Every year, 90 percent of Americans give money or time to charities. Is such generosity necessarily welfare enhancing? We present a theoretical framework that pinpoints two types of motivation: individuals like to give, e.g., due to altruism or warm glow, or individuals would rather not give but dislike saying no, e.g., due to social pressure. To distinguish the two types of motivation, we design a door-to-door fund-raising drive in which we vary the ability of households to seek or avoid a solicitor. Some households are informed about the exact time of solicitation with a flyer on the door-knob; thus, they can seek the fund-raiser if giving is welfare-enhancing, and avoid it if giving is welfare-decreasing. We find that the flyer reduces the share of households opening the door by 10 to 25 percent, suggesting that the average household seeks to avoid fund-raisers. Moreover, if the flyer allows checking a box for ‘Do Not Disturb ’ giving is 30 percent lower. The latter decrease is concentrated among donations smaller than $10. These findings suggest that both types of motivation affect charitable giving, with more evidence supporting the social pressure explanation. Combining reduced form insights from these treatments with data gathered from a complementary field experiment, we are able to structurally estimate altruism and social pressure parameters.

What is the short-run impact of media violence on crime? Laboratory experiments in psychology find that exposure to media violence increases aggression. In this paper, we provide field evidence on this question. We exploit variation in the violence of blockbuster movies from 1995 to 2004, and study the effect on same-day assaults. We find that violent crime decreases on days with larger theater audiences for violent movies. The effect is partly due to incapacitation: between 6PM and 12AM, an increase of one million in the audience for violent movies reduces violent crime by 0.5 to 0.9 percent. After exposure to the movie, between 12AM and 6AM, crime is reduced by an even larger percentage (albeit from a lower base). This decrease does not appear to be due only to a cathartic effect specific to violent movies, since non-violent movies that appeal to young males have a similar effect. The finding is most likely due to a substitution away from other activities (with higher levels of violence) both during and after the movie, and a decrease in alcohol consumption. Overall, we find no evidence of a temporary surge in violent crime due to exposure to movie violence as would be predicted by the laboratory experiments. Rather, our estimates suggest that in the short-run violent movies deter 175 assaults daily. The differences compared to the experimental results can be explained by experimental procedures and sorting into violent movies in the field. Our design does not allow us to estimate long-run effects.

Model selection for monetary policy analysis – How important is empirical validity?

Traditional explanations for the popularity of auctions are efficiency and revenue maximization. We argue that another reason is the potential for overbidding, i.e., buyers bidding above their willingness to pay outside the auction. The auction mechanism ensures that, even if only few buyers overbid, they affect prices and allocations. We employ a novel approach to identify overbidding in the field. Comparing auction prices to simultaneous fixed prices for identical items on the same eBay webpage, we argue that fixed prices provide an upper bound for auction bids. In a detailed data set of board game auctions, we find that the final price exceeds the simultaneous fixed price in 42 percent of the auctions. The result is not explained by differences in item quality, shipping costs, or seller reputation. Prior auction experience does not eliminate overbidding. The finding replicates in a second, broad data set of a cross-section of auctions (48 percent overbidding). The substantial fraction of overbid auctions is induced by a small number of bidders: only 17 percent ever bid above the fixed price. Using a simple model of second-price auctions with alternative fixed prices, we show that transaction costs of switching between auctions and fixed prices

Copyright c○2008 by the authors. One Chance in a Million: Altruism and

Charities often devise fund-raising strategies that exploit natural human competitiveness in combination with the desire for public recognition. We explore whether institutions promoting competition can affect altruistic giving- even when possibilities for public acclaim are minimal. In a controlled laboratory experiment based on a sequential “dictator game”, we find that subjects tend to give more when placed in a generosity tournament, and tend to give less when placed in an earnings tournament- even if there is no award whatsoever for winning the tournament. Further we find that subjects ’ experimental behavior correlates with their responses to a postexperiment questionnaire, particularly questions addressing altruistic and rivalrous behavior. Based on this evidence, we argue that behavior in our experiment is driven, in part, by innate competitive motives.

Traditional explanations for the popularity of auctions are efficiency and revenue maximization. We argue that another reason is the potential for overbidding, i.e., buyers bidding above their willingness to pay outside the auction. The auction mechanism ensures that, even if only few buyers overbid, they affect prices and allocations. We employ a novel approach to identify overbidding in the field. Comparing auction prices to simultaneous fixed prices for identical items on the same eBay webpage, we argue that fixed prices provide an upper bound for auction bids. In a detailed data set of board game auctions, we find that the final price exceeds the simultaneous fixed price in 42 percent of the auctions. The result is not explained by differences in item quality, shipping costs, or seller reputation. Prior auction experience does not eliminate overbidding. The finding replicates in a second, broad data set of a cross-section of auctions (48 percent overbidding). The substantial fraction of overbid auctions is induced by a small number of bidders: only 17 percent ever bid above the fixed price. Using a simple model of second-price auctions with alternative fixed prices, we show that transaction costs of switching between auctions and fixed prices

Abstract. If preferences and beliefs are appropriately parametrized, different theories of “other-regarding ” preferences poses equilibria that are consistent with experimental results in a variety of setting. Our goal is to experimentally separate between those theories, by studying their comparative-static performance in the neighborhood of the classic Ultimatum Game, whose results are extremely robust. In order to perform this exercise, we first characterize all Perfect Bayesian Equilibia in the Ultimatum Game if preferences are interdependent. We then show that in this model, capping the demand a proposer can make may increase the proposer’s demand and the responder’s acceptance probability. Outcome-based theories and intentions-based models have opposite predictions. We then design and execute an experiment that facilitates almost instantaneous learning and convergence by both proposers and responders. The experimental results are consistent with the predictions of the interdependent-preferences model. Beyond the evident theoretical implications, the economic and social implications of this result are far-reaching: low minimum wage may lower wages, and high price cap may increase the price a monopolist charges. 1.

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Abstract not found