Commitment and incentives: Economic Behaviors under Oath
Nicolas Jacquemet, Stéphane Luchini, Jason Shogren
Paris School of Economics
Université de Lorraine, BETA
Paper (in french) available here.
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Team
Nicolas Jacquemet (Paris School of Economics)
Robert-Vincent Joulé (Aix-Marseille University)
Stéphane Luchini (CNRS and Aix-Marseille School of Economics)
Jason Shogren (University of Wyoming)
Danica Prelec (MIT)
Drazen Prelec (MIT)
Julie Rosaz (University of Montpellier)
Adam Zylbersztejn (Paris School of Economics)
Ongoing projects:
Jérome Hergueux (Sc Po)
Antoine Malézieux (U Lorraine, BETA)
Danica Prelec (MIT)
Drazen Prelec (MIT)
Verity Watson (U Aberdeen)
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Starting point
Microeconomic theory is a powerful tool to design an analyze social life institutions
based on the idea that individual behavior is driven by monetary incentives.
Monetary incentives engage people in real economic commitments.
Accumulated evidence in behavioral economics shows in a lot of economic contexts
and/or goods, monetary incentives are not available, have mixed effects or are
counter productive, e.g.
Non-market goods evaluation: Hypothetical Bias
Coordination failure and lack of trust in others’ behavior
Crowding-out of explicit incentives ...
....
The open question: How to create “real commitment” for non-market choices and
for situations in which monetary incentives are not efficient?
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Oath as a commitment device
Working assumption: social psychology of commitment provides a framework to design
non monetary institutional devices.
“Theory of commitment” in social psychology (originated by Kiesler, 1971):
preparatory acts “link” people to their decisions in subsequent choice environments.
Especially powerful when the preparatory act is written down and signed (Joule,
Girandola, and Bernard, 2007).
Commitment is the binding of the individual to behavioral acts ⇒ behavior induces
behavior.
Commitment devices: “preparatory acts” (e.g. foot in the door techniques)
Compliance with the preliminary request affects the main decision of interest.
Main mechanism: decisions made along a sequence of actions induce drastic changes
in subsequent decision making.
Commitment and economic behavior: based on commitment theory, actions have
the same effect on individual decision making as incentives do.
Herein we study economic behavior under one particular commitment device: asking
subjects to take an Oath to “tell the truth”.
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Road map
1
The oath procedure
2
Preference elicitation for non-market goods
3
Coordination with communication under oath
4
Truth-Telling under oath
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The oath procedure
Oath procedure
Subjects called one by one to private desk;
Each subject is proposed to sign a
truth-telling oath before entering the lab
Solemn Commitment
Subjects are told signing is free,
participation and earnings are not
conditional on signing; Thanked whatever
the decision;
Topic: “JZ”; Research number 1842A
I undersigned ....................................... swear upon my
honour that, during the whole experiment, I will:
Subject then enters the lab;
Tell the truth and always provide honest answers.
No peer effects: Waiting subjects – in the
lab or before their turn – could neither see
nor hear what happened at the oath-desk.
No selection: designed in such a way that
(almost) everybody complies (> 95%)
Paris, ................
Signature...................
PSE, 48 Boulevard Jourdan 75014 Paris - France.
Possible behavioral mechanisms behind the effect of the oath (which is not our first
order question):
A pure experimenter demand effect – people comply with our request, just to please us.
Guilt aversion / Lying aversion
Self-attribution (Bem, 1972)
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Preference elicitation under oath
Road map
1
The oath procedure
2
Preference elicitation for non-market goods
3
Coordination with communication under oath
4
Truth-Telling under oath
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Preference elicitation under oath
Preference elicitation for non-market goods
with Robert-Vincent Joule – Jacquemet, Joule, Luchini, and Shogren (2013)
Evaluation of non-market goods with stated preferences methods:
Surveys asking respondents for their WTP for public goods (e.g. environmental
preservation programs, health programs,. . . )
Most often, preferences are evaluated in a hypothetical context:
Typical result: people overstate their WTP in a hypothetical context (Hypothetical
Bias).
Our assumption : individuals lack motivation to provide truthful responses in the
absence of monetary incentives.
