Trust and Reciprocity in 2-node and 3-node Networks

In this paper we focus on the interaction between exogenous network structure and bargaining behavior in a laboratory experiment. Our main question is how competition and cooperation interact in bargaining environments based on networked versions of the investment game. We focus on 3-node networked markets and vary the network structure to model competition upstream (multiple sellers paired with a monopsonistic buyer) and competition downstream (a monopolistic seller paired with multiple buyers). We describe two kinds of models of trust for such networked environments, absolute and relativized models, and use this structure to generate a general hypothesis about these environments: that information crowds in cooperation on the competitive side of the market. The experimental results support this hypothesis.networks, trust, reciprocity, experiments, investment game

Spillovers and growth in a local interaction model

In this paper we aim at studying to what extent spillovers between firms may foster economic growth. The attention is addressed to the spillovers connected with the R&D activity that improves the quality of the goods firms supply. Our model develops a growth theory framework and we assume that firms spread around a circle. Our study assesses that spillovers between neighbors affect the probability of successful research for each of them. In particular, spillovers are the forces fuelling growth when, on the whole, firms turn out to be net receivers with respect to their neighbors.Firm agglomerations, Local Spillovers, Economic Growth

Spillovers and growth in a local interaction model

In this paper we aim at studying to what extent spillovers between firms may foster economic growth. The attention is addressed to the spillovers connected with the R&D activity that improves the quality of the goods firms supply. Our model develops a growth theory framework and we assume that firms spread around a circle. Our study assesses that spillovers between neighbors affect the probability of successful research for each of them. In particular, spillovers are the forces fuelling growth when, on the whole, firms turn out to be net receivers with respect to their neighbors.The second author gratefully acknowledges the financial support from the European Community Marie Curie Fellowship under contract n. HPMF-CT-2000-00855

Institutional quality, culture, and norms of cooperation: Evidence from behavioral field experiments

We examine the causal effect of legal institutional quality on informal norms of cooperation and study the interaction of institutions and culture in sustaining economic exchange. A total of 346 subjects in Italy and Kosovo played a market game under different and randomly allocated institutional treatments, which generated different incentives to behave honestly, preceded and followed by a noncontractible and nonenforceable trust game. Significant increases in individual trust and trustworthiness followed exposure to better institutions. A 1- percentage-point reduction in the probability of facing a dishonest partner in the market game, which is induced by the quality of legal institutions, increases trust by 7–11 percent and trustworthiness by 13–19 percent. This suggests that moral norms of cooperative behavior can follow improvements in formal institutional quality. Cultural origin, initial trust, and trustworthiness influence opportunistic behavior in markets, but only in the absence of strong formal institutions

Spillovers and growth in a local interaction model

In this paper we aim at studying to what extent spillovers between firms may foster economic growth. The attention is addressed to the spillovers connected with the R&D activity that improves the quality of the goods firms supply. Our model develops a growth theory framework and we assume that firms spread around a circle. Our study assesses that spillovers between neighbors affect the probability of successful research for each of them. In particular, spillovers are the forces fuelling growth when, on the whole, firms turn out to be net receivers with respect to their neighbors

Goal Effectiveness in Achieving Educational Outcomes: Experimental Evidence from 9th Graders in Medellin, Colombia

Does goal setting among low-income ninth graders leads to higher average goal achievements of educational outcomes? This question is explored by a field experiment motivated by the acknowledged California-based Family Independence Initiative (FII), to analyze the effectiveness of individual goal setting, incentives and self-help groups on the achievement of educational goals. By randomizing treatments and control with the cooperation of the Secretary of Education in Medellin, different classrooms were assigned to five different experimental groups that met systematically for five months. The results show that goal setting is a cost-effective method to help low-income students achieve educational outcomes. Setting a goal significantly increases a subject’s probability of achieving the task set out in the goal. Combining this with incentives and self-help groups is the most effective approach, with an increase in the likelihood of achieving an educational goal by 41% compared to setting a goal alone. Increased goal achievement leads to a higher academic performance through a higher average grade

Does Social Capital Matter? Evidence from a Five-Country Group Lending Experiment

Does social capital matter to economic decision-making? We address this broad question through an artefactual group lending experiment carried out in five countries: India, Kenya, Guatemala, Armenia, and the Philippines, obtaining data from 10,673 contribution decisions on simulated group loans from 1,554 participants in 259 experimental borrowing groups. We carry out treatments for social homogeneity, group monitoring, and group self-selection. Results show that societal trust has a positive and significant impact on group loan contribution rates, that group lending appears to create as well as harness social capital, and that peer monitoring can have perverse as well as beneficial effects

Credit Rationing with Behavioral Foundations: Revisiting Stiglitz and Weiss

The seminal credit market model of Stiglitz and Weiss (1981) proposes that asymmetric information between borrowers and lenders creates a moral hazard in which borrowers to have an incentive to invest in risky projects, creating the basis for a rationing equilibrium in credit markets. Other recent behavioral work, argues that a different type of behavior is more central to credit market risk: the temptation for borrowers to use borrowed capital to meet short-term consumption needs rather than for productive investment (Banerjee and Mullainathan, 2010). In this note, we present a simple model that is able to explain credit rationing where present-bias, rather than an incentive to undertake risky projects, characterizes the root source of risk under asymmetric information in credit markets

Prosocial Option Increases Women’s Entry Into Competition

We provide evidence that women enter competitions at the same rate as men when the incentive for winning includes the option to share part of the rewards with the losers (i.e., when the incentive system is socially oriented). Using an experiment (with N = 238 subjects from three laboratories), we find that about 16% more men than women choose to compete in the standard tournament; this gender gap is eliminated in the socially oriented incentive treatment. While men’s choice to compete remains unchanged, at around 52% in both conditions, women increase their entry rate from 35% in the standard tournament to 60% when the incentive includes a socially oriented option

Inentives and Education: Experimental Evidence from Medellin, Colombia

This research uses an experimental design to investigate how incentive structure influences goal achievement among disadvantaged high school students in Medellin, Colombia. Of particular interest is how treatment effects influence school performance as well as how this may vary with differing key characteristics of the participants. Medellin, Colombia, like much of South America suffers from high levels of inequality in the city proper. Improving educational outcomes in impoverished neighborhoods is essential for the growth of these neighborhoods and the greater community in which they are located. The model used in this experiment is inspired by the Family Independence Initiative (FII). This research finds that conditional incentives in particular play a significant role in determining the achievement of objectives and that those participants in the conditional incentive treatment tend to perform better after the conclusion of the experiment