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Payment in challenge studies from an economics perspective

Sandro Ambuehl, Axel Ockenfels and Alvin E. Roth
2020. Journal of Medical Ethics.


Maverick: Experimentally Testing a Conjecture of the Antitrust Authorities

Christoph Engel and Axel Ockenfels
2020. In: Advances in the Sociology of Trust and Cooperation: Theory, Experiments, and Applications, Buskens, Corten, Snijders (eds.), Oldenbourg: De Gruyter.

Antitrust authorities all over the world are keen on the presence of a particularly aggressive competitor, a “maverick”. Yet there is a lack of theoretical justification. One plausible determinant of acting as a maverick is behavioral: the maverick derives utility from acting competitively. We test this conjecture in the lab. In a pretest, we classify participants by their social value orientation. Individuals who are rivalistic in an allocation task indeed bid more aggressively in a laboratory oligopoly market. This disciplines incumbents. We conclude that the existence of rivalistic attitudes may justify antitrust policies that protect mavericks.

Not all Group Members are created Equal: Heterogeneous Abilities in Intergroup Contests

Francesco Fallucchi, Enrique Fatas, Felix Kölle and Ori Weisel
Forthcoming. Experimental Economics.

Competition between groups is ubiquitous in social and economic life, and typically occurs between groups that are not created equal. Here we experimentally investigate the implications of this general observation on the unfolding of symmetric and asymmetric competition between groups that are either homogeneous or heterogeneous in the ability of their members to contribute to the success of the group. Our main finding is that relative to the benchmark case in which two homogeneous compete against each other, heterogeneity within groups per se has no discernable effect on competition, while introducing heterogeneity between groups leads to a significant intensification of conflict as well as increased volatility, thereby reducing earnings of contest participants and increasing inequality. We further find that heterogeneous groups share the labor much more equally than predicted by theory, and that in asymmetric contests group members change the way in which they condition their efforts on those of their peers.

z-Tree unleashed: A novel client-integrating architecture for conducting z-Tree experiments over the Internet

Matthias L. Duch, Max R. P. Grossmann and Thomas Lauer
2020. Journal of Behavioral and Experimental Finance, 28, 100400.

We present z-Tree unleashed, a novel approach and set of scripts to aid the implementation of computerized behavioral experiments outside the laboratory. z-Tree unleashed enables subjects to join the experiment using a web portal that requires no software apart from a web browser. Experimenters are likewise enabled to administer their experiments from anywhere in the world. Except for z-Tree itself, z-Tree unleashed is entirely based on free and open-source software. In this paper we give a high-level overview of z-Tree unleashed's features and benefits and its design. We also show how to set up the server and demonstrate the steps required for conducting an entire experiment. We subsequently explain how to leverage the security and routing features of a virtual private network with z-Tree unleashed, enabling servers to securely run behind routers.

Market Design, Human Behavior, and Management

Yan Chen, Peter Cramton, John A. List and Axel Ockenfels
2020. Management Science.

We review past research and discuss future directions on how the vibrant research areas of market design and behavioral economics have influenced and will continue to impact the science and practice of management in both the private and public sectors. Using examples from various auction markets, reputation and feedback systems in online markets, matching markets in education, and labor markets, we demonstrate that com- bining market design theory, behavioral insights, and experimental methods can lead to fruitful implementation of superior market designs in practice.

Trust in Everyday Life

Alexa Weiss, Corinna Michels, Pascal Burgmer, Thomas Mussweiler, Axel Ockenfels and Wilhelm Hofmann
Forthcoming. Journal of Personality and Social Psychology: IRGP. 

Although trust plays a pivotal role in many aspects of life, very little is known about the manifestation of trust and distrust in everyday life. In this work, we integrated several prior approaches to trust and investigated the prevalence and key determinants of trust (vs. distrust) in people’s natural environments, using preregistered experience-sampling methodology. Across more than 4,500 social interactions from a heterogeneous sample of 427 participants, results showed high average levels of trust, but also considerable variability in trust across contexts. This variability was attributable to aspects of trustee perception, social distance, as well as three key dimensions of situational interdependence: conflict of interests, information (un)certainty, and power imbalance. At the dispositional level, average everyday trust was shaped by general trust, moral identity, and zero-sum beliefs. The social scope of most trust-related traits, however, was moderated by social distance: Whereas moral identity buffered against distrusting distant targets, high general distrust and low social value orientation amplified trust differences between close vs. distant others. Furthermore, a laboratory-based trust game predicted everyday trust only with regard to more distant but not close interaction partners. Finally, everyday trust was linked to self-disclosure and to cooperation, particularly in situations of high conflict between interaction partners’ interests. We conclude that trust can be conceptualized as a relational hub that interconnects the social perception of the trustee, the relational closeness between trustor and trustee, key structural features of situational interdependence, and behavioral response options such as self-disclosure.

