Exley and Kessler (2021) on Information Avoidance

Christine L. Exley and Judd B. Kessler, “Information Avoidance and Image Concerns.” NBER Working Paper 28376, January 2021 (revised May 2021).

• Contrary to what a standard economic view would suggest, people often avoid receiving information that is pertinent and seemingly free. A plethora of potential reasons can be offered as explanations for information avoidance.

• People want to think well of themselves, so they might like to muddy the waters around selfish acts, by remaining ignorant (thereby possessing plausible deniability) of the actual extent of their selfishness. This article asks how much information avoidance is driven by concerns with maintaining one’s self-image.

• More specifically, people often avoid learning about how their choices affect the outcomes for other people – even if the information would not affect their decision. When I intend to act selfishly, I might not want to know how much others are harmed by my choice. The opportunity to avoid information about harms to others promotes more selfish behavior. 

• The approach here is to look at information avoidance with respect to two decisions that differ only in that one decision has no prospect of involving a selfish motive (as the chooser's own payoff is not implicated in the decision).  

• A person is asked to choose either option A or option B. The "Self/Other condition" is one in which the chooser will receive a higher payoff from A than for B. Their choice between A or B, however, will also affect the payoff of someone else ("Other"), and it is possible that the other person will receive a much higher payoff with B. At the start, the chooser does no know what option is best for the other person, but does know that A is best for the chooser him or her self. The chooser (sometimes) has the option of just making the choice between A or B, or, learning the Other's payoffs associated with A or B. Will the chooser seek to learn this information?

• If Self and Other turn out to both do better with A, that is termed the "aligned" state; if it turns out that Other prefers option B, that is the "unaligned" state, the preferences of the two folks do not match. (So choosing to get the info means that the chooser learns whether the preferences are aligned or unaligned – if they are aligned, then there is no conflict, the selfish choice is also good for the Other.)

• In the Other/Other condition, alternatively, the chooser is again making a choice in the Self/Other circumstances, except what used to be the chooser's payoffs now go to someone else, a third party – the chooser has no skin in the game, no selfish interest, but the interests of the two Others might conflict. Will the chooser elect to learn whether the interest are aligned or unaligned?

• Four studies, overall n > 4,600.

• In Self/Other, if choosers know (no choice) the info and it is unaligned, about 1/3 make the selfish choice. If the state information is not revealed unless requested, 2/3 of subjects in Self/Other choose not to acquire the information. If the choosers elect not to know, more than half choose the selfish option. That is, people who avoid the info behave in a more selfish way, on average, than if their choice fully revealed their selfishness because of their knowledge of unalignment.

• In the Other/Other condition, where there is no selfish option, information avoidance falls – but only by about 20%; that is, more than half the participants still choose to avoid the information. 

• The Other/Other results suggest that most of the information avoidance is not about self-image concerns, because there are no such concerns in the Other/Other condition.

• If you make info provision an active choice (as opposed to opt-in), information avoidance falls by about half: it sort of seems like participants just aren’t paying much attention without the need to make an active choice?

Michaelsen, Johansson, and Hedesström (2021) on Experiencing Default Nudges

Patrik Michaelsen, Lars-Olof Johansson, and Martin Hedesström, “Experiencing Default Nudges: Autonomy, Manipulation, and Choice-Satisfaction as Judged by People Themselves.” Behavioural Public Policy, First View, 1–22, 19 March 2021. 

• This article examines how people feel about default nudges, especially with respect to their perception of their autonomy and their satisfaction with their ultimate choice. "We present three experiments (total N = 2083) where participants are subjected to opt-out default nudges and compared with participants subjected to opt-in or a no-default active-choice format [pages 3 and 4]."

• Study 1: MTurk folks consider whether to have “green” (and slightly more expensive) appliances in their (imaginary) new flats. There are three conditions: green (environmentally friendly) default (opt out); non-green default (opt-in); and active choice.

• The effect of the default is big, with about twice as many green appliances chosen with opt-out relative to opt-in; active choice leads to more green appliances than opt-in, too, but not as much more as opt-out.

• Participant ratings of their autonomy, satisfaction, and perceived threat to their choice freedom do not differ based on the condition. In particular, the opt-out default, which produces greener choices, does not lead to participant dissatisfaction.  

• Study 2 replicates study 1, but with a twist: now, half of the participants ae told about the default or active choice, and how default nudges are expected to influence choices. How does making the nudge transparent affect its influence on choices and satisfaction?

• It turns out that lots of participants don’t really understand the explanation of how the default nudge is supposed to work.

• The large impact on choosing green appliances from the opt-out default is replicated – and nudge transparency does not change that.  

• The participants give high ratings across-the-board for autonomy, but opt-out folks report slightly higher experienced autonomy and satisfaction than do their opt-in brethren.

• Study 3 aims to raise the stakes (slightly). Participants receive a 20 cent bonus, on top of the 50 cents they are paid to take part.  But they are given an opportunity to donate their bonus to a charity. The opt-out condition is where the bonus is defaulted to the charitable contribution. 

• Defaults continue to have consequences: opt-out folks are more likely to donate than are opt-in; active choice is in the middle; the three conditions have no effect on feelings of autonomy.

• With disclosure (and understanding), opt-in and active choice donations go up. (Again, the number of participants who do not understand the disclosure is fairly staggering.)

• Opt-out folks view the set-up as more threatening to freedom of choice, and full transparency raises everyone's view of such a threat – but despite that threat, people aren't really worked up over it. 

Colby, Li, and Chapman (2020) on Avoiding Healthy Defaults

Helen Colby, Meng Li, and Gretchen Chapman, “Dodging Dietary Defaults: Choosing Away from Healthy Nudges.” Organizational Behavior and Human Decision Processes 161: 50-60, 2020.

• Imagine a burger restaurant that makes carrots the default “side” – as opposed to French fries, say. Are people more likely to choose the carrots than if fries were the default? [Yes]. 

• Note that, unlike some environments with default nudges such as organ donations or pension registration, dining is an ongoing choice; so…

• …would people be less likely to return to a restaurant in which carrots are the default side dish?

• Two real-life(ish) and three hypothetical studies are conducted. In Study 1, university mugs are packaged with either M&Ms or a (healthier) fruit-and-nut bar as defaults. Shoppers know that they can easily override the default by asking the cashier for the alternative filling. 

