Off the charts: massive unexplained heterogeneity in a global study of ambiguity attitudes

Ambiguity attitudes have been indicated as important determinants of economic outcomes in economic models, but we still know little about the demographic correlates of ambiguity attitudes, or indeed about the universality of patterns found in the West. We analyse the ambiguity attitudes of almost 3000 students across 30 countries. For gains we find ambiguity aversion everywhere, while ambiguity aversion is much weaker for losses. We also find ambiguity attitudes to systematically change with probabilities for both gains and losses, reflecting ambiguity-insensitivity to probabilities. Much of the between-country variation can be explained through a few macroeconomic characteristics. In contrast, we find massive unexplained variation at the individual level, suggesting that individual differences in ambiguity attitudes remain difficult to explain. We also find much unexplained heterogeneity in individual responses to different decision tasks. We conclude by discussing potential issues underlying this heterogeneity, and indicating potential solution

Carrots, Sticks, or Simplicity? Field Evidence on What Makes People Pay TV Fees

We provide evidence on both innovative as well as known behavioral strategies aimed at improving tax compliance, using a unified environment of two large correspondence experiments (N=82,599 and N=51,142) with potential TV-fees evaders in the Czech Republic. We (i) simplify the original letter and add a QR code for easier registration; use two innovative text strategies aimed at (ii) the elicitation of preference for fee designation, and (iii) the explanation of fee purpose. We also employ strategies known in the literature but providing mixed results: highlighting (iv) legal consequences of non-compliance, (v) value of services for the fee, and (vi) social norms. Apart from the text treatments, we modify the envelopes by placing there (vii) a picture of a cartoon character (supported by a sticker inside), or (viii) a red inscription “Important”, with the aim to stimulate recipients' reciprocity and attention. Our results show that the text simplification and highlighting legal consequences substantially improve effectiveness of the letter, which we self-replicate on a new sample two years later, while the remaining treatments do not improve over the baseline. The QR code brings only a modest improvement

Separating attitudes towards money from attitudes towards probabilities: stake effects and ambiguity as a test for prospect theory

Prospect theory (PT) is the dominant descriptive theory of decision making under risk today. For the modeling of choices, PT relies on a psychologically founded separation of risk attitudes into attitudes towards outcomes, captured in a value function; and attitudes towards probabilities, captured in a probability weighting function. However, while it is theoretically sound, it is unclear whether this clear separation is reflected in actual choices. To test this, we designed two experiments. In the first experiment, we elicit the value and probability weighting functions both under known and unknown probabilities. The results support PT and show that the value function is unaffected by the nature of the probabilities, which only affects probability weighting. More in general, this finding supports theories that represent ambiguity attitudes through probability transformations rather than utility transformations. In the second experiment, we examine the effects of an increase in stakes on risk attitudes. We find that the stake increase is not reflected in the value function, but rather in the weighting function, thus contradicting PT's prediction. (author's abstract

Anti-social behavior in groups

This paper provides strong evidence supporting the long-standing speculation that decision-making in groups has a dark side, by magnifying the prevalence of anti-social behavior towards outsiders. A large-scale experiment implemented in Slovakia and Uganda (N=2,309) reveals that deciding in a group with randomly assigned peers increases the prevalence of anti-social behavior that reduces everyone’s payoff but which improves the relative position of own group. The effects are driven by the influence of a group context on individual behavior, rather than by group deliberation. The observed patterns are strikingly similar on both continents

Group membership magnifies the dark side of human social behavior

Does decision-making in groups foster rationality and selfishness, or does it give rise to nasty behavior towards outsiders? In this paper, we implement a large-scale lab-in-field experiment in Slovakia and Uganda (N=2,309) and provide new evidence showing that the behavioral difference in inter-personal interactions between groups and individuals is primarily driven by a stronger preference to be nasty even at one’s own expense. Furthermore, the greater nastiness of groups arises almost exclusively due to the psychological effect of being a part of a group on individual preferences, rather than due to deliberation and joint decision-making among group members. We observe strikingly similar patterns on both continents, suggesting the elevation of the dark side of human social motivations is a deeply rooted behavioral response when individuals are banded in a group. The findings have implications for economic theory and can help to explain the prevalence of self-destructive group conflicts

Off the charts: Massive unexplained heterogeneity in a global study of ambiguity attitudes

Ambiguity attitudes have been prominently used in economic models, but we still know little about their demographic correlates or their generalizability beyond the West. We analyze the ambiguity attitudes of almost 3,000 students across thirty countries. For gains, we find ambiguity aversion everywhere, while ambiguity aversion is much weaker for losses. Ambiguity attitudes change systematically with probabilities for both gains and losses. Much of the between-country variation can be explained through a fewmacroeconomic characteristics. In contrast, we find massive unexplained variation at the individual level. We also find much unexplained heterogeneity in individual responses to different decision tasks. © 2018 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology