Other Publications
1. "Limits on Regret as a Tool for Incentive Design," with F. Araujo and A. Wilson. Journal of Political Economy Microeconomics, accepted. [New Update]
[Abstract] [Working Paper]
We demonstrate the pitfalls when extrapolating behavioral findings across different contexts and decision environments. We focus on regret theory and the use of "regret lotteries" for motivating
behavior change. Here, findings from one-shot settings have been used to promote regret as a tool to boost incentives in recurrent decisions across many settings. Using theory and experiments, we replicate regret lotteries as the superior one-shot incentive; however, for repeated decisions the comparative static is entirely reversed. Moreover, the effects are extremely sensitive to details of regret implementation. Our results suggest caution should be used when designing incentive schemes that exploit regret.
2. "A Clean Slate: Adapting the Realization Effect to Online Gambling and its Effectiveness in People with Gambling Problems." with K. Zhang and L. Clark. Journal of Behavioral Decision Making, accepted.
[Abstract] [Paper]
Betting more after losses (i.e. ‘loss chasing’) is a central clinical feature of disordered gambling. According to Prospect Theory, increasing risk-seeking following losses could arise from a failure to ‘re-reference’. By contrast, successful re-referencing between successive decisions closes the mental account, and any losses are regarded as final or realized; gamblers should not chase realized losses. The present study sought to test this ‘realization effect’ among gamblers using an ecologically-valid online gambling task. We were further interested in whether the effectiveness of the loss realization varied as a function of problem gambling severity. Using online recruitment of past-year gamblers stratified on the Problem Gambling Severity Index, we tested a group without gambling problems (n=227), a group with at-risk gambling (n=239), and a group with gambling problems (n=223). Over a sequence of 9 bets, after bet 6, half of the participants underwent a simulated realization procedure that entailed cashing out from the gambling website, and re-depositing their remaining funds on another website. The feedback comparison group were shown their account balance after bet 6 but did not withdraw or transfer their funds. In line with the realization effect, the group with non-problem gambling significantly reduced their bet after cashing out. The realization procedure did not significantly ameliorate loss chasing in the groups with at-risk gambling or gambling problems. We conclude that the realization effect can be elicited in an online gambling context, but that stronger interventions for realizing losses may be required for people experiencing gambling problems.
3. "How Framing Influences Strategic Interactions," with C. Hsee and X. Li. Management Science, 2024.
[Abstract] [Paper]
In many settings, a person’s outcome depends not only on her own behavior,but also on her counterpart’s. Such strategic decisions have traditionally been studiedusing normative game theory, which assumes that people adopt equilibrium strategiesand will reach the same decision, regardless of how the problem is described (framed). We examine a potentially important type of framing effect---focusing on how the relationshipbetween players’ actions generates joint outcomes. Any strategic interaction can bedescribed by either spelling out the outcomes of all possible action combinations (which we call “outcome framing,” or simply “O-framing”) or describing what will happen if different players choose the same action or choose different actions (which we call “relation framing,” or simply “R-framing”). O-framing has been the typical way to describe a strategic problem in prior work, whereas R-framing is commonly employed in real-life communications. We propose that these functionally equivalent frames induce different psychological processes and lead to different decisions: Relative to O-framing, R-framing increases players’ beliefs about their counterparts’ likelihood of coordinating on a cooperative option. We demonstrate this effect in the context of classic games such as the Prisoner’s Dilemma and the Stag Hunt. We find that, compared with O-framing, R-framing significantly increases people’s likelihood to choose the action that maximizes collective benefits rather than individual interests, and it does so by increasing beliefs that one’s partner will choose the same action as well. We derive conditions when this effect is likely to emerge and discuss the managerial implications of this research.
4. "Can’t wait to pay: The desire for goal closure increases impatience for costs," with A. Roberts and A. Fishbach. Journal of Personality and Social Psychology, 2023.
