, decrease self-esteem, and lead to antisocial behavior. However, little is known about the causal impacts of LHD on donor return. Study Design and Methods: We conducted a quasi-experiment with 80,060 donors invited to blood drives in the canton of Zurich, Switzerland, between 2009 and 2014. Within a narrow window of Hb values around the predetermined cutoff, the rate of LHD jumps discontinuously. This discontinuous jump allows us to quantify the causal effects of LHD on donor return, as it is uncorrelated with other unobserved factors that may also affect donor return. Results: We found different behavioral reactions to LHD for female and male donors. Female donors do not react to the first LHD. However, after any repeated LHD, they are 13.53 percentage points (p <0.001) less likely to make at least 1 donation attempt within the next 18 months and make 0.389 fewer donation attempts (p <0.001). Male donors react to the first LHD. They are 5.32 percentage points (p = 0.139) less likely to make at least 1 donation attempt over the next 18 months and make 0.227 (p = 0.018) fewer donation attempts. After any repeated LHD, male donors are 13.30 percentage points (p = 0.004) less likely to make at least 1 donation attempt and make 0.152 (p = 0.308) fewer donation attempts. Conclusion: LHD have detrimental impacts on donor return, especially if they occur repeatedly – suggesting that avoiding false LHD and helping donors to better cope with them helps to maintain the pool of prospective donors.

We develop a model of public good contributions as signals of the contributor's trustworthiness, and test the predictions of this model using data on volunteering in small Swiss towns. Unlike most previous work, we avoid assuming that agents simply have a taste for prestige, and instead model the material value of a prosocial reputation. The model predicts that, specifically in small communities with low population turnover where reputation is important, volunteering will decline with age (as the end of the agent's reputational game approaches). In communities with higher turnover, this effect will not be observed. Our results support this hypothesis. The model also implies that the presence of a public good which must be provided voluntarily enhances trust in bilateral market and non-market interactions.

•Two lab-in-the-field experiments on the decision to become an organ donor.•Stimulating reflection on organ donation reduces reported registrations as donors.•A commitment nudge does not increase the willingness to become an organ donor.•A commitment nudge reduces procrastination reasons for not becoming a donor.

The provision of feedback about individual electricity consumption is a widely used approach to promote pro-environmental behavior. This form of feedback typically invokes social comparisons by informing households about their aggregate electricity consumption relative to others. While previous research has shown that aggregate consumption feedback translates into significant energy savings, the potential for further reductions may remain untapped because households lack knowledge about their appliance energy consumption patterns. In this paper, we present evidence from a field experiment, where we provide residents with feedback about their electricity consumption, specific to a high-energy use appliance (i.e. air-conditioner). We provide the relevant social norm information by varying the reference group of each resident. We find that our appliance-specific feedback is a powerful tool to curb electricity consumption. Residents significantly reduce their average air-conditioning usage by 17% in our treatment groups. Notwithstanding, our effects are not driven by comparative feedback with respect to different reference groups. We interpret this as encouraging evidence to promote the use of appliance-specific feedback to realize energy savings.

Inattention and imperfect information bias behavior toward the salient and immediately visible. This distortion creates costs for individuals, the organizations in which they work, and society at large. We show that an effective way to overcome this bias is by making the implications of one’s behavior salient in real time, while individuals can directly adapt. In a large-scale field experiment, we gave participants real-time feedback on the resource consumption of a daily, energy-intensive activity (showering). We find that real-time feedback reduced resource consumption for the target behavior by 22%. At the household level, this led to much larger conservation gains in absolute terms than conventional policy interventions that provide aggregate feedback on resource use. High baseline users displayed a larger conservation effect, in line with the notion that real-time feedback helps eliminate “slack” in resource use. The approach is cost effective, is technically applicable to the vast majority of households, and generated savings of 1.2 kWh per day and household, which exceeds the average energy use for lighting. The intervention also shows how digitalization in our everyday lives makes information available that can help individuals overcome salience bias and act more in line with their preferences., Management Science, 64 (3), ISSN:0025-1909, ISSN:1526-5501

This project examines the role of heterogeneity in loss aversion for identifying models of expectations-based reference dependence (Kőszegi and Rabin, 2006, 2007) (KR). Different levels of loss aversion lead to different signs for comparative statics previously used to test the KR model. In an experiment with 607 subjects, we show heterogeneous treatment effects over loss aversion types. Recognizing heterogeneity in loss aversion allows us to reliably recover the KR model’s central element of expectations-based reference points. Additional effects are discussed related to the subjective perception of exchange experiences.

