High Stakes Behavior with Low Payoffs: Inducing Preferences with Holt-Laury Gambles

A continuing goal of experiments is to understand risky decisions when the decisions are important. Often a decision’s importance is related to the magnitude of the associated monetary stake. Khaneman and Tversky (1979) argue that risky decisions in high stakes environments can be informed using questionnaires with hypothetical choices (since subjects have no incentive to answer questions falsely.) However, results reported by Holt and Laury (2002, henceforth HL), as well as replications by Harrison (2005) suggest that decisions in “high” monetary payoff environments are not well-predicted by questionnaire responses. Thus, a potential implication of the HL results is that studying decisions in high stakes environments requires using high stakes. Here we describe and implement a procedure for studying high-stakes behavior in a low-stakes environment. We use the binary-lottery reward technique (introduced by Berg, et al (1986)) to induce preferences in a way that is consistent with the decisions reported by HL under a variety of stake sizes. The resulting decisions, all of which were made in a low-stakes environment, reflect surprisingly well the noisy choice behavior reported by HL’s subjects even in their highstakes environment. This finding is important because inducing preferences evidently requires substantially less cost than paying people to participate in extremely high-stakes games.

Altruistic Punishment in Elections

Altruistic punishment is a fundamental driver for cooperation in human interactions. In this paper, we expand our understanding of this form of costly punishment to help explain a puzzle of voting behavior: why do people who are indifferent between two potential policy outcomes of an election participate in large-scale elections when voting is costly? Using a simple voting experiment, we show that many voters are willing to engage in voting as a form of punishment, even when voting is costly and the voter has no monetary stake in the election outcome. In our sample, we observe that at least fourteen percent of individuals are willing to incur a cost and vote against candidates who broke their electoral promises, even when they have no pecuniary interest in the election outcome

Vaccine Hesitancy and Betrayal aversion

The determinants of vaccine hesitancy remain complex and context specific. Betrayal aversion occurs when an individual is hesitant to risk being betrayed in an environment involving trust. In this pre-registered vignette experiment, we show that betrayal aversion is not captured by current vaccine hesitancy measures despite representing a significant source of unwillingness to be vaccinated. Our survey instrument was administered to 888 United States residents via Amazon Mechanical Turk in March 2021. We find that over a third of participants have betrayal averse preferences, resulting in an 8-26% decline in vaccine acceptance, depending on the betrayal source. Interestingly, attributing betrayal risk to scientists or government results in the greatest declines in vaccine acceptance. We explore an exogenous message intervention and show that an otherwise effective message acts narrowly and fails to reduce betrayal aversion. Our results demonstrate the importance of betrayal aversion as a preference construct in the decision to vaccinate

Endogenous Group Formation Via Unproductive Costs

Sacrifice is widely believed to enhance cooperation in churches, communes, gangs, clans, military units, and many other groups. We find that sacrifice can also work in the lab, apart from special ideologies, identities, or interactions. Our subjects play a modified VCM game—one in which they can voluntarily join groups that provide reduced rates of return on private investment. This leads to both endogenous sorting (because free-riders tend to reject the reduced-rate option) and substitution (because reduced private productivity favours increased club involvement). Seemingly unproductive costs thus serve to screen out free-riders, attract conditional cooperators, boost club production, and increase member welfare. The sacrifice mechanism is simple and particularly useful where monitoring difficulties impede punishment, exclusion, fees, and other more standard solutions

High Stakes Behavior with Low Payoffs: Inducing preferences with Holt-Laury gambles

A continuing goal of experiments is to understand risky decisions when the decisions are important. Often a decision’s importance is related to the magnitude of the associated monetary stake. Khaneman and Tversky (1979) argue that risky decisions in high stakes environments can be informed using questionnaires with hypothetical choices (since subjects have no incentive to answer questions falsely.) However, results reported by Holt and Laury (2002, henceforth HL), as well as replications by Harrison (2005) suggest that decisions in “high” monetary payoff environments are not well-predicted by questionnaire responses. Thus, a potential implication of the HL results is that studying decisions in high stakes environments requires using high stakes. Here we describe and implement a procedure for studying high-stakes behavior in a low-stakes environment. We use the binary-lottery reward technique (introduced by Berg, et al (1986)) to induce preferences in a way that is consistent with the decisions reported by HL under a variety of stake sizes. The resulting decisions, all of which were made in a low-stakes environment, reflect surprisingly well the noisy choice behavior reported by HL’s subjects even in their highstakes environment. This finding is important because inducing preferences evidently requires substantially less cost than paying people to participate in extremely high-stakes games

Beneficial Betrayal Aversion

Many studies demonstrate the social benefits of cooperation. Likewise, recent studies convincingly demonstrate that betrayal aversion hinders trust and discourages cooperation. In this respect, betrayal aversion is unlike socially “beneficial” preferences including altruism, fairness and inequity aversion, all of which encourage cooperation and exchange. To our knowledge, other than the suggestion that it acts as a barrier to rash trust decisions, the benefits of betrayal aversion remain largely unexplored. Here we use laboratory experiments with human participants to show that groups including betrayal-averse agents achieve higher levels of reciprocity and more profitable social exchange than groups lacking betrayal aversion. These results are the first rigorous evidence on the benefits of betrayal aversion, and may help future research investigating cultural differences in betrayal aversion as well as future research on the evolutionary roots of betrayal aversion. Further, our results extend the understanding of how intentions affect social interactions and exchange and provide an effective platform for further research on betrayal aversion and its effects on human behavior

An Empirical Test of the Heckman and Rubinstein GED Mixed-Signal: Evidence from Prison

Economists have begun to embrace the notion, already accepted by the market, that GEDs and High School Diplomas signal similar cognitive abilities, but different non-cognitive abilities. To better understand this phenomenon and its implications, this paper presents a study of an education environment, prison, which provides natural controls for non-cognitive abilities. The study reveals similarities in decisions between the two types of agents that are surprising in light of decisions made in standard educational environments. The results support the mixed-signal theory and furthermore suggest that stricter enforcement of discipline and other non-cognitive attributes may help to reduce dropout rates in non-prison educational facilities.