[Abstract] [Paper]
We explore whether the desire to achieve psychological closure on a goal creates impatience. If so, people should choose an earlier (vs. later) option even when it does not deliver a reward. For example, they may prefer to pay money or complete work earlier rather than later. A choice to incur earlier costs seems to violate the preference for positive discounting (indeed, it may appear like negative time discounting), unless people value earlier goal closure. Across seven studies we consistently find that people preferred to pay more money sooner over less money later (Study 1) and complete more work sooner over less work later (Studies 2-5) more when they had a stronger desire for goal closure, such as when the sooner option allowed them to achieve goal closure and when the goal would otherwise linger on their minds (compared to when it would not). The implications of goal closure extend to impatience for gains (Studies 6-7), as people preferred less money sooner (vs. more later) when it allowed them to achieve goal closure. These findings suggest that the desire to achieve goal closure is an important aspect of time preferences. Taking this desire into account can explain marketplace anomalies and inform interventions to reduce impatience.
5. "The Psychology of Negative-Sum Behavior in Strategic Interactions," with C. Hsee, Y. Zeng, and X. Li. Journal of Personality and Social Psychology, 2023.
[Abstract] [Paper]
Many real-life examples—from interpersonal rivalries to international conflicts—suggest that people actively engage in competitive behavior even when it is negative-sum (benefiting the self at a greater cost to others). This often leads to loss spirals where everyone—including the winner—ends up losing. Our research seeks to understand the psychology of such negative-sum behavior in a controlled setting. To do so, we introduce an experimental paradigm in which paired participants have the option to repeatedly perform a behavior that causes a relatively small gain for the self and a larger loss to the other. Although they have the freedom not to engage in the behavior, most participants actively do so and incur substantial losses. We propose that an important reason behind the phenomena is shallow-thinking—focusing on the immediate benefit to the self while overlooking the downstream consequences of how the behavior will influence their counterparts’ actions. In support of the proposition, we find that participants are less likely to engage in negative-sum behavior if they are advised to consider the downstream consequences of their actions, or if they are put in a less frenzied decision environment, which facilitates deeper thinking (acting in discrete versus continuous time). We discuss how our results differ from prior findings and the implications of our research for mitigating negative-sum competition and loss spirals in real life.
6. "Behavioral Food Subsidies," with A. Brownback and M. Kuhn. Review of Economics and Statistics, 2023.
[Abstract] [Working Paper]
We conduct a pre-registered field experiment with low-income grocery shoppers to study how behavioral interventions can improve the effectiveness of healthy food subsidies. Our unique design enables us to elicit choices and deliver subsidies both before and at the point of purchase. We examine the effects of two non-restrictive changes to the choice environment: giving shoppers a choice over the type of subsidy they receive and introducing a waiting period before the shopping trip to prompt deliberation about the food purchase decision. Combined, our interventions substantially improve the effectiveness of subsidies, increasing healthy purchases by 61% relative to a choice-less subsidy restricted to healthy food, and 199% relative to an un-subsidized control group. We discuss how these low-cost, scalable interventions can help mitigate nutritional inequality.
7. "Biased By Choice: How Financial Constraints Can Reduce Financial Mistakes," with R. Heimer. Review of Financial Studies, 2021.
Review of Financial Studies Rising Scholars Award
[Abstract] [Working Paper]
We show that constraints can improve financial decision-making by disciplining behavioral biases. In financial markets, restrictions on leverage limit traders' ability to borrow to open new positions. We demonstrate that regulation which restricts the provision of leverage to retail traders increases trading performance. By increasing the opportunity cost of postponing the realization of losses, leverage constraints improve traders' market timing and reduce their disposition effect. We replicate these findings in two distinct experimental settings, further isolating the mechanism and demonstrating generality of the results. The interaction between constraints and behavioral biases has implications for policy and choice architecture.
8. "Bounded Rationality in Strategic Decisions: Undershooting in a Resource Pool-Choice Dilemma," with C. Hsee, Y. Zeng, and X. Li. Management Science, 2021.
[Abstract] [Paper]
This research studies a resource pool-choice dilemma, in which a group of resource seekers independently choose between a larger pool containing more resources and a smaller pool containing fewer resources, knowing that the resources in each pool will be divided equally among its choosers, so that the more (fewer) people choose a certain pool, the fewer (more) resources each of them will get. This setting corresponds to many real-world situations, ranging from students choosing majors as a function of job opportunities to entrepreneurs choosing markets as a function of customer bases. Ten studies reveal a systematic undershooting bias: fewer people choose the larger pool relative to both the normative equilibrium benchmark and chance (random choice), thus advantaging those who chose the larger pool and disadvantaging those who chose the smaller pool. We present evidence that the undershooting bias is driven by bounded rationality in strategic thinking, and discuss the relationship of our paradigm with other coordination games.