Two experiments design:
Induced value auction – a lot of control, very few external validity;
Homegrown values auction – loss of control, traded against more realism.
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Preference elicitation under oath
The empirical challenge I: preference elicitation in Induced Value Auctions
Ind. Value
AD (IV × 18)
H
M
RAD
%
RAD
%
24
432
38
684
53
954
63
1134
65
1170
68
1224
71
1278
76
1368
84
1512
626
144.9
687
159.0
808
118.1
735
107.5
1050
110.1
1078
113.0
1193
105.2
1045
92.2
1201
102.6
1318
112.6
1192
97.4
1259
102.9
1242
97.2
1281
100.2
1290
94.3
1334
97.5
1532
101.32
1591
105.2
Test of the assumption of perfect revealing bids by estimating a panel Tobit model
censored at 0 and 100 for each treatment:
bit = βνit + αi + φt + it
(1)
Perfect revealing bids (H0 ) if β = 1, α = 0 (+φt = 0, ∀t). Wald tests:
IV-Baseline
IV-Monetary-Incentives
: p <0.001
: p =0.009
H0 Rejected
H0 Rejected
Result 1
Behavior both with and without incentives differ from perfect revelation.
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Preference elicitation under oath
Induced value Auctions: Results
Ind. Value
AD (IV × 18)
H
M
O
RAD
%
RAD
%
RAD
%
24
432
38
684
53
954
63
1134
65
1170
68
1224
71
1278
76
1368
84
1512
626
144.9
687
159.0
475
110.0
808
118.1
735
107.5
757
110.7
1050
110.1
1078
113.0
1046
109.6
1193
105.2
1045
92.2
1129
99.5
1201
102.6
1318
112.6
1261
107.8
1192
97.4
1259
102.9
1249
102.0
1242
97.2
1281
100.2
1331
104.1
1290
94.3
1334
97.5
1345
98.3
1532
101.32
1591
105.2
1535
101.5
Wald test of perfectly revealing bids:
IV-Oath
: p =0.12
H0 Not rejected
Result 2
Asking a bidder to take an oath that pledges him or her to tell the truth and always
provide honest answers lead to sincere bidding behavior.
Note: All subjects but one took an oath (94% acceptance rate)
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Preference elicitation under oath
The empirical challenge II: Hypothetical bias in HG preference elicitation
80
Bootstrap mean difference test:
p < .001
40
No significant difference in experimental
earnings (A
C18.9 vs. 18.6, p = .364)
20
Mean bid in HG-Monetary-incentives=
A
C2.98
60
Mean bid in HG-Baseline= A
C17.43
100
Commodity: adoption of a dolphin (World Wide Fund –WWF).
Second price Vickrey auction with fixed ] bidders (18) and ] trials (5)
HG−baseline
HG−monetary−incentives
0
No significant differences in debriefing
questions.
0
5
10
15
20
25
30
Bid value (euros)
Result 3
Hypothetical bias exists in the homegrown second price auction without an oath. We
observe significant difference in bidding behavior with and without monetary incentives.
Bidders frequently violated their budget constraint without monetary incentives (47.7%) ;
bidders frequently violate the participation constraint with monetary incentives (26.7%).
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Preference elicitation under oath
40
No significant difference in experimental
earnings (A
C18.1, p = .275)
No significant differences in debriefing
questions.
HG−baseline
HG−monetary−incentives
HG−oath
0
Decrease in number of bids above
earnings = 18.9% (p < .001)
20
Decrease in mean behavior = A
C11.46
(p = .026)
60
80
100
HG preference elicitation under oath
0
5
10
15
20
25
30
Bid value (euros)
Note: All subjects but one took an oath (94% acceptance rate)
Result 4
In a second price homegrown values auction with hypothetical decisions, asking a bidder
to take an explicit oath that pledges him or her to tell the truth and always provide
honest answers leads to (i) lower bids than those elicited using incentives and (ii) less
violations of the budget constraint than those observed in the baseline.
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Preference elicitation under oath
Preference elicitation under oath: robustness checks and follow up studies
Does the oath work (beyond 2nd price auctions)?