Pricing externalities and moral behaviour

Axel Ockenfels, Peter Werner and Ottmar Edenhofer
2020. Nature Sustainability. 

To measure how moral behaviour interacts with pricing regimes, we conduct highly controlled experiments in which trading creates pollution. We compare indirect pricing (here, a cap and trade mechanism) and direct pricing (a tax) in an otherwise equivalent setting in which ‘producers’ are incentivized to emit CO2. ‘Judges’ decide on central trading parameters that may restrict socially harmful activities. Profit maximization predicts the same producer behaviour in either setting in the absence of regulation, yet we find a substantial share of producers refraining from emitting CO2 at all. Although judges restrict behaviour in similar ways across mechanisms, direct pricing more effectively accommodates moral behaviour than the quantity policy.

Promoting voter registration: the effects of low-cost interventions on behaviour and norms

Felix Kölle, Tom Lane, Daniele Nosenzo and Chris Starmer
2020. Behavioural Public Policy, 4(1), 26-49.

We report two studies investigating whether, and if so how, different low-cost interventions affect voter registration rates. Low-cost message-based interventions are increasingly used to promote target behaviours. While growing evidence shows that such ‘nudges’ often significantly impact behaviour, understanding of why interventions work or fail in particular contexts remains underdeveloped. In a natural field experiment conducted before the 2015 UK general election, we varied messages on a postcard sent by Oxford City Council to unregistered students encouraging them to join the electoral register. Our primary finding from the field study is that just one of our interventions – a reminder that people failing to register may be fined – has a significant positive impact. Offering small monetary rewards to register instead has a negative but insignificant effect. In a second study, using an online experiment we identify a particular mechanism explaining the influence of this intervention. Specifically, we show that our interventions have divergent effects on perceptions of the normative appropriateness of registering: emphasising that failing to register is punishable by law strengthened the perception that one ought to register, while offering monetary inducements for registering weakened the perception that doing so is an action already expected within society.

Borrow crisis tactics to get COVID-19 supplies to where they are needed

Peter Cramton, Axel Ockenfels, Alvin E. Roth and Robert B. Wilson
2020. Nature, 582, 334–336.

Emergency procedures that keep electricity running and food banks stocked can also keep health workers in protective equipment.

Female and male role models and competitiveness

Uta Schier
2020. Journal of Economic Behavior & Organization, 173, 55-67.

We investigate how role models affect the competitiveness of men and women. A strand of experimental literature shows that women shy away from competition. In a laboratory experiment, we test how observing an outstanding woman or man competing and succeeding (a female or a male role model) affects women's and men's competitiveness. We find that women's competitiveness increases after observing a female or male role model, while men's competitiveness is not affected. In addition, we find that a female role model raises women's self-confidence.

Überkreuznierenspenden in Deutschland?

Dorothea Kübler und Axel Ockenfels
2020. Medizinrecht, 38, 89–94.

Lebendspenden werden in Deutschland sehr viel seltener ermöglicht als in anderen Ländern. Das liegt auch daran, dass Überkreuzspenden nicht erlaubt sind. Spender und Empfänger müssen sich „in besonderer persönlicher Verbundenheit offenkundig nahestehen.“ Die Organe potenzieller Nierenspender mit dem geforderten Näheverhältnis zum Empfänger sind allerdings aufgrund von Unverträglichkeiten in etwa 40% der Fälle nicht kompatibel mit den jeweiligen Empfängern. Die Überkreuzspende bringt zwei Paare zusammen, bestehend aus jeweils einem Patienten und einem nahestehenden Spender, um eine Organspende ‚über Kreuz‘ zu ermöglichen. Aus der Praxis der Überkreuzspende in anderen Ländern lassen sich Best Practices ableiten.

Bringing the efficiency of electricity market mechanisms to multimodal mobility across congested transportation systems

Arash Beheshtian, Peter Cramton, Wooseok Do, R. Richard Geddes, Kara M. Kockelmann, Axel Ockenfels and Omid M. Rouhani
2020. Transportation Research Part A: Policy and Practice, 131, 58-69.

A central challenge facing Mobility as a Service (MaaS) is mispricing of its a core input: the use of scarce road space. A transparent real-time market for road use is essential for MaaS to reach its full potential. We focus on how network-wide, real-time markets for road use support MaaS, and how such markets can be developed.
In our proposed network-management scheme, roadway tolls (for entire trips – from origin to destination) are determined in a two-stage market hosted by an independent system operator or “ISO”. Service providers purchase the product (the right to use a series of road segments at a reasonably specific time of day) in the day-ahead market. In real-time, the market becomes physical and operates under the principle of open access: road capacity cannot be withheld in real time and its use is determined by users’ decisions, guided by prices and suggested routings. Real-time road-use prices are computed using clearing prices that balance real-time supply and demand. Those with pre-paid slots can be paid to delay their travel, to create space for high bidders during periods of suddenly low capacity or unexpectedly high demand. Such policies and programs can avoid excessive congestion, provide reliable travel times, and keep traffic moving, especially as automation makes car and truck travel easier.
Such policies are critical in helping cities and regions avoid gridlock. They ensure that travelers internalize congestion externalities, while enabling MaaS and other transport providers to deliver higher-quality mobility service for all travelers. Thoughtful marriage of week-ahead, day-ahead and real-time road pricing for travelers on congested networks can deliver efficient transportation systems that save time and energy, while providing signals for optimal infrastructure investment.