• The defaults turn out to be almost perfectly sticky (unlike those well-designed M&Ms). But, more mugs are sold when M&Ms are the default. People don't override the healthy default, even though they know they could, but the healthy default seems to put them off the mug purchase altogether.

• If the store elected to employ a healthy default to promote customer health, is it doing the right thing? 

• Study 2 is also a real-life one, involving signing up for meal kit deliveries. What (three) meals will serve as the default for the kit? The experiment compares a default kit of three healthy meals (from one company) with an alternative default of three unhealthy meals (from a different company); once again, it is easy for meal kit purchasers to override the defaults.

• Again, the defaults are sticky, and in particular, the healthy default works in terms of nudging the choice of healthy meals. But, when choosing which company to patronize, there is a significant “dodge” effect: people became more likely to choose the company with the unhealthy default meals. So maybe it is not such a good idea for meal kit companies to set up healthy meals as the default?

• Study 3 is an internet-mediated "lab" experiment about which (hypothetical) restaurants people are likely to patronize. A subject is asked to order food from two competing burger restaurants. One burger restaurant uses turkey burgers as the default (this is the relatively healthy version, though not for the turkey), and the other burger place has been hamburgers as the default. (A similar comparison is run between two pizza places, and two sandwich shops). 

• Once again, (hypothetical) patrons tend to stick with the default, whether it is heathy or unhealthy. But they also are asked which of the restaurants they would return to, and in the case of burger joints, for the most part they would return to the unhealthy default version. People stay away from burger joints with a healthy default – turkey instead of beef burger – even though when at the "healthy" place, they generally go with the default. (It turns out that people are not so reluctant to return to pizza or sandwich shops that offer healthy defaults.)

• Study 4 looks at what happens if potential customers see an ad that lets them know in advance that turkey is the default burger meat. People become more enamored of the alternative restaurant that offers a beef default, and also suspect that ordering will be more of a hassle with the healthy default.

• Study 5 looks at healthy versus unhealthy defaults in a familiar setting, a McDonalds. There is a line, and a subject observes that the five people ahead of him or her in the line each stick with the default burger, where it is healthy or unhealthy. Does this social confirmation influence subsequent orders? 

• Once again, people tend to stick with default – but less so when the default is a turkey burger, when a third of folks request an override. Nonetheless, people indicate that they would dodge the healthy default restaurant in the future – but the dodgers were primarily folks who did not bother to override the healthy default!

• So, defaults can be quite sticky. Set up a health default, and you can expect that it will increase the percentage of customers who choose the healthy option. But there is a partial offset: some customers will dodge the restaurant with the healthy default, reducing the effectiveness of the healthy nudge by some 25%.

Zlatev and Rogers (2020) on Returnable Reciprocity

Julian J. Zlatev and Todd Rogers, "Returnable Reciprocity: When Optional Gifts Increase Compliance.” Organizational Behavior and Human Decision Processes 161(S): 74-84, November 2020.

• Sometimes a charity, say, will send potential contributors a small gift along with a request for a donation. They presumably are trying to take advantage of a human propensity to reciprocate gifts, which might in part derive from an aversion of feeling indebted. 

• "Returnable reciprocity" is when the gift that is first sent is explicitly made returnable. The return of the gift by non-contributors is not required, it is perfectly OK to keep the gift and not contribute. Is it possible that by including the option to return the gift, people are more likely to contribute or to otherwise reciprocate?

• Note that with a return option, one has a new channel to avoid the guilt of not reciprocating the gift, beyond contributing – namely, returning the gift.

• The authors conduct six experiments looking at returnable reciprocity in the context of trying to incentivize people to participate in rather virtuous behavior, behavior they would think it admirable to do – like signing up for their employer's wellness program. 

• The first experiment involves a hypothetical choice, of whether you would sign up for a wellness program, if you were first gifted $5. In one condition, you keep the money and either join or not, but in the second condition, you can keep the money and join or not, or return the money (and presumably not join). The returnable condition yields a higher percentage of folks saying they will join. 

• The second experiment, this one a field experiment,  concerns returning a filled-out survey, and being gifted $5 in advance. Once again, the returnable variant increases compliance (returning the completed survey). "Study 2 found that the addition of a single line mentioning the possibility of returning the gift led to a 26% increase in compliance over a traditional reciprocity request [p. 80]."

• Other experiments find that people in the returnable reciprocity condition anticipate feeling more guilty for a failure to comply, and that when given the choice between a standard reciprocity condition and a reciprocal reciprocity condition, people prefer standard reciprocity. Nudging via reciprocal reciprocity might increase compliance, but it might not be a nudge "for good." 

Salas-Morellón, Palacios-Huerta, and Call (2021), “Dynamic Inconsistency in Great Apes"

Laura Salas-Morellón, Ignacio Palacios-Huerta, and Josep Call, “Dynamic Inconsistency in Great Apes,” July 2021. 

• People often display impatience when they are making decisions about rewards either right now or (larger rewards) with a slight delay. 

• The impatience is reduced if both the options are delayed, say, by an additional month; hence, there is a possibility for dynamic inconsistency, where people opt to be patient for choices concerning the distant future, but when those same choices become closer to the present, the less patient, immediate gratification choice becomes more attractive. 

• Do bonobos, gorillas, and orangutans – who share some 99% of their DNA with humans – display similar choice patterns? If they do, that suggests that human preferences are not due to human cultural factors, but are rather baked into us by our genetic make-up. 

• The "N" is quite small: 6 orangutans, 5 bonobos, and 4 gorillas. One of the gorillas was left out of the full experiment due to not meeting the pre-test criteria. 

• In the experiments, apes are offered the choice between an immediate reward (fruit) and a three-times-larger reward that is delayed by three minutes. 

• The same choices are again offered to apes, but this time, the “fast” reward arrives after three minutes, and the delayed reward arrives in nine minutes. 

• The apes prefer more to less, if the time delay is the same. 

• The apes prefer sooner to later, if the reward is the same. 

• The apes show more patience for the larger reward when both the options are delayed; that is, like humans, they seem to be subject to dynamic inconsistency in their intertemporal choices. 