9. "Mental Money Laundering: A Motivated Violation of Fungibility," with G. Loewenstein and C. K. Morewedge. Journal of the European Economic Association, 2021.
[Abstract] [Working Paper] [Media Summaries: Chicago Booth Review ]
People exploit flexibility in mental accounting to relax psychological constraints on spending. Four studies demonstrate this in the context of moral behavior. The first study replicates prior findings that people donate more money to charity when they earned it through unethical versus ethical means. However, when the unethically-earned money is first “laundered”––the cash is physically exchanged for the same amount but from a different arbitrary source—people spent it as if it was earned ethically. This mental money laundering represents an extreme fungibility violation: exchanging “dirty” money for the same sum coming from a “clean” source significantly changed people’s propensity to spend it prosocially. The second study demonstrates that mental money laundering generalizes to cases in which ethically and unethically earned money is mixed. When gains from ethical and unethical sources were pooled, people spent the entire pooled sum as if it was ethically earned. The last two studies provide mixed support for the prediction that people actively seek out laundering opportunities for unethically earned money, suggesting partial sophistication about these effects. These findings provide new evidence for the ease with which people can rationalize misbehavior, and have implications for consumer choice, corporate behavior and public policy.
10. "Are Non-Contingent Incentives More Effective in Motivating New Behavior? Evidence from the Field," with D. Schwartz and A. Cordova. Games and Economic Behavior, 2021.
[Abstract] [Working Paper]
Companies and policymakers are increasingly relying on economic incentives as a means of promoting new habits and changing people’s behavior. For example, workplace wellness programs use incentives to encourage a healthier lifestyle and municipalities offer financial incentives to fund recycling programs. The goal of these incentives is to motivate previous non-compliers---to prompt participation amongst those that they were not engaged in an activity before. We ran a field experiment with a recycling program to examine which types of incentives are more effective in motivating new behavior---in our context, attracting previous non-recyclers. We compared the effects of standard incentives (payment contingent on recycling) to non-contingent incentives (upfront unconditional payment). We found that a high contingent incentive was as effective as a non-contingent incentive (of any size) in getting people to participate in the program, but this masked substantial differences in who participated. Over 50% of those participating under non-contingent incentives were new recyclers, compared to less than 15% under contingent incentives. This difference was particularly stark when incentives were relatively small: 53% of participants under non-continent incentives had never recycled before, compared to 0 new recyclers under contingent incentives. Follow-up surveys provide suggestive evidence that non-contingent incentives were effective in prompting persistent behavior change. A second experiment conceptually replicated this effect in an online job market, showing that non-contingent incentives were substantially more effective in attracting previous non-compliers.
11. "The Impact of Agency on Time and Risk Preferences," with A. Gneezy and A. Jaroszewicz. Nature: Communications, 2020.
[Abstract] [Paper]
Scholars have long argued for the central role of agency—the size of one’s choice set—in the human experience. We demonstrate the importance of agency in shaping people’s preferences. We first examine the effects of resource scarcity—which has been associated with both impatience and a lack of agency—on patience and risk tolerance, successfully replicating the decrease in patience among those exposed to scarcity. Critically, however, we show that endowing individuals with agency over scarcity fully moderates this effect, increasing patience substantially. We further demonstrate that agency’s impact on patience is partly driven by greater risk tolerance. These results hold even though nearly all individuals with greater agency do not exercise it, suggesting that merely knowing that one could alleviate scarcity is sufficient to change behavior. We then demonstrate that the effects of agency generalize to other adverse states, highlighting the potential for agency-based policy and institutional design.
12. "Opting In to Prosocial Incentives," with D. Schwartz, E. A. Keenan and A. Gneezy. Organizational Behavior and Human Decision Processes, 2019.
[Abstract] [Paper] [Online Appendix]
The design of effective incentive schemes that are both successful in motivating employees and keeping down costs is of critical importance. Research has demonstrated that prosocial incentives – where individuals’ effort benefits a charitable organization – can sometimes be more effective than standard monetary incentives. However, most research has focused on the intensive margin, assuming that participation in the activity (whether voluntary or mandatory) is certain. We examine the effect of prosocial incentives on people’s decision to opt-in to an incentivized activity offering an optional prosocial incentive. By not restricting a participant’s choice set, optional prosocial incentives act as a nudge that combines the effectiveness of both standard and prosocial incentives. Across four experiments that vary incentive size, we find that individuals are more likely to avoid activities that involve any prosocial incentive. Our results highlight the importance of considering the environment and conditions necessary for successful design and implementation of nudges.
