Essays on Experimental and Empirical Economics

Document Type
Doctoral Thesis
Issue Date
Issue Year
Auferoth, Florian

This dissertation presents three essays that use experimental or empirical methods to investigate the the impact of incentives and the decision-structure on behavior. Each essay is a self-contained study that contributes to the understanding of human behavior. The first essay (chapter 1) identifies the impact that tracking technology and individual incentives have on human behavior. The second essay (chapter 2) focuses on interventions to induce short-term action for long-term benefits. The third essay (chapter 3) investigates the tendency by decision-makers to compensate potential previous mistakes.

In chapter 1, my coauthors and I investigate the impact of tracking technology and individual incentives in a controlled experimental setup. We identify the impact that the team interaction tracking and the individual incentive scheme have on behavior by fixing the experimental conditions and balancing teams across different treatments. Deviating from a standard laboratory experimental setup allows us to credibly manipulate the tracking environment. Since participants in this experiment are allocated to the different teams and treatments by the experimenters, the selection into incentive schemes does not affect the reaction to the incentives. The study not only evaluates the productivity effects of tracking technology and individual incentives, but also identifies effects on stress levels, which can lead to long-term health effects. First, we do not find evidence that team members produce higher output due to individual incentives. However, the results show that the work effort is less specialized as a result of moving from team to individual incentives. We then show that the introduction of tracking technology causes higher stress levels. The results demonstrate that tracking technology can be implemented to monitor teams and set incentives in teamwork. However, the productivity effects of such technology will be limited if incentives are not set optimally. Furthermore, since stress levels increase, the introduction of tracking technology may not pass a cost-benefit analysis if the stress increase leads to large long-term health costs.

Chapter 2 reports results from a framed field experiment that identifies the impact nudges have on voluntary actions with a long-term benefit. This experiment is set in the context of a university course. This context allows for the observation of behavior over a full semester, including the final exam. By randomizing students into different groups and sending each group different information emails for exam preparation, the impacts of different nudges on behavior and on exam outcomes is identified. Investigating behavior over the entire semester allows for the differentiation between the short-term reactions to the nudge and the long-term benefits. The results show that reminder nudges can increase exam preparation and lead to considerable improvements in grades. Subgroup analyses suggest that such grade improvements occur for students who achieved better-than-average grades on previous exams, but also for students who did not take a previous test. The results imply that the tracking of student behavior and more targeted interventions to tackle low preparation among some student types may be more effective than general nudges applied to all students.

In chapter 3 my coauthors and I analyze decisions by supposedly impartial decision-makers for compensation behavior in response to mistakes. By using data on referee mistakes in the Bundesliga, the highest elite football division in Germany, we evaluate whether referees try to alternate who they favor in close situations. Furthermore, we evaluate whether discretionary decisions such as yellow cards are influenced by previous mistakes. The results indicate that referees compensate a home team for a mistake against it by awarding additional yellow cards to the away team. This represents a form of home bias since no such behavior can be observed following mistakes against the away team. Additional analysis shows that the effects are more pronounced in games that are important to the home team, when the stadium is fully occupied, and when the referee is less experienced. These additional results are consistent with social pressure as an important factor in whether the referee compensates for a previous mistake. In summary, all three chapters provide evidence that humans react to incentives in their every-day environments. These reactions are rational and strategic but can also be influenced by the social context. The methods employed in the different chapters account for the different contexts investigated. The experiment in chapter 1 favors internal validity over generalizability due to the restricted actions investigated. The experiment in chapter 2, in contrast, provides data from a more natural context and allows for the analysis of short and long term effects of the considered intervention. Finally, the data in chapter 3 is collected without an experimental intervention and is thus unaffected by any influences due to the identification method. These methods all have comparative strengths and weaknesses. By combining multiple methods, the chapters in this dissertation demonstrate the wide range of tools available to produce insights into human decision-making processes.

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