RESEARCH

 

Job Market Paper

Reference-dependent choice bracketing

Summary: I derive a theoretical model of choice bracketing from two behavioral axioms in an expected utility framework. The first behavioral axiom establishes a direct link between narrow bracketing and correlation neglect. The second behavioral axiom identifies the reference point as the place where broad and narrow preferences are connected. In my model the narrow bracketer is characterized by an inability to process changes from the reference point in different dimensions simultaneously. As a result, her trade-offs between dimensions are distorted. While she disregards interactions between actual outcomes, she appreciates these interactions mistakenly with respect to the reference point. In addition to the theoretical contribution, I present an experiment which demonstrates the empirical testability of my model and provides preliminary evidence in support of its validity.

 

Working Papers

Welfare-based altruism (with Yves Breitmoser)

Summary: Why do people give when asked, but prefer not to be asked, and even take when possible? We show that standard behavioral axioms including separability, narrow bracketing, and scaling invariance predict these seemingly inconsistent observations. Specifically, these axioms imply that interdependence of preferences (“altruism”) results from concerns for the welfare of others, as opposed to their mere payoffs, where individual welfares are captured by the reference-dependent value functions known from prospect theory. The resulting preferences are non-convex, which captures giving, sorting, and taking directly. This allows us to consistently predict choices across seminal experiments covering distributive decisions in many contexts.

 

Publications

Efficient structure of noisy communication networks (with Yves Breitmoser), Mathematical Social Sciences, 2013, 66(3):396-409.

Summary: In the canonical network model, the connections model, only three specific network structures are generically efficient: complete, empty, and star networks. This renders many plausible network structures inefficient. We show that requiring robustness with respect to stochastic information transmission failures rehabilitates incomplete, redundant network structures. Specifically, we show that star and complete networks are not generally robust to transmission failures, that circular and quasi-circular networks are efficient at intermediate costs in four-player networks, and that if either of them is efficient, then at least one of them is pairwise stable even without reallocation. Thus, incomplete, redundant networks are efficient and stable at intermediate costs.

 

Work in Progress

Decomposing Trust (with Dirk Engelmann, Jana Friedrichsen, Roel van Veldhuizen, and Joachim Winter)

Summary: Trust is thought to be an important driver of economic growth and other economic outcomes. Previous studies suggest that trust may be a combination of risk attitudes, distributional preferences, betrayal aversion, and beliefs about the probability of being reciprocated. We compare the results of a binary trust game to the results of a series of control treatments that remove the effects of one of or more of these components of trust by design. This allows us to decompose variation in trust behavior into its underlying factors. Our preliminary results suggest that beliefs are the main driver of trust, and that the additional components only play a role when beliefs about reciprocity are sufficiently optimistic.

Fake News (with Steffen Huck and Georg Weizsäcker)

Summary: We model the transmission of information from a media outlet to an economic agent as a cheap talk game. The agent does not know whether she faces a truthful or a biased media outlet. We find that even a very small probability of news to be fake has a large negative impact on what an agent can infer from the media outlet's message. Strikingly, however, an agent who does not update her beliefs about the media outlet's type can be better off than a rational agent in this game, not only for certain realizations of the true state of the world, but in expectation.

 

©2020 Pauline Vorjohann.