The presence of workers who reciprocate higher wages with greater effort can have important consequences for firms and labor markets. Knowledge about the extent and determinants of reciprocal effort choices is, however, incomplete. We investigate the role of fairness perceptions and social preferences in a field experiment in which workers were hired for a one-time job. We show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases, whereas those who feel adequately paid or overpaid at the base wage do not change their performance. Moreover, we find that only the workers who display reciprocity in a choice experiment show reciprocal effort responses in the field. The workers who lack reciprocity in the choice experiment do not respond to the wage increase, even if they feel underpaid at the base wage. Our findings suggest that fairness perceptions and social preferences are key in workers' performance response to wage increases. In our study, the wage increase affects effort mainly through the removal of perceived unfairness, i.e., the elimination of negative reciprocity toward the firm, rather than positive reciprocity. These results are the first direct evidence of the fair-wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1970 . This paper was accepted by Uri Gneezy, behavioral economics.

BACKGROUND Little is known about the long-term effects of interventions aimed at increasing turnout among voluntary blood donors. STUDY DESIGN AND METHODS We use a retrospective natural experiment with all 40,653 donors who were repeatedly invited to blood drives in Zurich, Switzerland, between 2010 and 2013. The intervention is a quasi-randomized phone call informing donors of a current shortage of their blood type. The panel structure of the data allows identification of different types of donors reacting to the phone call. RESULTS Our analysis reveals two types. Type 1 donors make up 27.1% of the population. They are highly motivated and exhibit a baseline donation rate of 59.4% (p

Unprecedented levels of US subprime mortgage defaults precipitated a severe global financial crisis in late 2008, plunging much of the industrialized world into a deep recession. However, the fundamental reasons for why US mortgages defaulted at such spectacular rates remain largely unknown. This paper presents empirical evidence showing that the ability to perform basic mathematical calculations is negatively associated with the propensity to default on one’s mortgage. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out loans in 2006 and 2007, and match them to objective, detailed administrative data on mortgage characteristics and payment histories. The relationship between numerical ability and mortgage default is robust to controlling for a broad set of sociodemographic variables, and is not driven by other aspects of cognitive ability. We find no support for the hypothesis that numerical ability impacts mortgage outcomes through the choice of the mortgage contract. Rather, our results suggest that individuals with limited numerical ability default on their mortgage due to behavior unrelated to the initial choice of their mortgage.

Evidence from both psychology and economics indicates that individuals give statements that appear to overestimate their ability compared to that of others. We test three theories that predict such relative overconfidence. The first theory argues that overconfidence can be generated by Bayesian updating from a common prior and truthful statements if individuals do not know their true type. The second theory suggests that self-image concerns asymmetrically affect the choice to receive new information about one's abilities, and this asymmetry can produce overconfidence. The third theory is that overconfidence is induced by the desire to send positive signals to others about one's own skill; this suggests either a bias in judgement, strategic lying, or both. We formulate this theory precisely. Using a large data set of relative ability judgements about two cognitive tests, we reject the restrictions imposed by the Bayesian model and also reject a key prediction of the self-image models that individuals with optimistic beliefs will be less likely to search for further information about their skill because this information might shatter their self-image. We provide evidence that personality traits strongly affect relative ability judgements in a pattern that is consistent with the third theory of social signalling. Our results together suggest that overconfidence in statements is more likely to be induced by social concerns than by either of the other two factors. Copyright 2013, Oxford University Press.

Economists are increasingly interested in how group membership affects individual behavior. The standard method assigns individuals to “minimal” groups, i.e. arbitrary labels, in a lab. But real groups often involve social interactions leading to social ties between group members. Our experiments compare randomly assigned minimal groups to randomly assigned groups involving real social interactions. While adding social ties leads to qualitatively similar, although stronger, in-group favoritism in cooperation, altruistic norm enforcement patterns are qualitatively different between treatments. Our findings contribute to the micro-foundation of theories of group preferences, and caution against generalizations from “minimal” groups to groups with social context. (JEL C92, D64, D71, Z13)

Firms are often organized into groups. Group membership has been shown empirically to have positive effects, in the form of increased prosocial behavior toward in-group members. This includes an enhanced willingness to engage in altruistic punishment of inefficient defection. Our paper provides evidence of a dark side of group membership. In the presence of cues of competition between groups, a taste for harming the out-group emerges: punishment ceases to serve a norm enforcement function, and instead, out-group members are punished harder and regardless of whether they cooperate or defect. Our results point to a mechanism that might help explain previous mixed results on the social value of punishment, and they contribute to understanding the sources of conflict between groups. They also point to an important trade-off for firms: introducing competition enhances within-group efficiency but also generates costly between-group conflict. This paper was accepted by Teck Ho, decision analysis.

