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Economies prosper when agents move beyond local exchange and cooperate with strangers in the creation of surplus.

But expanding the scale of cooperation presents formidable challenges: interaction becomes impersonal and reciprocity unfeasible, trust and social norms are weakened. In this study we show that stable monetary systems are important institutions to foster large-scale cooperation and surplus generation. In an experiment, subjects facing a cooperative task can restrict interaction to pairs, or widen it to large groups of strangers.

Cooperation is most efficient in large groups, but large groups rarely emerge and, when they do, self-regarding behavior prevails, generating significantly less surplus than pairs. Instead, when subjects can exchange intrinsically worthless tokens for cooperation, then large groups spontaneously emerge, and create significantly more surplus than pairs.  

Tim Cason (with Robertas Zubrickas)

Enhancing Fundraising with Refund Bonuses

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The provision point mechanism as a method of funding threshold public goods is extended with refund bonuses. Each contributor not only has his contribution refunded in the case of insufficient contributions but also receives a refund bonus proportional to his proposed contribution.

As long as the refund bonus pool does not exceed the net value of the public good, in equilibrium the public good is always provided and refund bonuses are never distributed. In this paper, we empirically investigate this extension of the provision point mechanism in a laboratory experiment by testing its properties on allocative and distributive efficiency, equilibrium coordination, and invariance to information distribution.

Individuals respond to the incentives induced by refund bonuses as predicted, but systematic deviations exist that are consistent with quantal response equilibrium. Since this simple mechanism has considerable practical potential especially in crowdfunding, these promising initial results call for further experimental work. 

Simon Gächter (with Felix Kölle and Simone Quercia)

 Different Frames or Different Games? Comparing Common Pool and Public Good Social Dilemmas

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Framing effects have been described as the evidence that “seemingly inconsequential changes in the formulation of choice problems cause significant shifts in preferences'' (Kahneman and Tversky 1981).

Although framing effects have been originally studied in individual decision problems, more recently researchers have also become interested in investigating framing effects in strategic interactions.

While in the former - relying on the theory of revealed preferences - different choices across different frames have been interpreted as evidence for frame-dependent preferences, in the latter the measurement of framing effects is complicated by additional confounds which are inherent to the strategic nature of games.

Nevertheless, many researchers have interpreted differences in game play as evidence for frame-dependent preferences. In this paper we tackle this problem by disentangling the effects of framing on preferences from the confounds of beliefs and misconceptions of the game form (Cason and Plott 2014). We experimentally investigate this question in Give-some vs. Take-some social dilemmas.

We find that preferences are significantly affected by the framing manipulation and that this effect persists even when controlling for misconception of the game form. We further show that the effect of framing on preferences is stable within and between subjects and that it can be explained by differences in kindness perceptions.

Overall our results demonstrate that Give vs. Take are not just two sides of the same social dilemma, but rather two fundamentally different cooperation problems because they trigger different kindness perceptions and different social preferences. Therefore, any behavioral difference at the cooperation level is not a pure framing effect but is due to the fact that people are actually playing two different games.  

John Hamman

On the Stability of Coordination in Dynamic Groups

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Groups of independent actors must regularly agree on social conventions of public good provision and self-governance, yet group make-up is rarely static.  With changing membership there is a potential tension between maintaining social conventions versus replacing them. 

We study the stability of coordination in such groups with changing membership. In a threshold public goods game with heterogeneous returns and costly punishment, group members chat to determine initial contributions to reach the threshold. Group members are then systematically rotated by either switching between groups or using a 'generations' design. We find that the rotation mechanism has a significant effect on coordination stability when subjects may see a contribution history for their new group.  

Hannah Schildberg-Hörisch (with Armin Falk and Fabian Kosse)

Choosing the right challenge

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The gap in achievement between individuals with different socio-economic status is well documented and a major political concern. In this paper, we propose a new explanation for this achievement gap that goes beyond differences in IQ, perseverance etc..

We argue that selecting the level of challenge that is appropriate to individual ability is key to whether individuals live up to their potential. We present an experiment design that measures this skill.

Our results show that children with low socio-economic status family background are less able to choose appropriate challenges than their high socio-economic status counterparts. In particular, they choose challenges that are too demanding given their individual ability, a behavior that seems to be driven by social image concerns.

Moreover, we provide causal evidence on a randomly assigned intervention, a mentoring program, that is able to improve low socio-economic status children’s skill to choose the appropriate level of challenge – and does so in a way that closes the gap between children with high and low socio-economic status.  

Sigrid Suetens (with Elena Cettolin)

Reciprocity in a Heterogeneous Society

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Reciprocity is key for successful economic and social interactions in a society. To understand how today's Western societies work, it is important to understand reciprocity among individuals with different ethnic and cultural backgrounds. We study whether reciprocation in a representative sample of individuals living in the Netherlands, and belonging to the native majority group, depends on whether the interaction partner is native as well, or is, instead, non-native.

Individuals in the sample play simple, incentivized trust games with an anonymous other in the sample, whose first name was (truthfully) communicated. We find that trustees reciprocate trust of non-native trustors up to 7% less than that of native trustors, and that the difference is statistically significant. Given that the decision to reciprocate does not involve any risk or uncertainty, we take our results as evidence of taste-based discrimination.  

Jean-Robert Tyran (with Lydia Mechtenberg)

Voter Motivation and the Quality of Democratic Choice

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The quality of democratic decision making critically depends on voter motivation, i.e. the voters’ willingness to incur costs to be well informed and to turn out. If voters are motivated, voting may result in smart choices because of information aggregation but if voters are unmotivated, delegating the choice to an expert may yield better outcomes.

Those willing to incur a cost to cast an informed vote improve the quality of democratic choice for the entire committee and thus provide a public good. We experimentally show that voting is more informationally efficient when subjects demand (by signing a petition) to make choices by voting than when decision making by voting is imposed on subjects.

Our results suggest that the quality of direct democratic decision making can be improved by letting voters know that others are (also) motivated to be informed and to turn out.