Publications from the iLEE project – Københavns Universitet

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Publications from the iLEE project 

"Deciding for Others Reduces Loss Aversion"

By Ola Andersson, Håkan J. Holm, Jean-Robert Tyran and Erik Wengström. 
Management Science forthcoming.

Abstract: We study risk taking on behalf of others, both when choices involve losses and when they do not. A large-scale incentivized experiment with subjects randomly drawn from the Danish population is conducted. We find that deciding for others reduces loss aversion. When choosing between risky prospects for which losses are ruled out by design, subjects make the same choices for themselves as for others. In contrast, when losses are possible, we find that the two types of choices differ. In particular, we find that subjects who make choices for themselves take less risk than those who decide for others when losses loom. This finding is consistent with an interpretation of loss aversion as a bias in decision making driven by emotions and that these emotions are reduced when making decisions for others

"Microfoundations of Social Capital"

By Christian Thöni, Jean-Robert Tyran and Erik Wengström.
Journal of Public Economics 2012, 96: 635-43. (supplementary online materials)

Abstract: Research on social capital routinely relies on survey measures of trust which can be collected in large and heterogeneous samples at low cost. We validate such survey measures in an incentivized public goods experiment and show that they are importantly related to cooperation behavior in a large and heterogeneous sample. We provide evidence on the microfoundation of this relation by use of an experimental design that enables us to disentangle preferences for cooperation from beliefs about others’ cooperation. Our analysis suggests that the standard trust question used in the World Values Survey is a proxy for cooperation preferences rather than beliefs about others’ cooperation. In contrast, the “fairness question”, a recently proposed alternative to the standard trust question, seems to operate through beliefs rather than preferences.

"Risk Aversion Relates to Cognitive Ability: Preferences or Noise?

By Ola Andersson, Jean-Robert Tyran, Erik Wengström and Håkan J. Holm Journal of the European Economic Association, forthcoming (supplementary materials)

Abstract: Recent experimental studies suggest that risk aversion is negatively related to cognitive ability. In this paper we report evidence that this relation may be spurious. We recruit a large subject pool drawn from the general Danish population for our experiment. By presenting subjects with choice tasks that vary the bias induced by random choices, we are able to generate both negative and positive correlations between risk aversion and cognitive ability. Our results suggest that cognitive ability is related to random decision making rather than to risk preferences.

"Fairness is Intuitive" 

By Alexander W. Cappelen, Ulrik H. Nielsen, Bertil Tungodden, Jean-Robert Tyran and Erik Wengström, Experimental Economics, forthcoming.

Abstract: In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker's cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.

"Give and Take in Dictator Games"

By Alexander W. Cappelen, Ulrik H. Nielsen, Erik Ø. Sørensen, Bertil Tungodden and Jean-Robert Tyran. Economics Letters 2013, 118(2): 280-283.

Abstract: It has been shown that participants in the dictator game are less willing to transfer money to the other participant when their choice set also includes the option to take money. This paper examines whether this effect is due to the choice set providing participants with information about entitlements. We find that the share of positive transfers depends on the choice set even when there is no uncertainty about entitlements. We also find that this effect of choice sets is independent of personal characteristics.

"Understanding the Nature of Cooperation Variability"

By Toke Fosgaard, Lars G. Hansen, and Erik Wengström (paper)
Journal of Public Economics 120: 134-143

Abstract: Our paper investigates framing effects in a large-scale public good experiment. We measure indicators of explanations previously proposed in the literature, which when combined with the large sample, enable us to estimate a structural model of framing effects. The model captures potential causal effects and the heterogeneity of cooperation behavior. We find that framing only has a small effect on the average level of cooperation but a substantial effect on behavioral heterogeneity explained almost exclusively by a corresponding change in the heterogeneity of beliefs about other subjects' behavior. The impact of changes in preferences and game form misperception is on the other hand negligible.