Assigning a subjective value to a contribution to a public good often requires reflection. For many reasons, this reflection may be put off, reinforcing the underprovision of public goods. We hypothesise that nudging individuals to reflect on whether to contribute to a public good leads to the formation of issue-specific altruistic preferences. The hypothesis is tested in a large-scale field experiment on blood donations. We find that an ‘active-decision’ intervention substantially increases donations among subjects who had not previously thought about the importance of donating blood. By contrast, contributions of individuals who had previously engaged in such reflection are unchanged.

The retention of previous donors and the recruitment of new donors is a serious challenge for many blood donation services in their effort to prevent blood shortages. More and more services make use of some sort of donation incentives. However, the use of (material) incentives to motivate blood donors is fiercely controversial, and there is a longstanding (ethical) debate about whether it should be allowed that donors receive material rewards. Interestingly, this debate is dealt with in almost complete absence of systematic empirical evidence on the effectiveness of material incentives in encouraging people to donate. In this article, we argue that the discussion on what is ethical in motivating blood donors should be enriched with empirical evidence based on field experiments. We confront the Titmuss controversy with recent results from an experiment administering lottery tickets as a motivation device. Moreover, we take up a neglected phenomenon in the study of blood donors: many nondonors are not principally against donating blood; they have just never made up their mind about becoming active blood donors. We propose active decisions as a mechanism to transform latent prosocial preferences into actual prosocial behaviour.

This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to renegotiate or modify the loan. The theoretical model and econometric analysis illustrate that unaffordable loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. In addition, this paper provides theoretical results and empirical evidence supporting the hypothesis that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications to date than contract frictions related to securitization agreements between servicers and investors. While investors might be foreclosing when it would be socially efficient to modify, there is little evidence to suggest they are acting against their own interests when they do so. An important implication of our analysis is that policies designed to reduce foreclosures should focus on ameliorating the immediate effects of job loss and other adverse life events rather than modifying loans to make them more affordable on a long-term basis.

We report the results of an artefactual field experiment with bicycle messengers in Switzerland and the United States. Messenger work is individualized enough that firms can choose to condition pay on it, but significant externalities in messenger behavior nonetheless give their on-the-job interactions the character of a social dilemma. Second-mover behavior in our sequential prisoner's dilemma allows us to characterize the cooperativeness of our participants. Among messengers, we find that employees at firms that pay for performance are significantly less cooperative than those at firms that pay hourly wages or who are members of cooperatives. To examine whether the difference is the result of treatment or selection we exploit the fact that firm type is location-specific in Switzerland and that entering messengers must work in performance pay firms in the U.S.

Health tests are often seen as promising donor incentives to improve the supply of blood. However, systematic behavioral evidence on donor recruitment is scarce.To study the effectiveness of a free cholesterol test in attracting new donors and motivating previous donors, two field experiments were conducted. In Study 1, 2825 nondonors were randomly assigned to one of three treatments: a solicitation letter, a solicitation letter plus an appeal, or a solicitation letter plus an appeal and the offer of a free cholesterol test. In Study 2, 8269 previous donors were randomly assigned to one of three treatments: a standard invitation, an invitation plus an appeal, or an invitation plus an appeal and a cholesterol test. Marginal effects from probit estimations were calculated to study the effects of the treatments on donors' response.In Study 1, only 0.6 percent reacted to the solicitation letter. There were no significant differences in the response rates between the three treatments. In Study 2, 45.3 percent of the invited previous donors came to donate. The appeal (marginal effect, -0.5%; standard error [SE], 1.9%) and offering a cholesterol test (marginal effect, 1.6%; SE, 1.8%) did not significantly increase the probability of a donation relative to the standard invitation. The treatment effects for the cholesterol test did not systematically differ between frequent and infrequent donors and female and male donors. There is some evidence that young donors responded relatively most positive to the cholesterol test (marginal effect, 4.4%; SE, 2.2%).Contrary to conclusions from survey studies, free cholesterol testing did not significantly increase donations from nondonors and previous donors during a 3-month campaign. The two studies show that field experiments are an important method to evaluate donation incentives, because measuring donors' intentions alone can lead to significantly different conclusions.

Using two large proprietary datasets from New England, this paper establishes some basic facts about the subprime crisis. First, while unaffordable interest-rate resets are often blamed for setting off this crisis, most subprime borrowers who defaulted did so well in advance of their reset dates. Defaults on subprime adjustable-rate mortgages are more sensitive to declining housing prices than are defaults on fixed-rate loans, however, and the data support a number of alternative explanations for this finding. Second, many borrowers with good credit scores took out subprime loans as the housing boom gathered steam. It is hard to construct a prima facie case that these borrowers were inappropriately steered into the subprime market, however, because the loans that these borrowers took out were too risky for prime treatment. Finally, 70% of Massachusetts homes recently lost to foreclosure were originally purchased with prime mortgages. But subprime refinancing is especially prevalent among owners who were likely to have extracted substantial amounts of equity before they defaulted.