• As the small sample-size suggests, the statistical significance of the results is quite limited.

Collard, Walford, Vernon, Itagaki, and Turk (2020) on Endowment, Ownership, and Culture

Philip Collard, Alexandra Walford, Lucy Vernon, Fumihiko Itagaki, and David Turk, “The Relationship Between Endowment and Ownership Effects in Memory Across Cultures.” Consciousness and Cognition 78, February 2020, 102865. 

• One manifestation of endowment effects is that people require more money to part with an owned item (willingness-to-accept, WTA) than they are willing to pay (WTP) to acquire such an item if it is not yet owned – as if the mere fact that you own something raises its value to you. 

• Prospect theory offers one explanation for endowment effects: things you own become part of your reference point, so to “lose” them is particularly painful, thanks to loss aversion. 

• But maybe the endowment effect is not about loss aversion, perhaps it is about your identity being connected to owned items. You have a positive view of your self-worth, so things that become associated with your self become more valuable in your eyes. Ownership of items also has been connected with an increased ability to remember the item down the road. 

• Hmm, but maybe in some cultures people are not so wrapped in self-worth that they raise the value of stuff they own because it is connected to them? Maybe cultures differ, too, in how much ownership of an item increases the ability to recall the item? 

• Experiment 1 (n=32): eight household goods are divided into two equally-valued sets of 4 items each, where those equal values are based upon student valuations collected in a pre-experiment. A participant is told that they own one of the sets but not the other. Then each of the eight items is shown, and the subject indicates how much they would be willing to sell the item for (if they “own” it) and how much they would be willing to pay for it (if they don’t own it). 

• The 32 British undergraduates showed an endowment effect: they were willing to pay on average 9.25 pounds for the unowned set, but would have to be paid 10.65 pounds to part with their “owned” items. But would a similar endowment effect be identified if the experimental subjects were not British but Japanese? 

• For Experiment 2, 61 British undergraduates were recruited, along with 52 Japanese undergraduates. A version of Experiment 1's endowment task was performed, along with new ownership and memory tasks. In the endowment experiment, the Japanese students showed no endowment effects, but once again, the British did. (The endowment task was not identical in the UK and Japan for an unexpected reason: one of the everyday items that made up part of the sets of goods was not available in Japan! "For the Japanese participants, the spatula was replaced with a ladle as the former item was not available locally [p. 4].") 

• As for remembering the items, the British subjects were much better for the items they “owned” than for ones they did not own, but the Japanese showed no difference in recall based upon ownership. Further, British subjects (but not the Japanese) showed a positive correlation between their endowment effects and the impact of ownership on their recall. 

 • Maybe these (British) endowment effects are not about loss aversion, but rather about connections to self?

O'Rourke Stuart, Windschitl, Miller, et al. (2022) on Ambiguity in a Treatment-Seeking Context

Jillian O'Rourke Stuart, Paul D. Windschitl, Jane E. Miller, et al., “Attributions for Ambiguity in a Treatment-Decision Context Can Create Ambiguity Aversion or Seeking.” Journal of Behavioral Decision Making 35(1): e22249, January 2022, available here. 

• You have a nasty skin rash and need one of two treatments: either one with a 75% chance of working or one (the ambiguous one) with somewhere between a 60% and 90% chance of working. Which do you prefer? 

• Some prior work shows that people tend to be ambiguity seeking with respect to medical treatments – they would prefer the 60-to-90% option! But perhaps the reason underlying the fact that the probability of success is uncertain affects how people feel about the ambiguous treatment? 

• Study 1 concerns two alternative reasons for ambiguity in a treatment. In one condition, the range of probabilities is attributed to different outcomes from different research studies; in the alternative condition, the ambiguity is said to arise from the medicine coming from two otherwise identical production batches, one of which has a lower probability of working than the other. 

• The subjects are a combination of Amazon Mturk participants and university students, with an overall n of 492. 

• Both conditions, that is, both explanations for the ambiguity present in one of the health treatments, give rise to some ambiguity aversion – not ambiguity seeking, as some previous literature had suggested to be exhibited in the health domain. In both conditions, nearly two-thirds of participants prefer the unambiguous option. Further, on average, participants indicated that their beliefs about the likelihood of a treatment working were lower for the ambiguous treatment than for the unambiguous treatment. 

• A second study was performed utilizing university students, with n=271. This study replicated study 1, except the ambiguity condition that previously had been attributed to varying results from research studies now was attributed to variations in the overall health status of the patients. (The alternative ambiguity explanation, concerning different production batches, remained the same.) The idea is that people might tend to have optimistic views of their health status, and further, they have some locus of control over their physical condition. Previous literature suggests that these features might induce a preference for ambiguity. 

• When the ambiguity was tied to one's overall health status, ambiguity aversion (on average) disappeared. Further, people who rated their health highly were likely to take the ambiguous option when it was tied to overall health. 

• A third study (Mturk, n=242) looked more at self-focused attributions for ambiguity, beyond overall health. Now the ambiguity was tied either to: (1) how regularly you apply the medicinal cream; or (2) the strength of your immune system; or (3) your genetic makeup. A fourth condition brought back the "different results from different research studies" explanation of study 1. 

• Study 3 also tried out two different conditions for the underlying probability of success, one centered on 75% and one centered on 25%. 

• Attributions 1 – application regularity – and 2 – immune system strength – led to rather massive ambiguity seeking! [The other ambiguity explanations led to ambiguity neutrality.] People indicate (in attributions 1 and 2) that they were optimistic about the resolution of the ambiguity. Indeed, folks seem excessively optimistic about the relative power of their immune systems.

White and Perfors (2022) on Ambiguity Aversion in Vignettes

Joshua P. White and Andrew Perfors, “Ambiguity Aversion in Qualitative Contexts: The Role of Prior Beliefs,” May 22, 2022; available here.

• The idea is to test for ambiguity aversion in more-or-less familiar risky situations that are not about money, such as blind dates or election outcomes. Further, the issue of whether ambiguity aversion arises from people holding pessimistic beliefs about the actual odds facing them in ambiguous situations is explored.

• The three lab experiments employ Amazon Mechanical Turk (overall n>2000) and the analysis is pre-registered, including the data exclusion criteria.