Das Klimaschutzprogramm der Bundesregierung: Eine Wende der deutschen Klimapolitik?

Ottmar Edenhofer, Matthias Kalkuhl und Axel Ockenfels
2020. Perspektiven der Wirtschaftspolitik, 21(1), 4-18.

Das Klimaschutzgesetz hat einen Paradigmenwechsel eingeleitet: den Einstieg in eine CO2-Bepreisung als künftiges Leitinstrument der Klimapolitik. Auf den ersten Blick ist der CO2-Preis unter einer Fülle von Fördermaßnahmen und ordnungsrechtlichen Regelungen verschüttet, deren Wirksamkeit und Kosten höchst unsicher sind. Der CO2-Preis ist aber so angelegt, dass er langfristig das dominante Instrument einer europäisch harmonisierten Klimapolitik werden kann. Der angedeutete Paradigmenwechsel der deutschen Klimapolitik öffnet damit die Tür, die europäische und internationale Kooperation zu stärken. Dazu ist es aber notwendig, neben der europäischen auch die globale Klimapolitik neu auszurichten. Auch dort sollten sich die Verhandlungen statt auf nationale Mengenziele auf CO2-Preise konzentrieren. Die erforderliche Kooperation wird möglich, wenn die Regierungen Transferzahlungen strategisch und reziprok nutzen. So könnte die Effektivität der Klimapolitik erhöht werden und es ließen sich die entstehenden Verteilungskonflikte entschärfen.

Games as Frames

Axel Ockenfels and Uta Schier
2020. Journal of Economic Behavior and Organization, 172, 97-106.

We show that economic games per se can provide contextual cues and thereby impact behavior. In two laboratory experiments, we examine whether deliberating on trust games versus stag-hunt games without feedback changes cooperation behavior in a subsequent game. First, we find that subjects who play trust games without feedback hold more pessimistic beliefs about other players’ cooperation in a subsequent game than subjects who played stag-hunt games without feedback. We also observe that deliberation on trust games versus stag-hunt games accordingly affects behavior in a subsequent, unrelated game. While stag-hunt games align interests between players, trust games pose a conflict of interest between players. Such (mis-)alignments induced by the game potentially explain our findings, because they may offer cues that affect beliefs and behavior in subsequent games.

People prefer coordinated punishment in cooperative interactions

Lucas Molleman, Felix Kölle, Chris Starmer and Simon Gächter
2019. Nature Human Behaviour, 3, 1145–1153.

Human groups can often maintain high levels of cooperation despite the threat of exploitation by individuals who reap the benefits of cooperation without contributing to its costs1–4. Prominent theoretical models suggest that cooperation is particularly likely to thrive if people join forces to curb free riding and punish their non-contributing peers in a coordinated fashion5. However, it is unclear whether and, if so, how people actually condition their punishment of peers on punishment behaviour by others. Here we provide direct evidence that many people prefer coordinated punishment. With two largescale decision-making experiments (total n = 4,320), we create minimal and controlled conditions to examine preferences for conditional punishment and cleanly identify how the punishment decisions of individuals are impacted by the punishment behaviour by others. We find that the most frequent preference is to punish a peer only if another (third) individual does so as well. Coordinated punishment is particularly common among participants who shy away from initiating punishment. With an additional experiment we further show that preferences for conditional punishment are unrelated to wellstudied preferences for conditional cooperation. Our results highlight the importance of conditional preferences in both positive and negative reciprocity, and they provide strong empirical support for theories that explain cooperation based on coordinated punishment.

Set road charges in real time to ease traffic

Peter Cramton, R. Richard Geddes and Axel Ockenfels
2018. Nature (Comment), 560, 23-25.

Track vehicles to link tolls with demand and cut congestion, urge Peter Cramton, R. Richard Geddes and Axel Ockenfels.

Dispute Resolution or Escalation? The Strategic Gaming of Feedback Withdrawal Options in Online Markets

Gary E. Bolton, Ben Greiner and Axel Ockenfels
2018. Management Science, 64(9), 4009-4031.

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of dispute. The mutual feedback withdrawal option creates an incentive to leave negative feedback, independent of the opponent’s behavior, to improve one’s bargaining position in the dispute resolution phase. This leads to distorted reputation information and less trust and trustworthiness in the trading phase. Buyers who refuse to give feedback strategically, even when it comes at a personal cost, mitigate the detrimental impact. It is also mitigated in markets with one-sided moral hazard and a unilateral feedback withdrawal option.