Wage rigidity - the observation that wages cannot be adjusted downwards - has important implications for labour markets and macroeconomic performance. Empirical evidence on the extent, causes and consequences of wage rigidity on the individual level is relatively scant, however. This Feature presents articles that apply a new methodology to estimate the incidence and extent of nominal and real wage rigidity among the employed in three major European countries (Germany, Italy and Great Britain). The results document the pervasiveness of nominal and, particularly, real wage rigidity in different institutional and economic environments, and a recent decline in real wage rigidity.

The paper examines real and nominal wage rigidities.We estimate a switching regime model, in which the observed distribution of individual wage changes, computed from West German register data for 1976-1997, is generated by simultaneous processes of real, nominal or no wage rigidity, and measurement error. The fraction of workers facing wage increases that are due to nominal, but mostly real wage rigidity is substantial.The extent of real rigidity rises with inflation, whereas the opposite holds for nominal rigidity. Overall, the incidence of wage rigidity, which accelerates unemployment growth, is most likely minimized in an environment with moderate inflation.

Social capital is a resource that includes the willingness of members of society to cooperate with each other, even when it is not in their own individual material self-interests to do so, or enforce beneficial social norms, even when this is materially costly for the enforcer. Evidence from economic choice experiments suggests that affect may play an important role in the individual-level decision process that generates these behavioral tendencies. Negative affective responses to uncooperative behavior can lead to a breakdown in social capital, if there is no option to punish. Given a punishment option, however, individuals discipline uncooperative types, even though it is materially costly to do so. This can completely counteract the tendency for social capital to decline in repeated interactions. Positive affect, triggered by punishing uncooperative types, appears to play a role in generating this socially beneficial willingness to sanction.

Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is not clear, however, whether these results are due to institutional constraints on workers� labor supply choices or whether the behavioral assumptions of the standard life cycle model with time separable preferences are empirically invalid. We conducted a randomized field experiment in a setting in which workers were free to choose their working times and their efforts during working time. We document a large positive wage elasticity of overall labor supply and an even larger wage elasticity of labor hours, which implies that the wage elasticity of effort per hour is negative. While the standard life cycle model cannot explain the negative effort elasticity, we show that a modified neoclassical model with preference spillovers across periods and a model with reference dependent, loss averse preferences are consistent with the evidence. With the help of a further experiment we can show that only loss averse individuals exhibit a significantly negative effort response to the wage increase and that the degree of loss aversion predicts the size of the negative effort response.

Evolutionary explanations of the co-existence of large-scale cooperation and warfare in human societies rest on the hypothesis of parochial altruism, the view that in-group pro-sociality and out-group anti-sociality have co-evolved. We designed an experiment that allows subjects to freely choose between actions that are purely pro-social, purely anti-social, or a combination of the two. We present behavioral evidence on the existence of "strong aggression" -- a pattern of non-strategic behaviors that are welfare-reducing for all individuals (i.e. victims and perpetrators). We also show how strong aggression serves to dynamically stabilize in-group pro-sociality.

An important advance in the study of reference-dependent preferences is the discipline provided by coherent accounts of reference point formation. Kőszegi and Rabin (2006) provide such discipline by positing a reference point grounded in rational expectations. We examine the predictions of Kőszegi and Rabin (2006) in the context of market experiments with probabilistic forced exchange. The experiment tightly tests the predictions of Kőszegi and Rabin (2006), as when the probability of forced exchange increases, individuals should grow more willing to exchange. This mechanism has the theoretical potential to eliminate and even reverse the 'endowment effect' (Knetsch and Sinden, 1984; Knetsch, 1989; Kahneman et al., 1990). Our results uniformly reject these theoretical predictions. In a series of experiments with a total of 930 subjects, sellers' valuations exceed buyers' valuations under all probabilities of forced exchange. In robustness tests where attention is drawn specifically to the forced exchange mechanism, the results are directionally more promising for buyers, but still reject the main thrust of the theoretical predictions. Our findings suggest a potential path forward incorporating failures to completely forecast sensations of gain and loss into models of expectations-based reference dependence.

