Lab in the Field: Measuring Preferences in the Wild

In this chapter, we discuss the “lab-in-the-field” methodology, which combines elements of both lab and field experiments in using standardized, validated paradigms from the lab in targeting relevant populations in naturalistic settings. We begin by examining how the methodology has been used to test economic models with populations of theoretical interest. Next, we outline how lab-in-the-field studies can be used to complement traditional Randomized Control Trials in collecting covariates to test theoretical predictions and explore behavioral mechanisms. We proceed to discuss how the methodology can be utilized to compare behavior across cultures and contexts, and test for the external validity of results obtained in the lab. The chapter concludes with an overview of lessons on how to use the methodology effectively

Do People Anticipate Loss Aversion?

There is growing interest in the use of loss contracts that offer performance incentives as upfront payments that employees can lose. Standard behavioral models predict a tradeoff in the use of loss contracts: employees will work harder under loss contracts than under gain contracts; but, anticipating loss aversion, they will prefer gain contracts to loss contracts. In a series of experiments, we test these predictions by measuring performance and preferences for payoff-equivalent gain and loss contracts. We find that people indeed work harder under loss than gain contracts, as the theory predicts. Surprisingly, rather than a preference for the gain contract, we find that people actually prefer loss contracts. In exploring mechanisms for our results, we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance

A Clean Slate: Adapting the Realization Effect to Online Gambling and Its Effectiveness in People With Gambling Problems

Betting more after losses (i.e., “loss-chasing”) is a central clinical feature of disordered gambling. According to prospect theory, increasing risk-seeking following losses could arise from a failure to “re-reference.” By contrast, successful re-referencing between successive decisions closes the mental account, and any losses are regarded as final or realized; gamblers should not chase realized losses. The present study sought to test this “realization effect” among gamblers using an ecologically valid online gambling task. We were further interested in whether the effectiveness of the loss realization varied as a function of problem gambling severity. Using online recruitment of past-year gamblers stratified on the Problem Gambling Severity Index, we tested a group without gambling problems (n = 227), a group with at-risk gambling (n = 239), and a group with gambling problems (n = 223). Over a sequence of nine bets, after the sixth bet, half of the participants underwent a simulated realization procedure that entailed cashing out from the gambling website and redepositing their remaining funds on another website. The feedback comparison group were shown their account balance after the sixth bet but did not withdraw or transfer their funds. In line with the realization effect, the group with non-problem gambling significantly reduced their bet after cashing out. The realization procedure did not significantly ameliorate loss-chasing in the groups with at-risk gambling or gambling problems. We conclude that the realization effect can be elicited in an online gambling context but that stronger interventions for realizing losses may be required for people experiencing gambling problems

Waiting to Choose

We study the role of heuristic versus deliberative processing in intertemporal choice. Using studies in the Democratic Republic of Congo and an online labor market, we show that waiting periods –designed to prompt deliberation by temporally separating news about choice sets from choices themselves– can shift individuals away from decisions consistent with heuristic thinking and lead to substantially more patient choices. These findings are not captured by exponential or hyperbolic discounting. Additionally, waiting periods have larger effects on those shown to be particularly prone to myopia as a result of prior trauma, highlighting their potential as targeted interventions

Estimating Individual Ambiguity Aversion: A Simple Approach

We introduce a simple, easy to implement instrument for jointly eliciting risk and ambiguity attitudes. Using this instrument, we structurally estimate a two-parameter model of preferences. Our findings indicate that ambiguity aversion is significantly overstated when risk neutrality is assumed. This highlights the interplay between risk and ambiguity attitudes as well as the importance of joint estimation. In addition, over our stakes levels we find no difference in the estimated parameters when incentives are real or hypothetical, raising the possibility that a simple hypothetical question can provide insights into an individuals preferences over ambiguity in such economic environments

Regret in One-Shot and Recurrent Decisions: A Cautionary Tale

Under regret theory, decision-makers derive utility both from the outcome of their chosen action and the counterfactual. Evidence for anticipatory regret aversion has been found in oneshot settings, with ”regret lotteries” that always reveal outcomes, as a counterfactual on non-entry, being priced higher than comparable standard lotteries that only realize outcomes for entrants. However, as anticipation and realization of regret necessarily interact in dynamic settings, the predictions of regret theory for repeated decisions are far from clear. Indeed while our one-shot experimental data corroborate the previous findings, data from a sequence of decisions show the reverse, with regret lotteries priced lower than standard lotteries and their certainty equivalents. Given the recent literature on the use of regret lotteries as incentives, our results suggest that while these lotteries can be effective for motivating one-time decisions, their benefits as a repeated incentive is less than clear. More generally, the paper illustrates the issues that can arise when extrapolating behavioral effects from one-shot to recurrent settings

A History of Violence: Field Evidence on Trauma, Discounting and Present Bias

The extent to which individuals discount the future and whether they discount in a time-consistent fashion is an important determinant of their life outcomes. Using a field experiment in the Democratic Republic of Congo, we show that direct exposure to violence substantially increases present bias – choice of the smaller, immediate reward over the larger, later reward. We demonstrate that providing individuals with a delay between information about the choice and the choice itself mitigates the differences in behavior between those who were exposed to violence and those who were not. Our findings suggest that enforcing a cooling off period between income notification and consumption opportunities may help generate more patient choices and mitigate the elevated impulsivity of individuals that have experienced violence. We measure our treatment effects both in reduced-form as well as in the form of structural estimates of a quasi-hyperbolic discounting function to enable comparison with measures of other types of time inconsistency and a welfare evaluation of the treatment effect. Our results have implications for policies aimed at alleviating the deleterious effects of present bias and the role of deliberation in the structure of commitment contracts