"Choosing Who You Are: The Structure and Behavioral Effects of Revealed Identification Preferences"

Hett, Florian, Markus Kröll, and Mario Mechtel

Economic Journal, revise and resubmit,

Social identity is an important driver of behavior. But where do differences in social identity come from? We use a novel laboratory experiment based on a revealed preference approach to analyze how individuals choose their identity. Facing a trade-off between monetary payments and belonging to different groups, individuals are willing to forego significant earnings to avoid certain groups and thereby reveal their identification preferences. We then show that these identification preferences are systematically related to behavioral heterogeneity in group-specific social preferences. These results illustrate the importance of identification as a choice and its relevance for explaining individual behavior.

"Do Children Cooperate Conditionally? Adapting the Strategy Method for First-Graders"

Hermes, Henning, Florian Hett, Mario Mechtel, Felix Schmidt, Daniel Schunk, and Valentin Wagner

Journal of Economic Behavior & Organization, forthcoming

We develop a public goods game (PGG) to measure cooperation and conditional cooperation in young children. Our design addresses several obstacles in adapting simultaneous and sequential PGGs to children who are not yet able to read or write, do not possess advanced abilities to calculate payoffs, and only have a very limited attention span at their disposal. It features the combination of haptic offline explanation, fully standardized audiovisual instructions, computerized choices based on touch-screens, and a suitable incentive scheme. Applying our experimental protocol to a sample of German first-graders, we find that already 6-year-olds cooperate conditionally and that the relative frequency of different cooperation types matches the findings for adult subjects. We also find that neither survey items from teachers nor from parents predict unconditional or conditional cooperation behavior; this underlines the value of incentivized experimental protocols for measuring cooperation in children.

"Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis"

Hett, Florian and Alexander Schmidt

Journal of Financial Economics, 126 (2017), 635-651.

Winner of the Sturm & Drang Prize for the best publication by a young researcher of the Faculty of Economics and Business Administration

We design a novel test for changes in market discipline based on the relation between firm-specific risk, credit spreads, and equity returns. We use our method to analyze the evolution of bailout expectations during the recent financial crisis. We find that bailout expectations peaked in reaction to government interventions following the failure of Lehman Brothers, and returned to pre-crisis levels following the initiation of the Dodd-Frank Act. We do not find such changes in market discipline for non-financial firms. Finally, market discipline is weaker for government-sponsored enterprises (GSEs) and systemically important banks (SIBs) than for investment banks.

"Social Identity and Social Free Riding"

Bernard, Mark, Florian Hett, and Mario Mechtel

European Economic Review, 90 (2016), 4-17 (lead article).

We model individual identification choice as a strategic group formation problem. When choosing a social group to identify with, individuals appreciate high social status and a group stereotype to which they have a small social distance. A group's social status and stereotype are shaped by the (exogenous) individual attributes of its members and hence endogenous to individuals' choices. Unless disutility from social distance is strong enough, this creates a strategic tension as individuals with attributes that contribute little to group status would like to join high-status groups, thereby diluting the latters' status and changing stereotypes. Such social free-riding motivates the use of soft exclusion technologies in high-status groups, which provides a unifying rationale for phenomena such as hazing rituals, charitable activities or status symbols that is not taste-based or follows a standard signaling mechanism.

"How Individual Characteristics Shape the Structure of Social Networks"

Girard, Yann, Florian Hett, and Daniel Schunk

Journal of Economic Behavior & Organization. 115 (2015), 197-216.

We study how students’ social networks emerge by documenting systematic patterns in the process of friendship formation of incoming students; these students all start out in a new environment and thus jointly create a new social network. As a specific novelty, we consider cooperativeness, time and risk preferences – elicited experimentally – together with factors like socioeconomic and personality characteristics. We find a number of robust predictors of link formation and of the position within the social network (local and global network centrality). In particular, cooperativeness has a complex association with link formation. We also find evidence for homophily along several dimensions. Finally, our results show that despite these systematic patterns, social network structures can be exogenously manipulated, as we find that random assignments of students to groups on the first two days of university impacts the students’ friendship formation process.

"Can monetary incentives increase organ donations?"

Eyting, Markus, Arne Hosemann, and Magnus Johannesson

Economics Letters. 142 (2016) 56–58

We test in an experiment if a monetary incentive or a charity incentive can motivate people to fill in the German organ donor card and thereby increase the number of organ donors. We find that a monetary incentive significantly increases the number of organ donors whereas the charity incentive does not.

"Belief Elicitation with Multiple Point Predictions"

Eyting, Markus and Patrick Schmidt

Working Paper, draft upon request

We provide a general framework for the elicitation of beliefs about real-valued outcomes and propose a novel, incentive compatible elicitation mechanism - Multiple Point Predictions. By simultaneously eliciting a set of quantiles, Multiple Point Predictions provide a simple way to infer subjective probabilities without requiring respondents to understand probabilistic concepts. The elicitation mechanism can be used in surveys, interviews, and expert forecasting and is robust for risk-averse agents. In a laboratory experiment, we compare the proposed mechanism to the standard approach of eliciting discrete probabilities on pre-defined intervals with the Quadratic Scoring Rule. We find that elicitation with point predictions is faster, more convenient, easier to understand, more predictive of subsequent economic behavior, and more conclusive about the subjective probability distribution. A novel set of evaluation tools suggests that elicited distributions are more accurate under heterogeneous information sets and less prone to overconfidence.