" 'At least I didn't lose money' - Nominal Loss Aversion Shapes Evaluations of Housing Transactions"

By Thomas A. Stephens and Jean-Robert Tyran (paper)

Abstract: Loss aversion is one of the most robust findings to have emerged from behavioral economics. Surprisingly little attention, however, has been devoted to nominal loss aversion, the interaction of loss aversion and money illusion. People tend to think of transactions in terms of their nominal (monetary) values. Real losses may therefore loom larger in people’s minds when they lose money than when real losses are hidden by purely nominal gains. Using a survey experiment with a large and heterogeneous sample, we show that evaluations of housing transactions are systematically biased by purely nominal gains versus losses.

"Second Thoughts on Free Riding"

By Ulrik H. Nielsen, Jean-Robert Tyran and Erik Wengström. Economics Letters 2014, 122(2): 136-139.

Abstract: We use the strategy method to classify subjects into cooperator types in a large-scale online Public Goods Game and find that free riders spend more time on making their decisions than conditional cooperators and other cooperator types. This result is robust to reversing the framing of the game and is not driven by free riders lacking cognitive ability, confusion, or natural swiftness in responding. Our results suggest that conditional cooperation serves as a norm and that free riders need time to resolve a moral dilemma.

"Who Cooperates? Evidence from a Large-Scale Experiment"

By Jean-Robert Tyran and Erik Wengström

Abstract: (presented at various seminars, e.g. Marseille, AEA meetings): We have developed iLEE, a new technology to “bring the lab to your living room”, i.e. to conduct controlled and incentivized experiments over the internet. Moreover, the technology allows us to match the experimental data with detailed register data while maintaining full subject-subject and subject-experimenter anonymity. I explain the iLEE technology and illustrate its use. We present results from a public goods experiment conducted with about 2200 participants from all walks of life (ages 18-80) in Denmark. We show that (i) participants cooperate at levels exceeding what is usually found in the laboratory, (ii) most participants are conditional cooperators, and (iii) cooperation depends in important ways on socio-demographics, psychometrics like personality and IQ, and survey measures of attitudes and values.

"Risking Other People’s Money. Experimental Evidence on Bonus Schemes, Competition, and Altruism"

By Ola Andersson, Håkan J. Holm, Jean-Robert Tyran and Erik Wengström (paper)

Abstract: We study risk taking on behalf of others in an experiment on a large random sample. The decision makers in our experiment are facing high-powered incentives to increase the risk on behalf of others through hedged compensation contracts or with tournament incentives. Compared to a baseline condition without such incentives, we find that the decision makers respond strongly to these incentives that result in an increased risk exposure of others. However, we find that the increase in risk taking is mitigated by altruistic preferences and pro-social personality traits.

"Income and Ideology: How Personality Traits, Cognitive Abilities, and Education Shape Political Attitudes"

By Rebecca Morton, Jean-Robert Tyran and Erik Wengström (paper)

Abstract: We find that cognitive abilities, educational attainment, and some personality traits indirectly affect ideological preferences through changes in income. The effects of changes in personality traits on ideology directly and indirectly through income are in the same direction. However, the indirect effects of cognitive abilities and education often offset the direct effects of these variables on ideological preferences. That is, increases in cognitive abilities and education significantly increase income, which reduces the tendency of individuals to express leftist preferences. These indirect effects are in some cases sizeable relative to direct effects. The indirect effects of cognitive abilities through income overwhelm the direct effects such that increasing IQ increases rightwing preferences. For ideological preferences over economic policy the indirect effects of advanced education also overwhelm the direct effects, such that individuals with higher education are more likely to express rightwing preferences than those with lower education.

"Personality Traits and the Gender Gap in Ideology"

By Rebecca Morton, Jean-Robert Tyran and Erik Wengström

Abstract: What explains the gender gap in ideology, i.e. the observation that women tend to be more leftist than men? We provide new evidence showing that personality traits play a key role. Using a novel high-quality data set, we show that the mediating (i.e. indirect) effects of gender operating through personality traits by far dominate the direct e¤ects of gender. They also dominate other potential differences between the sexes like income or education as explanatory factors. Our findings suggest that women tend to be more leftist than men mainly because they have different personalities, which, in turn, shape their expressed ideology. Taking such mediating effects of personality traits into account explains over three quarters of the observed gender gap in general ideological preferences.

