Self-Signaling Versus Social-Signaling in Giving (updated November 2010)
Abstract: I investigate the relative importance of social-signaling versus self-signaling in driving giving. I derive specific qualitative predictions about how the response of an image-motivated dictator to a change in the probability that her choice will be implemented depends crucially on the information available to the relevant observer. A probabilistic dictator game experiment tests the joint, relative, and independent effects of self-signaling and social-signaling. The results provide little evidence of self-signaling, but stronger evidence of social-signaling, particularly in a large subsample that excludes likely 'selfish types'.
A Second-Best Mechanism for Land Assembly with Jonathan Pincus and Perry Shapiro
Abstract: Land can be inefficiently allocated when attempts to assemble separately-owned pieces of land into large parcels are frustrated by holdout landowners. The existing land-assembly institution of eminent domain can be used neither to gauge efficiency nor to determine how to compensate displaced owners adequately. We take a mechanism-design approach to the assembly problem, formalizing it as a multilateral trade environment with perfectly complementary goods. We characterize the least-inefficient direct mechanism that is incentive compatible, self-financing, protects the property-rights of participants, and does not assume that participants have useful information about the subjective valuations of others. The second-best mechanism, which we call the Strong Pareto (SP) mechanism, utilizes a second-price auction among interested buyers, with a reserve sufficient to compensate fully all potential sellers, who are paid according to fixed and exhaustive shares of the winning buyer's offer. It may also internalize local externalities. While the SP mechanism only approves efficient sales, efficiency is not sufficient for sale---even with competitive bidding---because the auction reserve may exceed the aggregate seller valuation. The inefficiency of the second-best mechanism implies a Myserson-Satterthwaite (1981)-style impossibility theorem. We propose a criterion that encompasses concern for both efficiency and the rights of property owners to evaluate the relative performance of assembly mechanisms and the efficiency cost of strict adherence to individual rationality. In a simple example, we compare the expected outcome of the SP mechanism with two alternatives: a plurality mechanism based on SP, but with a lower reserve that is only high enough to fully compensate a plurality of owners and a stylized model of eminent domain.
Strategic Ignorance and the Robustness of Social Preferences
Abstract: How robust are social preferences to variations in the environment in which a decision is made? By varying the elicitation method and default choice in the `moral wiggle-room' game of Dana, Weber, and Kuang (2007), I examine the robustness and nature of the pattern of information avoidance in which many dictators in experiments-- if initially uncertain-- avoid learning whether their choice will help or hurt another person and choose selfishly. When ignorance is not the default choice, participants choose it much less frequently. However, when dictators express their outcome choice using the strategy method, most are willing to overcome the default choice and reveal the payoff state ex post. I conclude that people will employ strategic ignorance to avoid a morally-fraught decision if they can do so passively, but having to actively choose ignorance betrays its usefulness and leads to behavior largely consistent with models of preferences over outcomes. Thus while opportunities to create and exploit moral wiggle-room limit fair-minded behavior, environmental or psychological variables may reinforce the motivation that leads people to choose fair outcomes.
Social-Signaling with Anonymity: Rule-Rationality or Beliefs-Based Altruism?
Abstract: Why is the behavior of givers in the laboratory subject to audience effects, even when the giver is anonymous? Are participants rule-rational-- importing externally-useful social-image concern into the lab-- or are they beliefs-based altruists, concerned for the recipient's feelings, independent of his payoff? I measure beliefs-based altruism in three experiments by eliciting the willingness-to-pay of a financially-disinterested participant to influence a recipient's interim beliefs about his payoff or his beliefs about the intentions of the dictator(s) that determined his payoff. Few participants express any willingness-to-pay to influence the recipient's information. When participants can costlessly provide or withhold information, their behavior does not depend strongly on the content of the information. This offers little support for beliefs-based altruism and suggests that audience-sensitive anonymous givers bring social-image concern into the lab, despite its inapplicability.
An Unlucky Feeling: Persistent Overestimation of Absolute Performance with Noisy Feedback with Dave Owens
Abstract: How does overconfidence arise and persist in the face of experience and feedback? We examine experimentally how individuals' beliefs about their absolute, as opposed to relative, performance on a quiz react to noisy, but unbiased, feedback. Participants believe themselves to have received `unlucky' feedback and they overestimate their own scores, but they exhibit no overconfidence in non-ego-relevant beliefs---in this case, about others' scores. Unlike previous studies of relative performance estimates, we find this to be driven by overconfident priors, as opposed to biased updating, which suggests that social comparisons contribute to biased information processing. While feedback improves performance estimates, this learning does not translate into improved estimates of subsequent performances. This suggests that people use performance feedback to update their beliefs about their ability differently than they do to update their beliefs about their performance, contributing to the persistence of overconfidence.
The Control Premium: Preferences for Payoff Autonomy with Dave Owens
Abstract: Many individuals desire control over events in their lives. In an experiment, we document and quantify a lower bound for the control premium: the monetary cost that people are willing to incur in order to retain control over their own outcomes. Participants complete intelligence-based tasks, estimate their own likelihood of success on the task, as well as that of another participant, and choose between two assets, the values of which are contingent upon the participant's own success and that of the other participant, respectively. We find that while participants largely choose the asset for which they reportedly perceive the higher probability of success, a substantial number consistently sacrifice expected returns, lowering the probability of payment by 5.6% on average, by choosing the asset that depends upon their own performance. This finding highlights an efficiency-reducing phenomenon that undermines the willingness of a principal to delegate a task to an agent and it recommends caution in interpreting the results of incentivized studies on overconfidence.
Delegating to a Powerless Intermediary: Does it Reduce Punishment? with Regine Oexl
Beyond the classical reasons of efficiency, commitment, the distribution of information, or incentive provision, a person may also delegate decision rights so as to avoid blame for an unpopular or immoral decision. We show that by delegating to an intermediary, a dictator facing an allocation decision can effectively shift moral responsibility onto the delegee even when doing so necessarily eliminates the possibility of a fair outcome. Dictators who choose selfishly via an intermediary are punished less and earn greater profits than those who directly choose a selfish outcome, while the intermediary is punished more.