• The 24 vignettes: Would you rather be in the risky situation or the ambiguous situation? Half of the vignettes concern potential gains (e.g., new job) and half concern potential losses (e.g., losing a job). 

• The results: ambiguity aversion is typically present on average in both the gain and loss framings; ambiguity aversion is greater, however, in the gain scenarios, and the amount of aversion varies quite a bit across scenarios. 

• The scenario that tracked an Ellsberg urn problem showed (easily) the highest ambiguity aversion. 

• For some individuals, the aversion to ambiguity seems to derive from pessimistic feelings about how ambiguity would be resolved. (The Ellsberg-style urn vignette – which involved a casino! – is particularly likely to be affected by pessimism.) But there remains a good deal of ambiguity aversion that does not derive from pessimistic beliefs (nor from "comparative ignorance," the concern that a decision maker is up against better informed folks – such as casino owners, perhaps?).

Folkvord, Codagnone, Bogliacino, et al. (2019) on Online Gambling

Frans Folkvord, Cristiano Codagnone, Francesco Bogliacino, et al., “Experimental Evidence on Measures to Protect Consumers of Online Gambling Services.” Journal of Behavioral Economics for Policy 3(1): 20-29, 2019 [pdf here]. 

• Internet gambling might be particularly likely to induce problematic play. 

• The outcome variables tracked in both a laboratory (n=522) and an online (n=5997) experiment are the average amount bet, the time between plays, and the likelihood of ending a gambling session when given the opportunity. 

• In the first stage of the laboratory experiment, gamblers receive one of four interventions: a pop-up warning with a picture about gambling addiction; the warning without a picture; a task to reveal overconfidence; and a picture of a logo of a gambling treatment service. A control group skips those pre-play interventions. 

• None of the first-stage (pre-play) interventions reduce the extent or speed of play, though two of the interventions seem to speed up play! 

• The second stage of the laboratory experiment and the online experiment expand the number of treatments, including the possibility to set monetary limits and using pop-up messages requiring an action to continue gambling. 

• Most of the interventions have no effects. Monetary limits and the warnings that require a response reduce average bet amounts and slow down the rate of play. Registration forms incentivize people to quit.

Beine, Charness, Dupuy, and Joxhe (2020) on Earthquakes and Preferences

Michel Beine, Gary Charness, Arnaud Dupuy, and Majlinda Joxhe, “Shaking Things Up: On the Stability of Risk and Time Preferences.” IZA Discussion Paper No. 13084, March 2020. 

• It seems as if most economists believe that an individual’s risk and time preferences are pretty stable. 

• Patient people and the risk averse would seem to be less likely to migrate, and some empirical evidence supports this view. 

• Albanian per-capita GDP of just over $4000 per year is 30% of the EU average, despite recent high growth in Albania 

• The researchers converge on Tirana, where the currency is the Albanian lek, worth a bit less than one cent. Participants on average get about 12 dollars for a 20-minute or so interview, more than a day’s pay. 

• The 9 enumerators conducting the interactions speak Albanian. Geolocation data for the interviews is automatically collected, with n≈1500. 

• The first choice, aimed at gauging risk preferences: you have 100 coins, each worth 10 lek. You can put some of them in a bag. With probability .5, you will get triple what you put in; with probability .5, you will get nothing. How many coins will you put in the bag? (You keep the coins that you choose not to put in the bag). 

• For time preferences, the question concerns whether you would rather have 1000 lek today or some larger amount of money one month from today. The goal is to see how much more people will have to be paid to induce them to wait one month for their money. 

• The study started on August 31, 2019, and lasted through the end of the year. But on September 21 and November 26, 2019, two major earthquakes hit Tirana. 

• The control group in this (re-imagined post-quake) study is those people whose preferences were tested prior to the first earthquake. The two treatment groups are (1) those who experienced one earthquake, and (2) those who experienced two earthquakes, prior to their testing. 

• “the first earthquake reduces the amount invested in a risky asset (versus a safe asset) by about 25%, while the second one leads to an additional similar effect [p. 3].” Why the big change after the second one, when earthquakes have lost the element of surprise? And why should any changes in risk aversion be reflected in incentivized laboratory games with fixed probabilities? 

• Migration intentions share no connections with risk preferences among the study population, until after the second quake. (But pre-earthquake, already 70% of Albanians intend to migrate.) More exposure to the quakes makes more risk averse people more likely to migrate. More patience also means a lower intention to emigrate. 

• Before the first earthquake, about 42 coins are invested on average in the risk preferences situation: 144 people invest zero, 102 invest all 100 coins. (Aren’t there anti-gambling laws in Albania?) The number of coins risked falls from 42 to 34 to 23 with the earthquakes. 

• Would you take 2590 lek one month from now instead of 1000 lek today? Almost half of the participants would take the immediate 1000 lek. Patience (limited as it is) is cut in half with the first quake, and almost halved again with second. 

• Being exposed to heavier shaking (the geo data proxy for exposure) seems to be connected with a bigger change in risk and time preferences. 

• The earthquakes affect migration intentions indirectly, through their influence on risk and time preferences: the earthquakes mean that the now more risk averse people become willing to emigrate. More impatient people also are more interested in emigration.

Smitizsky, Liu, and Gneezy (2021) on Endowment Effects

Gal Smitizsky, Wendy Liu, and Uri Gneezy, “The Endowment Effect: Loss Aversion or a Buy-Sell Discrepancy?.” Journal of Experimental Psychology: General 150(9): 1890–1900, 2021; https://doi.org/10.1037/xge0000880. 

• The endowment effect, loosely: you value stuff more when you own it than when you don’t. 

• A standard way to “identify” endowment effects is to document a notable difference between the amount someone is willing-to-pay (WTP) to acquire an item and the amount that, if they already have the item, they would need to be paid to relinquish it (willingness-to-accept, WTA). 

• A WTA that is substantially higher than the WTP is evidence for an endowment effect. 

• A prospect theory-style explanation for endowment effects invokes loss aversion. Your reference point changes to include stuff you own, so to depart with owned stuff is coded in the loss domain. 

• An alternative explanation for WTA/WTP gaps is that people bring their buying and selling selves into the lab with them. Strategically, in the real world it often makes sense for buyers to understate their WTP and sellers to overstate their WTA, and maybe those strategies survive in the lab, despite efforts to incentivize truthful responses. 