"Framing and Misperceptions in a Public Goods Experiment"

By Toke Fosgaard, Lars G. Hansen and Erik Wengström (paper)
Scandinavian Journal of Economics, forthcoming

Abstract: Earlier studies have found that a substantial part of the contributions in public good games can be explained by subjects misperceiving the game's incentives. Using a large-scale public good experiment, we show that subtle changes in how the game is framed substantially affect such misperceptions and that this explains major parts of framing effect on subjects' behavior. When controlling for the different levels of misperception between frames, the framing effect on subjects' cooperation preferences disappears.

"Giving more when it’s for Real: Evidence of a Negative Hypothetical Bias in Public Goods Experiments"

By Jean-Robert Tyran and Erik Wengström (paper)

Abstract: This paper addresses the effects of providing financial incentives in two versions of the public good game; a standard one-shot public good game and a strategy-method game enabling elicitation of cooperation strategies. The experiment was conducted over the internet with a heterogeneous subject pool. Providing incentives significantly increases contributions in the standard public good game. This indicates that the strengthening of the social motivations dominates over the incentive to free ride. Cooperation profiles, elicited using the strategy method, are unaffected by incentives. We believe this is driven by two factors. First, the incentive effect in the standard public good game is partly driven by a shift in beliefs. Second, the discrepancy between the two versions of the public good game is due to a hot-cold empathy gap.

"The Demographic Distribution of Fairness Ideals"

By Alexander W. Cappelen, Erik Ø. Sørensen, Bertil Tungodden and Jean-Robert Tyran

Abstract (in progress): Using a large and quasi-representative sample of Danish citizens, we examine the distribution of social preferences in the population using a real effort task and a series of dictator decisions. We find that young males are considerably less altruistic than females, but this difference diminishes as giving increases with age. Making redistribution costly decreases redistribution, and this sensitivity seems to increase with age. We propose a model that can distinguish between changes in the distribution of fairness ideals and changes in the weight attached to social concerns relative to private pecuniary interests.

"Forgiven and Forgotten. A Large-Scale Experiment on Trust and Reputation"

By Dirk Engelmann, Florian Spitzer and Jean-Robert Tyran

Abstract: We study finitely repeated trust games in an internet-based experiment with a large heterogeneous sample of the Danish population. First movers choose only once their strategy, where they can condition on the reputation of the second mover, whereas second movers are matched 40 times with different first-mover strategies. The reputation of the second mover indicates whether she has abused trust in the recent past, where the length of this past is varied across treatments. Short histories ("forgetting") might provide insufficient incentives to honor trust, whereas long histories could have negative effects because deviators are excluded from efficient interactions for too long before they are rehabilitated. First movers who trust only if the second mover has a clean past are "unforgiving". We analyze the interplay of forgiving and forgetting in shaping trust.

"Gender Sorting into jobs"

By Alexander Rabas, Rupert Sausgruber and Jean-Robert Tyran

Abstract: We develop an experimental design to shed new light on the drivers of gender sorting, in particular the well-established fact that women tend to sort into jobs with low pay and high job security. We draw subjects from a representative sample of the Danish population and match experimental choices to official socioeconomic register data. In line with previous studies, we find that women are more risk averse than men which explains some of the sorting. In addition, we find that women's tendency to sort into such jobs is driven by gender differences in personality, in particular emotional stability, as well as a lack of confidence of women into their productivity. Accordingly, men do the opposite - they tend to sort into jobs with high pay and low security, driven by their personality and their overconfidence in productivity. To validate our results, we show that choices made in the lab predict sorting in the Danish labor market.

"Parents' Education and their Adult Offspring's Other-Regarding Behavior"

By Ulrik H. Nielsen (paper)

Abstract: Does socioeconomic background when measured by parental educational attainment explain the heterogeneity in adults' other-regarding preferences? I test this by using data from two online experiments -- a Dictator Game and a Trust Game that were conducted with a broad sample of the Danish adult population. I match the experimental data with high-quality data from the Danish population registers about my subjects and their parents. Whereas previous studies have found socioeconomic status, including parental educational attainment, to be predictive for children's generosity, I find no such evidence among adults. This result is robust across age groups and genders. I provide two explanations for this. First, sociodemographic characteristics in general appear to be poor predictors of adults' other-regarding behavior. Second, by using Danish survey data, I find that Danish parents' educational attainment appears to be uncorrelated with how important they find it to teach their children to "think of others". More speculative explanations are also provided.

