Economic theory grounds on the assumption of the homo oeconomicus, the rational decision-maker who is only maximizing his own utility. Economic experiments have shown many di fferent, large, and persistent deviations form the ideal of the homo oeconomicus. Experimental economics has shown that many subjects care about fairness and the payoff or well-being of others, that they behave reciprocal, i.e. that they reward cooperation and punish defection, even if this involves costs to them. Departing from pure-self interest, behavioral economists try to fi nd new models and assumptions and fi nd themselves in the tension between rational decision-making and emotional or motivational factors guiding human behavior. This dissertation presents four essays on behavioral and experimental economics.
In this paper, we analyze the effect of the criminal justice system on juvenile recidivism. Using a unique sample of German inmates, we are able to disentangle the selection into criminal and juvenile law from the subsequent recidivism decision of the inmate. We base our identification strategy on two distinct methods. First, we jointly estimate selection and recidivism in a bivariate probit model. In a second step, we use a discontinuity in law assignment created by German legislation and apply a (fuzzy) regression discontinuity design. In contrast to the bulk of the literature, which mainly relies on US data, we do not find that the application of criminal law increases juvenile recidivism. Rather, our results suggest that sentencing adolescents as adults reduces recidivism in Germany.
In a bilateral oligopoly where strategic buyers source a good from competing suppliers over time, buyers often have an incentive to sustain competition while suppliers benefit from excluding rival suppliers. We model this situation as a two period asymmetric cost Bertrand duopoly, where in the second period only those suppliers are active whose profit is sufficiently high in the first period. One or two buyers decide in each period how to source their demand from the suppliers. We solve the model analytically for a single buyer. In the first period the buyer dual sources and sustains competition when prices are high whereas for low prices single sourcing prevails. When the cost difference of suppliers is small, a unique subgame-perfect equilibrium in pure strategies exists. The more efficient supplier excludes the less efficient supplier by pricing at or below the cost of this supplier and the buyer sources all demand from him. With multiple identical buyers, equilibrium results do not change. Implementing the model numerically, we find that results are robust for coarse quantities. Exclusion can then occur even for large cost differences, while also equilibria exist where competition is often sustained. In addition, we implement an alternative procurement process where the buyer first sets the quantities to be sourced dependent on the relative prices. Then, equilibria where the buyer sources from both suppliers and competition is sustained with a high probability can exist even for small cost differences. The surplus of the buyer can, but need not, increase compared to the initial process. This model with its predicted predominance of exclusion is used in two experiments. First, we improve coordination from the baseline model with two independent buyers across treatments by allowing communication, introducing a single buyer and automating buyers. Outcomes in the second period are not observed to differ between treatments. In the first period, buyers nearly always dual source and sustain competition when this is rational for all treatments. With two independent buyers we observe exclusionary pricing to be predominant and accordingly competition is frequently not sustained. Contrary to the subgame-perfect prediction of no difference however, with improved coordination of buyers, pricing becomes more accommodating. Accordingly, competition is sustained more often and there is weak evidence that also buyer surplus increases in turn. In addition, we analyze experimentally the role of the procurement process with two buyers. Again, in the non-strategic setting of the second period, outcomes for all procurement processes are comparable. In the first period, supplier exclusion is predominant not only in the baseline process which corresponds to a procurement auction, but also for nonlinear prices in split-award auctions. Then, suppliers demand premia for small quantities which would allow to sustain competition, an option buyers however frequently do not use. When subsidies can be paid to suppliers or when buyers take their sourcing decisions before suppliers bid however, suppliers price more passively and competition is sustained substantially more often than in the baseline, in line with the prediction. Buyer sourcing is relatively close to rational behavior across procurement processes, although buyers are not always successful in sustaining competition when this is optimal. Therefore, the predicted increase in buyer surplus for subsidies and pre-announced sourcing is not observed. We thus find that both theoretically and experimentally, even with strong incentives for buyers to sustain competition, aggressive supplier behavior often entails exclusionary outcomes. However, both improved coordination of sourcing decisions and modifications of the procurement process are experimentally found to induce more accommodating pricing and lead to competition being sustained frequently.
This paper studies the long-run effect of the 2002 changeover on restaurant prices in Germany. German restaurant prices increased significantly when the euro was introduced as a new currency but rather than returning to their re-changeover trend, restaurant prices appear to have stabilized on a higher path. This stands in contrast to the prediction of menu costs models or models of confusion-induced price increases as these models can only account for a transitory effect. The persistence of the increase suggests the existence of more than one price equilibrium. This multiplicity of price equilibria is a central part of the explanation proposed in the paper.
In the climate policy debate, a rhetoric has evolved that attributes a high potential to "voluntary climate action". We turn to the population of Germany, the fourth largest cumulative GHG emitter, to obtain an Internet-)representative estimate of the individual willingness to abate one ton of CO2, the equivalent of 10 percent of annual per-capita CO2 emissions. The estimate derives from a large-scale (n=2,440) framed field experiment in which subjects choose between a guaranteed reduction of one ton of EU CO2 emissions and a randomly drawn cash award between €2 and €100. At €6.30, estimated mean WTP is considerably lower than prior hypothetical or non-representative estimates. Median WTP is non-positive. The almost bimodal nature of WTP in the population has important policy implications.
A well—known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (1999) or Bolton and Ockenfels (2000). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all.
The beauty contest game has been used to analyze how many steps of reasoning subjects are able to perform. A common finding is that a majority seem to have low levels of reasoning. We use eye-tracking to investigate not only the number chosen in the game, but also the strategies in use and the numbers contemplated. We can show that not all cases that are seemingly level-1 or level-2 thinking indeed are {they might be highly sophisticated adaptations to beliefs about other people's limited reasoning abilities.
