Beliefs, Empathy & Choice
Workshop: Recent Advances in the Economics of Philanthropy (May 18-19, 2017)
Workshop: Recent Advances in the Economics of Philanthropy (April 23-24, 2015)
Selected papers and abstracts
Adena, Maja/Huck, Steffen (2017): "Matching Donations without Crowding Out? Some Theoretical Considerations, a Field, and a Lab Experiment". In: Journal of Public Economics, Vol. 148, S. 32-42.
Abstract: Is there a way of matching donations that avoids crowding out? We introduce a novel matching method where the matched amount is allocated to a different project, present some simple theoretical considerations that predict reduced crowding out or crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experiment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes.
Adena, Maja/Huck, Steffen (2016): Online fundraising, self-deception, and the long-term impact of ask avoidance. WZB Discussion Paper SP II 2016–306. Berlin: WZB.
Abstract: We provide the first field evidence for the role of pure self-image, independent of social image, in charitable giving. In an online fundraising campaign run on an opera ticket booking platform we document how individuals engage in self-deception to preserve their self-image. In addition, we provide evidence on stark adverse long-run effects of fundraising campaigns for ticket selling entities. “Avoiding the ask,” opera customers buy fewer tickets in the following season. Ticket sales per person fall by €16–32, while average charitable income from the same group during the campaign is just €0.26.
Fehr, Dietmar/Huck, Steffen (2015): "Who Knows It Is a Game? On Strategic Awareness and Cognitive Ability". In: Experimental Economics, advance access, 11.08.2015, online: http://dx.doi.org/10.1007/s10683-015-9461-0.
Abstract: We examine strategic awareness in experimental games, that is, the question of whether subjects realize they are playing a game and thus have to form beliefs about others’ actions. We conduct a beauty contest game and elicit measures of cognitive ability and beliefs about others’ cognitive ability. We show that the effect of cognitive ability is highly non-linear. Subjects below a certain threshold choose numbers in the whole interval and their behavior does not correlate with beliefs about others’ ability. In contrast, subjects who exceed the threshold avoid choices above 50 and react very sensitively to beliefs about the cognitive ability of others.
Huck, Steffen/Rasul, Imran/Shephard, Andrew (2015): "Comparing Charitable Fundraising Schemes. Evidence from a Natural Field Experiment and a Structural Model". In: American Economic Journal - Economic Policy, Vol. 7, No. 2, S. 326-369.
Abstract: We present evidence from a natural field experiment and structural model to shed light on the efficacy of alternative fundraising schemes. In conjunction with the Bavarian State Opera, we mailed 25,000 opera attendees a letter describing a charitable fundraising project organized by the opera house. Recipients were randomly assigned to treatments designed to explore responses to fundraising schemes varying in: the presence of a lead donor; and how individual donations would be matched using the lead donation. The structural model estimates extensive and intensive margin responses, and is then utilized to predict giving behavior in counterfactual fundraising schemes.
Adena, Maja/Huck, Steffen (2015): Matching Donations without Crowding Out? Some Theoretical Considerations, a Field, and a Lab Experiment. WZB Discussion Paper SP II 2015-302r. Berlin: WZB.
Abstract: Is there a way of matching donations that avoids crowding out? We introduce a novel matching method where the matched amount is allocated to a different pro-ject, present some simple theoretical considerations that predict reduced crowd-ing out or more crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experi-ment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes.
Huck, Steffen/Szech, Nora/Wenner, Lukas M. (2015): More Effort with Less Pay. On Information Avoidance, Belief Design and Performance. WZB Discussion Paper SP II 2015-304r. Berlin: WZB.
Abstract: In a tedious real effort task, subjects know that their piece rate is either low or ten times higher. When subjects are informed about their piece rate realization, they adapt their performance. One third of subjects nevertheless forego this instrumental information when given the choice | and perform stunningly well. Agents who are uninformed regarding their piece rate tend to outperform all others, even those who know that their piece rate is high. This also holds for enforced instead of self-selected information avoidance. All our findings can be captured by a model of optimally distorted expectations following Brunnermeier and
Adena, Maja/Huck, Steffen/Rasul, Imran (2014): "Charitable Giving and Nonbinding Contribution-Level Suggestions. Evidence from a Field Experiment". In: Review of Behavioral Economics, Vol. 1, No. 3, S. 275-293.