HG referendum (Jacquemet, James, Luchini, and Shogren, 2015): HB is 1/3 lower;
Induced value Discrete Choice Experiment (Jacquemet, Luchini, Shogren, and
Watson, In progress): 40% increase in choice consistency;
Why does the oath work ?
Short term effect ? Training in HG-2nd price experiment – no;
Experimenter demand effect ? Consequential oath in HG-2nd price experiment – no;
Self-deception ? Cheap talk treatments in HG-2nd price experiment – mixed, CT
helps to better think to “the truth”;
Enhanced cognitive effort ? Calculator treatments in IV DCE experiments – no;
The procedure, rather than the oath ? Alternative wording of the oath in IV DCE
experiments – no;
See also follow-up studies by Carlsson, Kataria, Krupnick, Lampi, Lofgren, Qin, Sterner,
and Chung (2013); de Magistris and Pascucci (2014); Donfouet, Macha, and Mahieu
(2013); Stevens, Tabatabaei, and Lass (2013).
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Coordination with communication under oath
Coordination with communication under oath
with Adam Zylberstein – Jacquemet, Luchini, Shogren, and Zylbersztejn (2015)
A coordination game captures the idea that value can be created when people
coordinate their non- cooperative actions in a strategic environment
Coordination failure when people fail to realize the first best outcome due to
strategic uncertainty (risk associated with not knowing how your opponent will play
the game)
Communication between players = most frequently prescribed institution to
overcome coordination failure but mixed result.
We use a particular coordination game (Rosenthal, 1981):
Receiver
Jacquemet et al. (U. Lorraine – BETA & PSE)
L
R
Sender
l
r
(9.75; 3) (9.75; 3)
(3; 4.75)
(10; 5)
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Coordination with communication under oath
The open empirical challenge II
Existing literature on the Rosenthal game: Beard and Beil (1994); Beard, Beil, and
Mataga (2001); Goeree and Holt (2001); Van Huyck, Wildenthal, and Battalio (2002) –
weakly dominated actions chosen dramatically often.
For instance, in Jacquemet and Zylbersztejn (2014):
Tr
(BT1)
(ET1)
(ET3)
(ET4)
(ET2)
(BT2)
player A
chooses
L
(9.75 ; 3.00)
(9.75 ; 5.00)
(9.75 ; 5.50)
(8.50 ; 5.50)
(8.50 ; 8.50)
(8.50 ; 7.00)
player A chooses R
player B
player B
chooses l
chooses r
(3.00 ; 4.75)
(10.0 ; 5.0)
(5.00 ; 9.75)
(10.0 ; 10.0)
(5.50 ; 8.50)
(10.0 ; 10.0)
(5.50 ; 8.50)
(10.0 ; 10.0)
(6.50 ; 8.50)
(10.0 ; 10.0)
(6.50 ; 7.00)
(10.0 ; 8.5)
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Economic behavior under oath
Nb. of
Sessions
Paris
Warsaw
3
–
3
–
2
2
2
1
3
2
3
–
Likelihood
of decisions
R
r
0.490
0.807
0.457
0.727
0.575
0.828
0.730
0.823
0.776
0.936
0.743
0.940
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Coordination with communication under oath
Coordination with communication under oath
Baseline with Cheap talk communication – Sender sends “I will play r ”, “I will play l” or “I will play r or l”.
Efficient coordination: 50% no oath, 75% under oath
(a) Receivers
(b) Senders
1
No oath
Oath
.75
No oath
Oath
.5
.25
0
0
2
4
6
8
10
Number of decisions R
0
FOD bootstrap
test: p = .003
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2
4
6
8
Number of decisions r
10
FOD bootstrap
test p = .006
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Coordination with communication under oath
Further results
Why the oath works ?
Communication behavior: The oath does not change the amount of information
sent, but significantly shifts messages towards more payoff maximizing
announcements.
Quality of information: Improved truthfulness of senders – more often send an
informative message consistent with their subsequent actions;
The use of information: Improved trust of receivers – more often follow the message
received.
Does the oath simply foster overall trust, or actually improve communication? ⇒
Oath without communication – no effect of the oath.