Am Mittwoch, den 15. Juni 2011, fand in der Alten Aula der Ruprecht-Karls-Universität die achte Alfred-Weber-Lecture statt. Der Referent, Professor Dr. Dr. h.c. Claus Leggewie, ist Direktor des Kulturwissenschaftlichen Instituts in Essen und Professor für Politikwissenschaft an der Justus-Liebig-Universität in Gießen. Seit 2008 berät er die Bundesregierung zu Fragen der globalen Umweltveränderung. Als Autor zahlreicher Bücher und Herausgeber der "Blätter für Deutsche und Internationale Politik" nimmt Professor Leggewie engagiert an gesellschaftlichen und politischen Debatten teil. Als Gastgeber möchte das Alfred-Weber-Institut den Studierenden, den MitarbeiterInnen des Instituts und der Universität sowie einem interessierten Publikum aus der Metropolregion Rhein-Neckar das Zusammenspiel von Wirtschaft, Politik und Gesellschaft durch Vorträge namhafter Referenten näher bringen.
We conduct a large-scale field experiment with 2,440 subjects in which we exogenously vary the price of contributing to the closest empirical counterpart of an infinitely large public good, climate change mitigation. We find that the price effect is robust and negative, but quantitatively weak, with a price elasticity of -0.25. Socioeconomic variables such as education, situational variables such as meteorological conditions around the time of the experiment, and attitudinal variables that can be linked to guilt and moral responsibility dominate the price effect. The latter also explain better than price arbitrage the decision of subjects to declare to be field price censored. The results provide an experimental window on the absolute and relative role of price effects on public goods contributions in a large economy and inform current attempts to build a coherent theory of charitable giving.
The thesis acknowledges that in many law enforcement situations more than two types of actors are involved. It analyzes three different scenarios each adding a distinct third type of actor to the standard economic model of regulatory monitoring and enforcement. The first part considers citizens reporting crime and analyzes the impacts of citizens motivated to share their knowledge with enforcement authorities on the stage of rule design. The main contribution is that it uncovers a previously overlooked benefit of uniform regulations. It is shown that such regulations can be efficiency enhancing as they harness citizen reporting thereby reducing costly regulatory inspections. The second part considers private initiatives monitoring environmental mediums in order to detect potential pollution events. It analyzes how improvements in citizens' capability to assess whether a firm polluted affects pollution, environmental harm, and overall welfare. It is shown that a decrease in the probability of falsely not detecting an actual pollution event has ambiguous effects. Especially, due to crowding effects, a better monitoring technology can lead to more pollution, less environmental quality, and lower overall welfare. The third part considers the recent trend of an increased criminalization of environmental offences. It explicitly considers the institutional framework in which criminal law enforcement authorities, i.e. prosecutors and courts, are operating. This part shows that the restrictions accompanied with this framework - the legality principle and constrained sanctioning discretion - can have negative effects on polluters' incentives to self-report pollution events. This in turn decreases the regulator's ability to order recovery. Thus, it is shown that the merits of the higher deterrence of criminal law can be offset by less self-reporting and less recovery.
There is ample evidence that women do not react to competition as men do and are less willing to enter a competition than men (e.g., Gneezy et al.(2003), Niederle and Vesterlund (2007)). In this paper, we use personality variables to understand the underlying motives of women (and men) to enter a competition or avoid it. We use the Big Five personality factors (Goldberg (1981), McCrae and Costa JR (2003)), where especially neuroticism has been related to performance in achievement settings. We first test whether scores on the Big Five are related to performance in our experiment, and second how this is related to incentives. We can show that the sex di fference in the willingness to enter a competition is mediated by neuroticism and further that neuroticism is negatively related to performance in competiton. This raises the possibility that those women who do not choose competitive incentives "know" that they should not.
This paper introduces a democratic voting process into an OLG economy in order to analyze the e ffects of a rising old-age dependency ratio on the composition of government spending and endogenous economic growth. Forward-looking agents vote each period on the public policy mix between productive government expenditure and public consumption spending that benefi ts the elderly. Population aging shifts political power from the young to the old. While this does not aff ect public productive expenditure, it leads to an increase in public spending on the elderly and a slowdown in economic growth. However, the overall e ffect on long-term economic growth is positive. This is due to reduced capital dilution or increased saving.
The trade-off between price stability and output stabilization is in the centre of monetary policy-making. This trade-off enters many macroeconomic models as the central bank is assumed to minimize some loss function consisting of inflation deviations and output deviations from some specific targets. The policy instrument to control these variables is the short-term interest rate. Monetary policy-making is usually conducted in committees, whose members may have conflicting interests. This is evident for the Governing Council of the European Central Bank or the Board of Governors of the Federal Reserve System in the United States. In this thesis we take a closer look at monetary policy committees. In particular, we address how decision rules and transparency requirements concerning such rules in monetary policy committees should be designed. In particular we concern ourself with the following two issues: 1. Which type of majority rule should be applied in the monetary policy committee? 2. Should the public know which decision rule the monetary policy committee applies and should the central bankers release their information about economic shocks? To address these questions, standard monetary models with aggregate demand and supply shocks are introduced and we assume that a committee decides about the interestrate change according to some voting rule. We develop a flexible majority rule, where the majority for interest-rate changes depends itself on the size of the interest-rate change. Our main findings are: First, a well-designed flexible majority rule can improve welfare compared to a fixed majority rule in a simple shock structure. This insight is robust, if we apply more complex shock structures or if we introduce a simple dynamic setup. Second, transparency regarding the rule has ambiguous effects on welfare and it may not be necessary to publish the decision rule, but within our framework, we can provide a best combination of a decision rule and an information setup.