Blood donations are increasingly important for medical procedures, while meeting demand is challenging. This paper studies the role of spillovers arising from social interactions in the context of voluntary blood donations. We analyze a large-scale intervention among pairs of blood donors who live at the same street address. A quasi-random phone call provides the instrument for identifying the extent to which the propensity to donate spills over within these pairs. Spillovers transmit 41% to 46% of the behavioral impulse from one donor to the peer. This creates a significant social multiplier, ranging between 1.7 and 1.85. There is no evidence that these spillovers lead to intertemporal substitution. Taken together, our findings indicate that policy interventions have a substantially larger effect when targeted towards pairs instead of isolated individuals.

Firms are often organized into groups. Group membership has been shown empirically to have positive effects, in the form of increased pro-social behavior towards in-group members. This includes an enhanced willingness to engage in altruistic punishment of inefficient defection. Our paper provides evidence of a dark side of group membership. In the presence of cues of competition between groups, a taste for harming the out-group emerges: punishment ceases to serve a norm enforcement function, and instead, out-group members are punished harder and regardless of whether they cooperate or defect. Our results point to a mechanism that might help explain previous mixed results on the social value of punishment, and also contribute to understanding the sources of conflict between groups. They also point to an important tradeoff for firms: introducing competition enhances within-group efficiency, but also generates costly between-group conflict.

We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition between groups, individuals are more prone to cooperate altruistically in a prisoner's dilemma game with in-group as opposed to out-group members. They also use a costly punishment option to selectively harm those who defect, encouraging a norm of cooperation towards the group. Adding competition between groups causes even stronger in-group cooperation, but also a qualitative change in punishment: punishment becomes anti-social, harming cooperative and defecting out-group members alike. These findings support recent evolutionary models and have important organizational implications.

Recent shortages in the supply of blood donations have renewed the interest in how blood donations can be increased temporarily. We survey the evidence on the role of financial and other incentives in eliciting blood donations among donors who are normally willing to donate pro bono. We present the predictions from different empirical/psychological-based theories, with some predicting that incentives are effective while others predict that incentives may undermine prosocial motivation. The evidence suggests that incentives work relatively well in settings in which donors are relatively anonymous, but evidence indicates also that when image concerns become important, incentives may be counterproductive as donors do not want to be seen as greedy.

The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers' financial literacy - their numerical ability - may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately two-thirds lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. The result is robust to controlling for a broad set of sociodemographic variables and not driven by other aspects of cognitive ability or the characteristics of the mortgage contracts. Our results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis.

The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers' financial literacy—their numerical ability—may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately two-thirds lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. The result is robust to controlling for a broad set of sociodemographic variables and not driven by other aspects of cognitive ability or the characteristics of the mortgage contracts. Our results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis.

We use a sequential prisoner's dilemma game to measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: 100 college students, 94 non-student adults from the community surrounding the college and 1,069 adult trainee truckers in a residential training program. Both of the first two groups were recruited according to procedures commonly used in experimental economics (i.e., via e-mail and bulletin-board advertisements) and therefore subjects self-selected into the experiment. Because the structure of their training program reduced the opportunity cost of participating dramatically, 91% of the solicited trainees participated in the third group, so there was little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection into this type of experiment is unlikely to bias inferences with respect to non-student adult subjects. We also test (and reject) the more specific hypothesis that approval-seeking subjects are the ones most likely to select into experiments. At the same time, we find a large difference between the self-selected students and the self-selected adults from the surrounding community: the students appear considerably less pro-social. Regression results controlling for demographic factors confirm these basic findings.

In this paper, we argue that important labor market phenomena can be better understood if one takes (a) the inherent incompleteness and relational nature of most employment contracts and (b) the existence of reference-dependent fairness concerns among a substantial share of the population into account. Theory shows and experiments confirm that, even if fairness concerns were to exert only weak effects in one-shot interactions, repeated interactions greatly magnify the relevance of such concerns on economic outcomes. We also review evidence from laboratory and field experiments examining the role of wages and fairness on effort, derive predictions from our approach for entry-level wages and incumbent workers' wages, confront these predictions with the evidence, and show that reference-dependent fairness concerns may have important consequences for the effects of economic policies such as minimum wage laws.

This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to renegotiate or modify the loan. The theoretical model and econometric analysis illustrate that unaffordable loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. In addition, this paper provides theoretical results and empirical evidence supporting the hypothesis that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications to date than contract frictions related to securitization agreements between servicers and investors. While investors might be foreclosing when it would be socially efficient to modify, there is little evidence to suggest they are acting against their own interests when they do so. An important implication of our analysis is that policies designed to reduce foreclosures should focus on ameliorating the immediate effects of job loss and other adverse life events rather than modifying loans to make them more affordable on a long-term basis.