• The authors invent the “Pay to Keep” condition. [Though for a parallel, see the “retention paradigm” of Gal and Rucker (2018).] There is no selling, only keeping, in this condition. If the amount you are willing-to-pay to keep (PTK) is similar to WTP (and hence typically less than WTA), the “endowment effect” can’t be due to loss aversion: unlike with WTP, the PTK condition involves a loss of something “owned,” but PTK is still below WTA. Any discrepancies (between PTK and WTA, and between WTP and WTA), then, might be consistent with subjects adopting buyer/seller roles. 

• In testing the role of Pay to Keep, those who are offered the opportunity to pay to keep their item must believe that they already “own” the item, that it is part of their endowment. 

• So, the experiments involve three conditions: WTP, WTA, and PTK. Subjects find a nice college-branded pen at their station when they enter the lab. 

• In the WTA and PTK conditions, subjects are told that the pen is theirs, and they should use it to complete some boring task. In the WTP condition, the pen is just near the subject and they are told “no touchies;” they complete the boring task with a pencil instead. 

• After the boring task, WTP folks are asked, want to buy the cool pen (and how much will you pay)? 

• WTA folks are told they could sell their pen (how much would they need to be paid?) or just take it home. 

• PTK folks are told, sadly, pay for the pen or lose it. How much are you willing to pony up? 

• In the experiments, WTP and PTK are similar on average, and much less than WTA. 

• So, there’s an endowment effect (WTA-WTP gap as well as WTA-PTK gap) – but no evidence for loss aversion, as the PTK folks think (?) that the pen is theirs, part of their endowment, even though they have to pay to keep it. 

 • People are not more interested in keeping the pen than in buying the pen: the valuation gaps can be due to buyer/seller discrepancies, though not to loss aversion.

Berger and Bosetti (2020) on Ambiguity Attitudes of Policymakers

Loïc Berger and Valentina Bosetti, “Are Policymakers Ambiguity Averse?” The Economic Journal 130(626): 331-355, February 2020 [gated copy here, ungated preliminary pdf here.] 

• Climate change is one policy area mired in ambiguity, where the relevant probabilities of outcomes are not known with precision. Berger and Bosetti travel to the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change to examine the ambiguity preferences of policymakers working on climate change.

• Berger and Bosetti end up collecting data from 80 policymakers at the Climate Change Conference, and reinforce this data via a laboratory experiment involving 189 university students.

• The main finding is that most of the subjects are ambiguity averse, and that policy makers and students show similar ambiguity preferences (when controlling for policymaker country of origin and quantitative expertise). About 15% of policymakers show ambiguity-loving behavior, along with 9% of the students.

• Less than 20% of both samples choose in a manner consistent with expected utility maximization, which requires ambiguity neutrality. 

• The main experiments involve choices among subsets of four urns with different colored balls; there are monetary incentives for getting the "right" color when a ball is chosen.

• Urn 1 contains 50 red balls and 50 black balls. Urn 4 contains 100 balls, but it is unknown how many are red and how many are black. 

• The comparison between Urn 1 and Urn 4 is another (two-color) version of the Ellsberg game. The decisions are to pick a winning color and to pick an Urn; then, a ball will be picked at random from your chosen urn.

• As noted, most people prefer Urn 1 to Urn 4: they are ambiguity averse. About one-quarter of policymakers and one-fifth of students find Urns 1 and 4 to be equivalent: they are ambiguity neutral.

• The researchers also compare Urn 1 with each (separately) of two other urns. Urn 2 (compound risk) starts with a coin flip that determines whether all 100 balls are red are all 100 are black. Urn 3 (model uncertainty) is where the number of balls is unknown, but one urnish expert swears that they are all red while another expert maintains that they are all black.

• Most subjects (especially students) treat Urn 2 like Urn 1, while that is not the case with Urn 3: model uncertainty is aversive.

• Conference delegates from OECD countries show similar ambiguity aversion as those from non-OECD countries; nor does the degree of quantitative sophistication affect policymaker ambiguity preferences.

• More stringent climate control policies might make sense given widespread aversion to ambiguity, if such policies are able to reduce ambiguity.

Vosgerau and Peer (2019) on Preference Malleability

Joachim Vosgerau and Eyal Peer, “Extreme Malleability of Preferences: Absolute Preference Sign Changes Under Uncertainty.” Journal of Behavioral Decision Making 32(1): 38-46, January 2019.

• The evidence on the extent to which preferences are constructed as opposed to revealed has been challenged. Much of the evidence is based on a person preferring option A to option B in one condition, and then, preferring option B to option A in a somewhat different condition -- where the conditions differ only with respect to supposedly irrelevant factors. 

• The best evidence of preference malleability would be where a person evaluates the same prospect (just A, no B) in opposite directions – is it a good or a bad, is it desirable or undesirable? – in different conditions. 

• The authors conduct two experiments (the second experiment is a near replication of the first with a larger sample size and some other improvements) where subjects indicate whether they have to be paid to accept a prospect (it’s bad), and also whether they would pay for the opportunity to obtain the same prospect (it’s good). If they are both willing to pay and need to be paid for the prospect, then it seems that their preferences are quite malleable. 

• One lottery: you win 30 NIS (Israeli New Shekels) if heads and lose 20 NIS if tails; second lottery: you win 30 NIS if a die toss brings an odd number and lose 20 NIS if the toss yields an even number. These lotteries are thus identical in terms of payoffs and probabilities. 

• The experimenters ask how much subjects would need to be paid (“compensation amount”) for one of the lotteries and how much they would be willing to pay for the other lottery. 

• Most people are willing-to-pay, and even more people demand compensation -- but about half (experiment 1) or about 84% (experiment 2) do both. People do not seem to know whether the lottery is desirable or undesirable or both: they do not seem to possess some underlying, stable preference concerning this lottery. 

• In experiment 1, the more people were willing to pay for the lottery, the more they also required to be compensated to receive the lottery.

•  The experimental design also allows some inferences to be made concerning risk preferences; for instance, if your willingness-to-pay for a lottery is less than the lottery's expected value, that is evidence that you are risk averse. Risk preferences, too, are not clear or stable: about 34% of the participants in experiment 1 (and 61%+ in experiment 2) indicate that they are both risk averse and risk seeking/neutral!

