How norms guide behavior in an uncertain world: an experimental law & economics perspective

In four independent Chapters, I examine how norms guide our behavior in an uncertain world. Methodologically, I apply the toolbox of experimental economics to research questions that are on the interface between economics and law (especially Chapter 1 and Chapter 2), sociology (especially Chapter 3), and social psychology (especially Chapter 4). Chapter 1 experimentally explores the effect of a provision from German copyright law – the so-called “Bestseller Paragraph” on market prices, on the number of deals struck and on perceived fairness. The results show that the provision leads to lower prices for copyrights, more copyrights trade, and the buyers express less ex-post discontent. Chapter 2 tests the effect of customary law on cooperation. If it is not backed up by sanctions, customary law is not more effective than mere custom in realigning individual action and social well-being. Yet if the emerging rule is perceived to be grounded in law, sanctions and custom are complements, while they are substitutes otherwise. Chapter 3 proposes a very simple and light-handed mechanism to sustain cooperation and test its performance in a rich laboratory environment. The mechanism moderates cooperation by controlling experiences. Contributions are considerably sensitive to such selective information. In Chapter 4, I test experimentally the robustness of social preferences to (1) information about others’ behavior and (2) self-reflection about the morally right behavior. I find that whereas information has virtually no effect, self-reflection changes social preferences substantially

Can we manage first impressions in cooperation problems? An experiment

We study how cooperative behavior reacts to selective (favorable or unfavorable) pre-play information about the cooperativeness of other, unrelated groups within an experimental framework that is sufficiently rich for conflicting behavioral norms to emerge. We find that cooperation crucially depends on pre-play information, coinciding with a change in initial beliefs. Over time, behavior within both types of groups becomes increasingly homogeneous, indicating the formation of two rather different social norms, depending on whether pre-play information was favorable or unfavorable. In addition, we find unfavorable information to substantially reduce the effectiveness of peer punishment. For these differences to emerge it is immaterial whether each member or only one member of a four-person group receives the pre-play information.experiment, information, Norms, cooperation, Effectiveness of Sanctions, Expectations

Fairness ex ante & ex post: The benefits of renegotiation in media markets

The market for copyrights is characterised by a highly skewed distribution of profits: very few movies, books and songs generate huge profits, whereas the great bulk barely manages to recover production cost. At the moment when the owner of intellectual property grants a licence ('ex ante'), neither party knows the true value of the traded commodity. A seemingly odd norm from German copyright law, the so-called bestseller provision, stipulates that the seller of a licence has a legally enforceable right to a bonus in case the work ('ex post') turns out a blockbuster. We experimentally explore the effect of the provision on market prices, on the number of deals struck and on perceived fairness. Our results show that the provision leads to lower prices for copyrights. More copyrights trade. The buyers perceive less ex-post unfairness

Revival of the Cover Letter? Experimental Evidence on the Performance of AI-driven Personality Assessments

Organizations have long been trying to assess job applicants\u27 personality using self-reported psychometric tests, such as the Big Five personality test. However, these tests are not robust against incentives to pretend having certain desirable traits, for example, the disposition for being a good team player. We test whether machine learning classifiers trained on written self-descriptions, such as cover letters, predict people\u27s true cooperativeness better than psychometric tests. Based on data from a controlled online experiment with 400 participants, we find that - when people have incentives to fake their personality - linguistic classifiers based on self-descriptions significantly outperform psychometric classifiers based on the Big Five. Moreover, we find that a fine-tuned, pre-trained natural language model can detect incentives to fake in people\u27s self-descriptions. While further research is needed to achieve tamper-proof models, our findings illustrate the potential of automated personality tests based on job applicants\u27 cover letters

First Impressions are More Important than Early Intervention Qualifying Broken Windows Theory in the Lab

Broken Windows: the metaphor has changed New York and Los Angeles. Yet it is far from undisputed whether the broken windows policy was causal for reducing crime. In a series of lab experiments we put two components of the theory to the test. We show that first impressions and early punishment of antisocial behaviour are independently and jointly causal for cooperativeness. The effect of good first impressions and of early vigilance cannot be explained with, but adds to, participants’ initial level of benevolence. Mere impression management is not strong enough to maintain cooperation. Cooperation stabilizes if good first impressions are combined with some risk of sanctions. Yet if we control for first impressions, early vigilance only has a small effect. The effect vanishes over time.

Can We Manage First Impressions in Cooperation Problems? An Experimental Study on 'Broken (and Fixed) Windows'

Cooperation problems are at the heart of many everyday situations. In this paper, we propose a very simple and light-handed mechanism to sustain cooperation and test its performance in a rich laboratory environment. The mechanism moderates cooperation by controlling experiences, more specifically, it manipulates subjects' initial beliefs by providing them with selective information about (un)cooperative behavior in other, unrelated, groups. We observe that contributions are considerably sensitive to such selective information. First impressions participants happen to make predict subsequent behavior. Our results, however, suggest an asymmetry in the strength of the reaction - which might pose a limit on the effectiveness of the mechanism in natural settings

Echo chambers and opinion dynamics explain the occurrence of vaccination hesitancy

Vaccination hesitancy is a major obstacle to achieving and maintaining herd immunity. Therefore, public health authorities need to understand the dynamics of an anti-vaccine opinion in the population. We introduce a spatially structured mathematical model of opinion dynamics with reinforcement. The model allows as an emergent property for the occurrence of echo chambers, i.e. opinion bubbles in which information that is incompatible with one’s entrenched worldview, is probably disregarded. We scale the model both to a deterministic limit and to a weak-effects limit, and obtain bifurcations, phase transitions and the invariant measure. Fitting the model to measles and meningococci vaccination coverage across Germany, reveals that the emergence of echo chambers dynamics explains the occurrence and persistence of the anti-vaccination opinion in allowing anti-vaxxers to isolate and to ignore pro-vaccination facts. We predict and compare the effectiveness of different policies aimed at influencing opinion dynamics in order to increase vaccination uptake. According to our model, measures aiming at reducing the salience of partisan anti-vaccine information sources would have the largest effect on enhancing vaccination uptake. By contrast, measures aiming at reducing the reinforcement of vaccination deniers are predicted to have the smallest impact

Identity and economic incentives

This paper examines how beliefs and preferences drive identity-conforming consumption or investments. We introduce a theory that explains how identity distorts individuals' beliefs about potential outcomes and imposes psychic costs on benefiting from identity-incongruent sources. We substantiate our theoretical foundation through two lab-in-field experiments on soccer betting in Kenya and the UK, where participants either had established affiliations with the teams involved or assumed a neutral stance. The results indicate that soccer fans have overoptimistic beliefs about match outcomes that align with their identity and bet significantly higher amounts on those than on outcomes of comparable games where they are neutral. After accounting for individuals' beliefs and risk preferences, our structural estimates reveal that participants undervalue gains from identity-incongruent assets by 9% to 27%. Our counterfactual simulations imply that identity-specific beliefs account for 30% to 44% of the investment differences between neutral observers and supporters, with the remainder being due to identity preferences