13. "The Language of Discrimination: Using Experimental versus Observational Data," with J. A. Bohren and M. Rosenberg. American Economic Association: Papers and Proceedings, 2018.
[Abstract] [Paper]
We use experimental and observational data to examine whether people respond differently to questions posed by females versus males. We document significant differences in the language of responses, both in terms of the distribution of language utilized, and the sentiment of this language (positive or negative). In the observational data, we also document differences in the language and sentiment of questions posed by gender. This highlights the importance of using experimental data to identify the causal role that gender plays in influencing the language choice of individuals responding to questions from males versus females.
14. "Is Altruism Sensitive to Scope? The Role of Tangibility," with G. Loewenstein. American Economic Association: Papers and Proceedings, 2018.
[Abstract] [Paper]
Prior work has shown that people appear insensitive to the scope of their altruistic acts and prosocial behavior. While they respond positively when their choices lead to increasing rewards for themselves, people do not change their behavior when the outcomes for others increase. We demonstrate that the scope sensitivity of altruism depends critically on its tangibility, and suggest that this relationship operates through mental accounting. We show that by increasing the level of tangibility, people can become just as sensitive to changes in the size of rewards for others as if they were earning the rewards themselves.
15. "Do People Anticipate Loss Aversion?" with S. Sadoff and A. Samek. Management Science, 2016.
[Abstract] [Paper]
There is growing interest in the use of loss contracts that offer performance incentives as upfront payments that employees can lose. Standard behavioral models predict a tradeoff in the use of loss contracts: employees will work harder under loss contracts than under gain contracts; but, anticipating loss aversion, they will prefer gain contracts to loss contracts. In a series of experiments, we test these predictions by measuring performance and preferences for payoff-equivalent gain and loss contracts. We find that people indeed work harder under loss than gain contracts, as the theory predicts. Surprisingly, rather than a preference for the gain contract, we find that people actually prefer loss contracts. In exploring mechanisms for our results, we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance.
16. "Conscience Accounting: Emotion Dynamics in Social Behavior," with U. Gneezy and K. Madarasz. Management Science, 2014.
[Abstract] [Paper]
This paper presents theory and experiments where people's prosocial attitudes fluctuate over time following the violation of an internalized norm. We report the results of two experiments in which people who first made an immoral choice were then more likely to donate to charity than those who did not. In addition, those who knew that a donation opportunity would follow the potentially immoral choice behaved more unethically than those who did not know. We interpret this increase in charitable behavior as being driven by a temporal increase in guilt induced by past immoral actions. We term such behavior conscience accounting and discuss its importance in charitable giving and in the identification of social norms in choice behavior through time inconsistency.
17. "The Materazzi Effect and the Strategic Use of Anger," with U. Gneezy. Proceedings of the National Academy of Sciences, 2014.
[Abstract] [Paper]
We propose that individuals use anger strategically in interactions. We first show that in some environments angering people makes them more effective in competitions, whereas in others, anger makes them less effective. We then show that individuals anticipate these effects and strategically use the option to anger their opponents. In particular, they are more likely to anger their opponents when anger negatively affects the opponents’ performances. This finding suggests people understand the effects of emotions on behavior and exploit them to their advantage.
18. "Paying to be Nice: Costly Prosocial Behavior and Consistency," with A. Gneezy, L.D. Nelson, M.I. Norton and A. Brown. Management Science, 2012.
[Abstract] [Paper]
Building on previous research in economics and psychology, we propose that the costliness of initial prosocial behavior positively influences whether that behavior leads to consistent future behaviors. We suggest that costly prosocial behaviors serve as a signal of prosocial identity and that people subsequently behave in line with that self-perception. In contrast, costless prosocial acts do not signal much about one’s prosocial identity, so subsequent behavior is less likely to be consistent and may evenshow the reductions in prosocial behavior associated with licensing. The results of a laboratory experiment and a large field experiment converge to support our account.