Evers and Imas (2019) on Mental Accounting

Ellen Evers and Alex Imas, “Mental Accounting, Similarity, and Preferences Over the Timing of Outcomes,” September 12, 2019, available at https://ssrn.com/abstract=3452943.

• Do we experience life events in a bundle – a good day, say – or do we experience life more discretely, like a good work day followed by a nice dinner? Our “valuation” (of a day, for instance) will depend on the bundling, because of prospect-theory-style reference points. If we have a good morning, do we record that "event" as complete, in the hedonic books, as it were, and then start fresh in the afternoon?

• We might get more satisfaction if we could consume a good day in two or more parts, as a good morning followed by a good afternoon, as opposed to one indivisible event, a good day. Given "diminishing sensitivity" to gains and losses (a standard element of prospect theory), we would prefer to take gains discretely, and to bundle losses together.

• But can we actually choose how to bundle our experiences to maximize our well-being, to engage in “hedonic editing”? Maybe our control over the mental accounts is limited, maybe similar things (like a good morning and a good afternoon, both spent at the office) in a day will be bundled together.

• Similarity, here, takes the form of shared salient attributes. Temporal proximity is one salient feature, and hence, all else equal, with diminishing sensitivity, people would prefer losses to occur close together and gains to be spread out – but all else is not always equal, sometimes there are other factors (salient similarities) that lead to losses being mentally separated or gains being mentally bundled.

• Evers and Imas suggest that mental bookkeeping is done to economize on the comparison of attributes. At any rate, their “hedonic accounting hypothesis” is that people prefer to suffer similar losses in a short time span but dissimilar losses in a longer time span; alternatively, similar gains are spread over time and dissimilar gains are taken closer together. The similar losses are in the same mental account, and hence, treating them jointly helps (via diminishing sensitivity) to take away some of their sting. Dissimilar losses are sort of fated to be in different mental accounts, so there is no gain to bundling them, and something to be said for postponing one of them.

• In four online experiments (using mTurk, with more than 100 respondents for each of the experiments), the authors find support for their hypotheses: (1) more similar events are more likely to be bundled into a single event; (2) the more similar two negative events, the greater the desire to bundle them (by choosing to experience them in close temporal proximity); (3) the more similar two positive events, the greater the desire to separate them temporally; and (4) rendering events more similar by increasing the salience of their shared characteristics makes them more likely to be assigned to the same mental account. 

Friese, Loschelder, Gieseler, et al., "Is Ego Depletion Real?" (2018)

Malte Friese, David D. Loschelder, Karolin Gieseler, et al., “Is Ego Depletion Real? An Analysis of Arguments.” Personality and Social Psychology Review, published online, March 29, 2018. 

• The ego depletion hypothesis maintains that self-control is a construct that applies across (essentially?) all domains… 

• …and the exertion of self-control increases the chance of a failure of self-control in a subsequent (temporally proximate) task. 

• The standard experimental test for ego depletion is to conduct two consecutive self-control tasks. Ego depletion holds that folks who were induced to exert more control on the first task will show relatively low self-control on the second task. 

• The ego depletion literature frequently goes beyond the “depletion” being induced by self-control; any effortful behavior, including IKEA shopping, might lead to a depleted state and lessened self-control. 

• Some meta-analyses of the ego depletion literature conclude that the average effect might be zero; a preregistered large-scale replication of a previous ego depletion study also found a zero average effect. 

• Standard depletion-inducing exercises include variations on “e-crossing” and the Stroop test. Do these manipulations really work? 

• Journals traditionally have not been as interested in publishing null results than publishing articles that find statistically significant results. Researchers presumably respond to this situation by not bothering to write up and submit experiments that produce null results. Are the hundreds of published articles that find ego depletion matched or overmatched by countless unpublished studies that found no impaired self-control? 

• Another way that researchers might respond to the (perceived?) difficulty in publishing null results is to ensure that they do not get null results. One way to do that is to run many different empirical specifications (of a regression, say), but only report the “best” one. If you do this, the usual tests for statistical significance are meaningless. (See Shiny Apps p-hacker.)

• We don’t see many studies with reverse depletion effects, and if the truth were that the effect is null, we might(?) see as many negative as positive studies. 

• The unpublished studies might have to be legion to completely “offset” the many positive studies: that is, the truth might well be a positive effect (but of what size?) 

• Don’t we see evidence of ego depletion in everyday life? 

•  The solution lies in better science! Pre-register studies; increase sample sizes; use improved controls; report all results; collaborate with your intellectual opponents; develop theoretical understandings; check the quality of manipulations.

• Friese et al. suggest that the burden of proof on the existence of ego depletion is now on the proponents of the phenomenon.

Gal and Rucker (2018) on the Loss of Loss Aversion

David Gal and Derek D. Rucker, “The Loss of Loss Aversion: Will It Loom Larger Than Its Gain?” Journal of Consumer Psychology 28(3): 497-516, July 2018.

• Social scientists seem to all but universally believe in loss aversion, the notion that losses “loom larger” psychologically than do similarly-sized gains.

• Gal and Rucker claim that the actual evidence does not support any general tendency for losses to loom larger than gains: everything depends upon the context.

• There’s a bit of circularity in the promotion of loss aversion: some phenomenon (like the equity premium puzzle or the endowment effect) is “explained” by loss aversion, and then the existence of the phenomenon (the equity premium, the endowment effect) is taken to be evidence that loss aversion is pervasive. 

• The status quo bias might reflect a preference towards inaction – and such a preference can exist in the absence of loss aversion, due to the lack of a motive for action, or economizing on processing costs, or the tendency to regret errors of commission more than errors of omission. 

• When asked to trade their original good for an essentially identical one, loss aversion is not implicated – but people still show a large status quo bias. Action v. inaction confounds the loss-gain story. 

• Is the endowment effect just a case of a status quo bias, and therefore does not require loss aversion? 

• The “retention paradigm” recasts endowment effect experiments as willingness-to-pay (WTP) to obtain an item v. WTP to retain an item – so now the “inaction” choice is not to have the good in both cases. (That is, the confounding of loss aversion with inaction is sidestepped.) 

