This paper investigates theoretically and experimentally how difference in individual circumstances affects effort choice and attitudes towards redistribution. I introduce a model in which a worker’s production depends on effort, exogenous circumstances, and luck. I show that when workers aim to reach a target production, those who succeed on average are endowed with better circumstances and exert less effort. A third party who is informed only of the worker’s outcome - success or failure - believe that workers who succeed on average exert less effort than workers who fail. I test the theory using a real-effort experiment in which circumstances, effort and the distribution of luck determines the likelihood of success. The experimental results suggest that effort choice responds to circumstances. Workers with better circumstances exert less effort yet succeed more. Eighty-seven percent of workers who provide no effort start with circumstances below the median. Third parties make the right inference about the role that circumstances plays in determining success or failure. Earnings redistribution within pairs of workers with asymmetric outcomes is higher when third parties are informed of worker’s circumstances. The higher level of redistribution is suggestive of meritocratic behavior.
ESA World Meeting - University of Lyon 2023
ESA North-American Meeting - UNC Charlotte 2023
Behavioral and Experimental Economists of the Mid-Atlantic - Federal Reserve Bank of New York 2023
Correlation neglect occurs when decision makers underweight the correlation between signals. We extend a model by Ortoleva & Snowberg (2015) and focus on the interaction between correlation neglect and one type of overconfidence, namely overprecision. The model predicts that high neglecters value extra signals more, seek more information than other agents, and are more overconfident. We design and run a laboratory experiment closely replicating the theoretical set-up, which involves endogenous acquisition of highly correlated signals. We identify individual level of correlation neglect using two incentivized methods. Full neglecters in our experiment are willing to pay on average 51% more for three extra signals than other participants. We find that high correlation neglecters are also more overprecise. We rule out that the observed behavior is driven by base-rate neglect.
ESA North-Amercian Meeting - UC Santa Barbara 2022
Midwest Economic Association - Minneapolis 2022
Economics Graduate Student Conference - Washington University in St. Louis 2022
Work in Progress
Guilt Aversion or Social Image Concerns? Evidence From a Modified Dictator Game (Draft Coming Soon)
We use a modified dictator game with imperfect information to distinguish between two motives for altruistic behavior: guilt aversion and social image concerns. We exogenously vary the recipient’s payoff expectation by introducing uncertainty about the probability with which the dictator is called to move. Increasing the recipient's expectation should induce guilt averse dictators to behave more pro-socially but not affect social image. In a second treatment, we reveal to the recipient if her payoff is the result of the dictator or nature’s move. Increasing exposure should push dictators who care about their social image to be more prosocial, but not affect guilt aversion. We document the extent to which recipients give the benefit of the doubt by allowing them to punish the dictator. We show that it is rational for dictators who care about their social image to exploit the recipient's doubt to their benefit. We argue that this is because there is no social cost of behaving selfishly when the benefit of the doubt is given. This shows that social image concerns are only relevant at the margin. However, some agents still behave pro-socially even when they are given the benefit of the doubt because they are guilt averse and do not like to disappoint recipients.