Abstract: When asking for donations, charitable organizations often suggest a potential amount to contribute. However, the evidence concerning the effects of such suggestions is scarce and inconsistent. Unlike the majority of earlier studies concerned with small-money solicitations, we examine the effect of larger nonbinding suggestions in the context of middle-range donations which are relevant in practice. In a randomized field experiment conducted in conjunction with the Bavarian State Opera, opera visitors received solicitation letters asking to support a social youth project organized by the opera house. The three different treatments were: no suggestion and suggestions of €100 and €200, respectively. Both suggestions were larger than average and median donations in this context. We find that suggested contribution levels substantially influence the distribution of donations actually received. The mean amounts given increase significantly if a suggestion is made. The increase is stronger in the €200 treatment. On the other hand, the participation rate decreases if a suggestion is made. Overall, the returns from the campaign increase nonsignificantly when a suggestion is made. The solicitation was repeated a year later, without any suggestion. There is weak evidence that suggestions have a long-term effect on individual contribution-level decisions.
Costa-Gomes, Miguel A./Huck, Steffen/Weizsäcker, Georg (2014): "Beliefs and Actions in the Trust Game. Creating Instrumental Variables to Estimate the Causal Effect". In: Games and Economic Behavior, Vol. 88, No. November, S. 298–309.
Abstract: In many economic contexts, an elusive variable of interest is the agent's belief about relevant events, e.g. about other agents' behavior. A growing number of surveys and experiments asks participants to state beliefs explicitly but little is known about the causal relation between beliefs and actions. This paper discusses the possibility of creating exogenous instrumental variables for belief statements, by informing the agent about exogenous manipulations of the relevant events. We conduct trust game experiments where the amount sent back by the second player (trustee) is exogenously varied. The procedure allows detecting causal links from beliefs to actions under plausible assumptions. The IV-estimated effect is significant, confirming the causal role of beliefs.
Grohn, Jan/Huck, Steffen/Valasek, Justin Mattias (2014): "A Note On Empathy in Games". In: Journal of Economic Behavior & Organization, Vol. 108, Special Issue "Institutions, Games, and Experiments, in Honor of Werner Güth", edited by Martin Dufwenberg and Axel Ockenfels, S. 383–388.
Abstract: In this note we shall discuss a concept that – despite its prominence in both Hume (1739) and Smith (1759), its obvious relevance for social behavior, and its not so infrequent use in colloquial language – has never gained a foothold in economic theory: the concept of empathy. Specifically, we illustrate how some insights from the psychological literature on empathy can be incorporated into a standard utility framework, and demonstrate the potential interaction of beliefs and utility through the channel of empathy.
Adena, Maja (2014): Tax-price Elasticity of Charitable Donations – Evidence from the German Taxpayer Panel. WZB Discussion Paper SP II 2014-302. WZB: Berlin.
Abstract: I estimate permanent and transitory tax-price and income elasticity of charitable giving in Germany using a rich panel data of tax return for the years 2001-2006. Income tax reforms were implemented in 2004 and 2005. The results suggest that the permanent tax-price elasticity varies significantly by income class, ranging from -0.2 for low incomes to -1.6 for higher incomes. Permanent income elasticity does not vary much among income classes, is rather low, and ranges between 0.2-0.3. The donors adjust their donations gradually after changes in the tax schedule and respond to future predictable changes in price. They respond to changes in current and, to a smaller extent, in future income.
Falk, Armin/Szech, Nora (2013): Organizations, Diffused Pivotality and Immoral Outcomes. WZB Discussion Paper SP II 2013-303. Berlin: WZB.
Abstract: This paper studies how organizational design affects moral outcomes. Subjects face the decision to either kill mice for money or to save mice. We compare a Baseline treatment where subjects are fully pivotal to a Diffused-Pivotality treatment where subjects simultaneously choose in groups of eight. In the latter condition eight mice are killed if at least one subject opts for killing. The fraction of subjects deciding to kill is higher when pivotality is diffused. The likelihood of killing is monotone in subjective perceptions of pivotality. On an aggregate level many more mice are killed in Diffused-Pivotality than Baseline.
Huck, Steffen/Kübler, Dorothea/Weibull, Jörgen (2012): "Social Norms and Economic Incentives in Firms". In: Journal of Economic Behavior & Organization, Vol. 83, No. 2, S. 173-185.
Abstract: This paper studies the interplay between economic incentives and social norms in firms. We introduce a general framework to model social norms arguing that norms stem from agents’ desire for, or peer pressure towards, social efficiency. In a simple model of team production we examine the interplay of three types of contracts with social norms. We show that one and the same norm can be output-increasing, neutral, or output-decreasing depending on the contract. Multiplicity of equilibria and crowding out effects of steeper incentives can arise.