• If loss aversion is active, then in the retention paradigm, the WTP to retain will be higher than the WTP to obtain. But in the experiments, there was no premium to retain a good or service. For “mundane” goods – mugs, notebooks – obtaining tended to have a higher WTP than retaining. 

• One has to be creative to come up with reasonable “retain” scenarios! Fixing a broken phone, perhaps? 

• Analogous experiments ask if you would like to receive $0 for a good you own, or exchange it for another good. The second condition swaps the owned and alternative good. Mug v. $5 shows no endowment effect – even though the standard exchange paradigm (that is, not the "retention" paradigm) with these goods shows a significant endowment effect. 

• For the standard “loss aversion ratio” test, not accepting the bet is the status quo. This test, too, can be recast: Would you rather receive $0 with a probability of 1 or take a 50-50 bet with the possibility of winning or losing $15? People seem to have a slight preference for the risky alternative. 

• When stakes are higher, preferences shift toward the sure thing – but this could reflect risk aversion, not loss aversion. (And, loss aversion is generally taken to be independent of the stakes.) 

• When you ask people directly about the psychological impact of winning or losing something – you ask them how they feel about these events – losing doesn't dominate in terms of the magnitude of feelings. How do you feel about losing a mug versus winning a mug? 

• How do you feel about losing $3 versus winning $3? What about $100? At the low stakes, people seem to care more about the gain. 

• Loss “frames” are not generally more motivating than “gain” frames (despite some evidence to the contrary in certain domains). 

• Why is loss aversion so popular given its questionable evidentiary base? Perhaps in part due to a status-quo bias among researchers(!), or confirmation bias within Kuhnian “normal science.” 

• Loss aversion holds intuitive appeal: we all feel some losses acutely. And the name “loss aversion” itself is persuasive.

Sjåstad and Baumeister (2018) on Planning Aversion

Hallgeir Sjåstad and Roy F. Baumeister, “The Future and the Will: Planning Requires Self-control, and Ego Depletion Leads to Planning Aversion.” Journal of Experimental Social Psychology 76: 127-141, 2018.

• The authors hypothesize that the willingness to engage in the task of making plans for the future requires self-control; therefore, people who generally have low self-control ("trait" self-control) are less likely to plan, and people who are "ego depleted," who are fatigued ("state" self-control), also will be less likely to plan. (As with many notions in the behavioral sciences, ego depletion is not without its share of controversy.) 

• This article, therefore, adopts the view that willpower draws on a depletable resource, and that when people have depleted that resource through cognitively taxing tasks, they will, in the short term, display reduced willpower (be ego-depleted). In other words, people with higher trait and state self-control will plan more.

• The authors conduct four studies. Study 1 looks at the correlation between trait self-control and planning; Study 2 and Study 3 ask if depletion (low state self-control) reduces planning; and, Study 4 tries to identify the channel through which ego depletion might undermine planning. 

• Study 1 (N=201, Amazon Mechanical Turk, 30 cent payment per participant!) asks individuals questions about the extent of their self-control, their engagement in planning in the past, and their intended planning in the future. Sure enough, high self-control is associated with high past and future planning. Further, there is some evidence that women plan more than men.

• Study 2 is a lab experiment (n=105), where the control (non-depleted) group starts with a relatively easy, 12-minute writing task (avoid the letters x and z) and the depleted group has a 24-minute, difficult task (avoid the letters A and N); this depletion method is used to overcome problems identified in earlier experiments where shorter or less onerous tasks do not do much to distinguish the two groups. Those with the hard writing task report being both more exhausted and less interested (than those with the easy task) in making plans for the next four weeks. The depleted folks are less happy, too, but it doesn’t seem to be mood differences that dissuade the planning.

• Study 3 takes advantage of the possibility that shopping at Ikea tends to makes couples miserable! The participants (N=112) are Ikea shoppers in Norway, with half surveyed pre-shopping, and half surveyed post-shopping. Those who have completed their shopping report making many more recent decisions than the pre-shoppers, as well as being more exhausted. Further, post-shoppers are less willing to plan, though they do not express lower ambitions for the future. (They still want the benefits of planning, it seems, but are less willing to put in the effort.) 

• Study 4 (N=128) picks up on the mechanism connecting ego depletion with planning aversion. Once again, laboratory participants are separated into depletion groups through differentially trying writing tasks. But in this experiment, they are given the opportunity to actually engage in planning, instead of just being asked about their intentions to plan in the future. 

• The participants are asked how hard they like to work, and how hard they think planning would be. Again, the depleted folks avoid planning; further, they express a lessened desire to exert effort to engage in planning, and this altered desire (greater effort avoidance) mediates much of the relationship between depletion and planning: effort avoidance seems to be a major channel connecting depletion to reduced planning.

• "A vicious circle might develop in which failure to plan creates stresses and difficulties, which impose a further drain on limited self-regulatory resources, which in turn makes people all the more reluctant to plan [p. 139]."

Banker et al. (2017) on Sticky Anchors

Sachin Banker, Sarah E. Ainsworth, Roy F. Baumeister, Dan Ariely, and Kathleen D. Voh, “The Sticky Anchor Hypothesis: Ego Depletion Increases Susceptibility to Situational Cues.” Journal of Behavioral Decision Making 30(5): 1027-1040, December 2017 [pdf here].

• “Ego Depletion”: Exerting self-control undermines self-control in slightly later situations. 

• Is ego depletion a thing? Maybe, maybe not (pdf here); like many behavioral concepts (for example, grit [pdf here]), ego depletion has its detractors. 

• In a dictator game-type setting, does less altruistic behavior (from ego depletion) come about because self-controls over selfishness are undermined, or because people are more inclined to follow salient situational cues? This latter possibility is the sticky anchor hypothesis: depleted people are more suggestible or manipulable. 

• Some dictator game experiments show that depleted people do indeed keep more of the monetary stake for themselves. 

• Are the dictator game findings due to unleashed selfishness or to sticking with the default? To test between the two mechanisms, the authors switch the default: they conduct reverse dictator games. The other (anonymous) party is endowed with the full stake, but you, as the dictator, can choose to take some or all of it. The default, now, is the unselfish setting, so if depleted people have a hard time overcoming defaults, they will leave more of the cash with the other player (relative to the amount left by undepleted folks). Alternatively, if depletion makes you selfish, depleted folks will take more of the endowment from the other player. 

