Anonymous or personal? A simple model of repeated personalized advice
Marius Gramb, Christoph Schottmüller
University of Cologne, Working Paper Series in Economics No. 105, 2022
A consumer repeatedly asks an expert for advice. The expert’s incentives are not aligned with the consumer’s preferences because he can receive a bonus if the consumer takes certain actions. Over time, the expert gets to know the consumer and is therefore able to give better advice (if he wants to do so). In simple equilibria, both - consumer and expert - benefit from the expert’s learning if "learning" is such that the expert’s best guess about what is the best advice for the consumer becomes more precise. This provides a natural explanation for why consumers have a preference for personalized advice and also for why most internet users do not use anonymization tools. The theoretical predictions are tested in a laboratory experiment.
Anonymous or personal? A simple model of repeated personalized advice
Welfare optimal information structures in public good provision
Christoph Schottmüller
University of Cologne, Working Paper Series in Economics No. 104, 2022
This paper studies welfare maximizing information structures in a public good setting. In large groups less information is provided. In the limit, no information is provided but the information is efficient as by the law of large numbers no information is needed to take the efficient decision. This implies that the free rider problem is most severe not for large but for intermediate group sizes.
Welfare optimal information structures in public good provision
Macroeconomic Determinants of Involuntary Part-Time Employment in Germany
Theresa Markefke, Rebekka Rehm
University of Cologne, Working Paper Series in Economics No. 103, 2020
In times of economic crisis, employers in the US and UK reduce their employees' working hours, which results in a higher incidence of involuntary part-time work (IVPT). German labor market regulations make hours adjustments more difficult as employers need employees' consent. Against the background of this institutional difference, we use a panel regression frame- work that exploits federal state level variation to investigate the influence of cyclical, structural and institutional factors on the incidence of IVPT in Germany. In most sectors, unemployment is a key driver of IVPT. Since unilateral downward hours adjustments are hampered by regulation, we investigate the relevance of different channels that potentially explain the positive influence of unemployment on IVPT. It mainly stems from shifts in bargaining positions over the business cycle and from added labor supply on the intensive margin, that is, extended supply of already employed workers.
Macroeconomic Determinants of Involuntary Part-Time Employment in Germany
Inefficiency and Regulation in Credence Goods Markets with Altruistic Experts
Razi Farukh, Anna Kerkhof and Jonas Loebbing
University of Cologne, Working Paper Series in Economics No. 102, 2020
We study a credence goods problem - that is, a moral hazard problem with non-contractible outcome - where altruistic experts (the agents) care both about their income and the utility of consumers (the principals). Experts' marginal rate of substitution between income and consumer utility declines in income, such that experts care less for consumers when their financial situation is bad. In a market setting with multiple consumers per expert, a cross-consumer externality arises: one consumer's payment raises the expert's income, which makes the non-selfish part of preferences more important and thereby induces the expert to provide higher quality services to all consumers. The externality renders the market outcome inefficient. Price regulation partially overcomes this inefficiency and Pareto-improves upon the market outcome. If market entry of experts is endogenous, price regulation should be accompanied by entry restrictions. Our theory provides a novel rationale for the widespread use of price and entry regulation in real-world markets for expert services.
Inefficiency and Regulation in Credence Goods Markets with Altruistic Experts
Ingroup Love Drives Ingroup Bias within Natural Groups
Gönül Doğan, Luke Glowacki and Hannes Rusch
University of Cologne, Working Paper Series in Economics No. 101, 2020
Humans often favor their own group members over others, a preference that drives discrimination and intergroup conflicts. Whether such ingroup bias is a result of elevated concerns for one's group members or diminished concerns for outgroup members remains an open question. We test this experimentally with natural groups in Ethiopia that have varying intergroup relations (neutral vs. enmity) and strengths of group identity (weak vs. strong). We find that ingroup bias manifests as concern toward ingroup but not outgroup members and that a strong group identity amplifies ingroup concerns, whereas enmity has no effect. Our results thus identify shared group identity as a primary driver of concerns for others.
The Aversion to Monetary Incentives for Changing Behavior
Viola S. Ackfeld
University of Cologne, Working Paper Series in Economics No. 100, 2020
In this paper, I study an aversion to monetary incentives to make other people change their behavior. Particularly, I provide evidence that monetary incentives are disliked because they are powerful in changing what people do but not why they do it besides for money. In an experiment, one group of participants decides about interventions which try to change others' behavior. Between treatments, I vary whether the intervention consists of convincing information or monetary incentives. I find that participants consider monetary incentives as more effective in changing behavior than informative interventions. Nonetheless, they are less willing to intervene by monetary incentives compared to informative interventions to foster their preferred outcome. A comprehensive set of elicited beliefs supports the idea that this aversion to incentives stems from incentives' lack of changing one's reason to act.