"Correlates and Consequences of Distributional Preferences"

By Morten Hedegaard, Rudolf Kerschbamer and Jean-Robert Tyran

Abstract: (work in progress)

"Ethical versus Selfish Motivations and Turnout in Small and Large Elections"

By Rebecca Morton and Jean-Robert Tyran (paper)

Abstract: We evaluate voter motivations using both small and large electorates with a diverse subject pool via two virtual laboratory experiments. We find little support for selfish instrumental turnout; that is, abstention does not increase with electorate size and voters who are in the minority abstain more than those in the majority. Expressive motivations, related to pro-social behavior, appear to explain the majority of voter turnout. Most of these voters make selfish voting choices. A smaller significant number of voters make ethical choices, which are best explained by instrumental ethical motivations or large expressive ethical utility. However, we also find a signiifcant minority of voters appears to engage in bandwagon voting, which offsets the possible moral bias in electoral outcomes from ethical voting. Moreover, the percentage of ethical voting is unrelated to electorate size, so although we find a slight moral bias in electoral outcomes, it does not increase in electorate size.

"Does Shared Responsibility Breed Unfairness?"

By Raymond Duch, Ulrik H. Nielsen and Jean-Robert Tyran

Abstract: (work in progress) We investigate whether a coalition government’s decision to implement unpopular policies depends on how much the voters hold individual coalition members responsible for the policy. We use a modified dictator game with multiple dictators (parties) and multiple recipients (voters). The parties decide on how to distribute (policy) a fixed sum of money between the voters and themselves. The voters cannot directly affect the parties’ decisions, but they are given the opportunity to punish the parties. We ask: Do coalition governments in which power is dispersed implement more unfair policies than coalitions in which a strong party dominates? Is this effect due to voters holding the strong party responsible for the implemented policies? Do the parties correctly anticipate the voters’ punishment behavior?

"Coalition Context, Voter Heuristics and the Coalition-directed Vote"

By Raymond Duch and Jean-Robert Tyran (paper) (supplementary materials)

Abstract: In contexts with multi-party governing coalitions national electorates employ heuristics that are ecologically rational, i.e. adapted to the complexity of the environment. Evidence from Denmark, Germany and the U.K., indicates that voters acquire the heuristics that allow them to anticipate the types of coalitions that form after an election. Employing experimental vingettes embedded in internet surveys we nd that voters 1) understand the basic arithmetic of majority coalition formation; 2) recognise that formateur parties likely enter the governing coalition; 3) anticipate that parties that are proximate on the ideological scale will more likely agree to a coalition; 4) anticipate coalitions of parties that are ideologically connected; and 5) anticipate the formation of minimal winning connected coalitions. The Danes exhibits more sophisticated coalition heuristics than the Germans; and the British have under-developed coalition reasoning heuristics. Acquiring these heuristics increases the likelihood of exercising an informed coalition directed economic vote.

"The Gambler's Fallacy"

By Sigrid Suetens and Jean-Robert Tyran

Abstract: (work in progress) 

"Investment behavior in the Lab predicts Wealth in Life"

By Thomas A. Stephens and Jean-Robert Tyran

Abstract: (work in progress) We present experimental subjects with a series of investment opportunities that systematically vary in salient returns and in true profitability. Some investment opportunities look attractive but actually result in losses, while others look unattractive but actually offer gains. For a third group, salient returns provide correct signals about true profitability. From subjects’ choices, we develop a simple metric of investment skill that allows us to distinguish rational investors from others. We draw subjects from a representative sample of the Danish population and match experimental choices to official socioeconomic register data. We find that rational investors are substantially richer than those who are misled by salience or those who make incoherent choices. While our evidence is correlational by design, we find that these differences develop at higher ages, and increase with age, suggesting that causality runs from rationality to wealth accumulation.