• The depletion manipulation (in Experiment 1, with overall N=54) involves writing some text without using the letters A or N. (Those in the “undepleted” camp write without using the letters X and Z. Incidentally, this reminds me of the singular novel Ella Minnow Pea.) That is, it is attention control that is the source of ego depletion within this experiment.

• On average, those in the depleted condition take less money for themselves ($2.62) than do those in the undepleted condition ($3.69). So, ego depletion does not seem to increase selfishness; rather, it makes it harder to overcome the influence of environmental cues: defaults become more sticky. Notice that neither group is particularly generous. 

• But maybe the attention control manipulation means that the depleted also feel like failures, because they perform poorly at writing without A’s or N’s: they don’t deserve the money in the reverse dictator game. Vicarious depletion [pdf here] to the rescue! A waiter is really hungry…(alternatively, not so hungry…) 

• Once again, the depleted folks (that is, the now vicariously depleted folks, who feel no shame) stick more closely to the anchor: it doesn’t seem to be a lack of desert that causes them to take less money (or fewer lottery tickets) for themselves. 

• But maybe it isn’t general environmental cues at work, maybe it is just our old friend, the status quo effect. So now (Experiment 3) the authors offer either a high or a low anchor before subjects decide how much money to take. Note that the default (the anonymous other gets all the cash) is unchanged, but there is a new situational cue, the anchor. (Subjects are first asked whether they want to take more or less than the anchor; only then are they asked for the precise amount they want to take.) Will depleted people respond to the anchor (more than non-depleted people do), or just to the default? 

• Both depleted and non-depleted subjects respond to the anchor. But the depleted respond more, particularly in the low-anchor treatment. The influence of environmental cues, and not the status quo per se, is what leads to different behavior by depleted folk relative to the undepleted.

Chen and Schonger (2016) on Ambiguity Aversion

Daniel L. Chen and Martin Schonger, “Is Ambiguity Aversion a Preference?” TSE Working Paper No. 16-703, December 2016.

• Ambiguity aversion has been implicated in many real world phenomena, including the equity premium puzzle: the stock market operates under Knightian uncertainty (ambiguity), not risk, and so ambiguity-averse investors need compensation to buy stocks. Overly punitive plea bargains are acceptable to ambiguity-averse defendants…

• But perhaps the sort of behavior exhibited by the Ellsberg paradox is not really indicative of underlying preferences – perhaps it is mistake, the use of a decision heuristic in inappropriate circumstances. Perhaps people are not actually ambiguity averse.

• Maybe people (rightly) shy away from unfamiliar offers, especially when the person making the offer possesses superior information – and this is the situation when experimental participants are presented with the Ellsberg game. Subjects suspect that the experimenter actually knows how many red and blue balls are in the urn.

• Chen and Schonger set up an Ellsberg experiment where the experimenter is not the party responsible for the contents of the ambiguous urn; rather, the choices of other subjects determine the contents. 

• Every subject decides which of two symbols to send to the others. In experiment 1, the symbol that gets the most “votes” is the symbol that will appear in the “ambiguous” urn for other participants (which need not be the same for all participants, incidentally). 

• All experiments involve a toss of a fair coin, where the subjects can choose to bet on either heads or tails, along with the two ambiguous options. A correct outcome yields 4€. The choice of the bet is determined by taking the maximum of the valuations provided by each participant for each of the four bets. 

• People turn out to prefer the ambiguous bets! “For each of the 16 sessions, individuals were more likely to bet on a symbol with subjective uncertainty, and in all but 2 of the 16 sessions, both bets with subjective uncertainty were more popular than the bets with objective uncertainty [p. 15].” This remains true in design 2, where there is a full-on urn and not just a specific symbol chosen by others.

Bénabou and Tirole (2016) on Motivated Beliefs

Roland Bénabou and Jean Tirole, “Mindful Economics: The Production, Consumption, and Value of Beliefs.” Journal of Economic Perspectives 30(3): 141-164, Summer 2016.

• People value their beliefs, both directly and for instrumental reasons; therefore, beliefs can withstand counter-evidence, and people may prefer to steer clear of evidence.

• Positive beliefs can be nurtured by responding asymmetrically to good and bad news.

• Shared beliefs also can be resistant to evidence, possibly with dreadful consequences.

• Bénabou et Tirole treat beliefs as if they were standard economic goods or assets, which people consume, invest in, produce, and so on.

• Optimism can serve as a sort of commitment device to stick with long-term projects and to avoid temptation. False beliefs can also influence other people in a way that might serve your interests. Religious beliefs might contribute both to self-discipline and to improve your view of yourself and your future. 

• Methods to protect valued beliefs include “strategic ignorance, reality denial, and self-signaling [p. 144].” More educated people are not better shielded from employing these methods. 

• Confirmation bias allows people to believe that their previous views have been corroborated. They anticipate this future corroboration, and this allows them to take on risky projects. 

• Emotional responses to a challenge to your beliefs are a signal that your beliefs are something you are trying to protect. Standard rationality suggests that challenges should be welcomed -- shades of  J. S. Mill.

• There’s a trade-off between accepting bad news and optimizing decisions given reality versus living in blissful ignorance for awhile before the piper must be paid. 

• Because it is easier to recall our actions than it is to recall our motives, we might try to self-signal, by choosing actions that will allow us to later have a good (but distorted) view of ourselves. 

• In laboratory experiments, subjects have a harder time remembering (accurately) their past failures.

• Self-deception rises with the size of the sunk costs. People persuade themselves of the future value of these investments. 

• People are quite good at believing they had sound reasons for their bad behaviors. 

• Blind persistence in social projects in the face of bad news might make the situation more tolerable. But if persistence can lead to bigger losses, watch out for “Mutually Assured Delusion.” Unfortunately, it is in this situation that denial becomes contagious. 

• Organizational failures might be a result of bad beliefs as much as bad incentives. 

• “Just-world” beliefs and the extent of the welfare state are negatively correlated. 

• Constitutional guarantees of free speech and a free press might serve as a commitment device to allow dissent even in the future bad states – and reduce the protection of current beliefs, because of the increased likelihood that they will be challenged, anyway.