Does the oath manages to remove strategic uncertainty ?
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Coordination with communication under oath
Well, seems so...
% of decisions R by round
Robots
Oath
100%
100%
75%
75%
50%
50%
25%
25%
0%
0%
1
2
3
4
5
6
7
8
9 10
round
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1
2
3
4
5
6
7
8
9 10
round
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Truth-Telling under oath
Truth-telling under oath
with Julie Rosaz – Jacquemet, Luchini, Rosaz, and Shogren (2015)
In previous experiments, the oath points to the dominant strategy (auctions) or to
the pay-off dominant strategy (coordination game).
What if the oath is in conflict with one’s own (monetary) interest?
In the following, deception games adapted from Erat and Gneezy (2012) in which
subject is given the opportunity to deceive another subject.
Two players, a sender and a receiver
The computer draws a 6-sided dice and informs only the sender about the result.
The sender is then asked to send a message to the receiver. One of the following six
messages is sent: “The outcome of the roll of dice was ....”.
After observing the message, the receiver chooses a number from the set
{1, 2, 3, 4, 5, 6}. The actual payment of subjects depends on this choice.
If the receiver chooses the actual outcome of the dice roll, payment described by option
X are implemented. Otherwise, both subjects will be paid according to option Y .
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Truth-Telling under oath
Treatment variables
Three Payments schemes (within subject, random order):
Treatment
T[-5;10]
T[1;-5]
T[10;10]
T[-10,-10]
Lie
Altruistic
Selfish
Pareto
Reverse
Option X
(20;20)
(20;20)
(20;20)
(30;30)
Option Y
(15;30)
(21;15)
(30;30)
(20;20)
Does the oath reduces to a “priming” effect ? : Two treatment variables Oath and
Priming
2*2 factorial design (baseline: no oath, neutral language)
Priming = Loaded language to describe the game
Participant A must therefore make a choice: (1) she can be honest and tell the truth
by sending the true draw of the dice; or (2) she can lie and send a message that
does not correspond to the true draw of the dice. If she chooses (2), there is a 0%
chance that participant B discovers that participant A lied to her.
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Truth-Telling under oath
Truth-telling ratios by treatment, all payoffs
1
1
Baseline
Loaded baseline
Loaded baseline
.75
Loaded Oath
.75
.5
.5
.25
.25
0
0
0
1
2
3
4
0
First-order dominance
boostrap test p = .097
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1
2
3
4
First-order dominance
boostrap test p = .001
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Truth-Telling under oath
Oath in a the neutrally worded game
100%
Oath
No oath
75%
68.3% 68.3%
50%
41.7%
36.7%
34.2%
30.4%
25%
13.3%
13.3%
11.7%
5.0%
0%
T[-5,10]
Jacquemet et al. (U. Lorraine – BETA & PSE)
T[1,-5]
T[10,10]
Economic behavior under oath
T[-10,-10]
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Truth-Telling under oath
Oath with loaded instructions
100%
Oath
No oath
75%
60.0%
50%
36.7%
35.0%
25.4%
25%
17.1%
16.7%
5.0%
8.3%
6.7%
1.7%
0%
T[-5,10]
T[1,-5]
T[10,10]
T[-10,-10]
All
Difference significant with p = .022.
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Truth-Telling under oath
Conclusion
Based on the social psychology of commitment, preparatory acts link people to the
consequences of their decisions – just in the same way as incentives do.
In situations in which incentives fail to drive behavior, the oath works as such a
commitment device enhancing:
Preference elicitation for non-market-goods – see above;
Coordination through cheap talk communication – see above, and also Kataria and
Winter (2013).
Truth-telling – 1/3 decrease in lying behavior, when lies are explicit; see also Weaver
and Prelec (2012).
But also:
Public good contributions – Full income contributions 3 times higher.
Dulleck, Koessler, and Page (2014); Hergueux, Jacquemet, Luchini, and Shogren (In
progress).
Tax evasion – Twice as much full compliers under oath.
Jacquemet, Luchini, Malézieux, and Shogren (In progress)
Many open and exciting questions remain open.
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