Experimental Economics The disciplines of social science, with the notable exception of psycholog... more Experimental Economics The disciplines of social science, with the notable exception of psychology, have traditionally steered clear of laboratory. The field of economics, and in particular econometrics, has amassed an imposing arsenal of quantitative and statistical methods for analyzing observational data in assessing economic theory and in making causal inferences. More recently, laboratory experiments carried out under controlled conditions and randomized field experiments carried out under natural conditions have gained some currency as complementary approaches. Falk and Heckman (p. 535 ) review the strengths and shortfalls of these recent developments.
It is ecologically adaptive that the amount of effort invested to achieve a reward increases the ... more It is ecologically adaptive that the amount of effort invested to achieve a reward increases the relevance of the resulting outcome. Here, we investigated the effect of effort on activity in reward and loss processing brain areas by using functional magnetic resonance imaging. In total, 28 subjects were endowed with monetary rewards of randomly varying magnitude after performing arithmetic calculations that were either difficult (high effort), easy (low effort) or already solved (no effort). Subsequently, a forced donation took place, where a varying part of the endowment was transferred to a charity organization, causing a loss for the subject. Results show that reward magnitude positively modulates activity in reward-processing brain areas (subgenual anterior cingulate cortex and nucleus accumbens) only in the high effort condition. Furthermore, anterior insular activity was positively modulated by loss magnitude only after high effort. The results strongly suggest an increasing relevance of outcomes with increasing previous effort.
The prevailing labour market models assume that minimum wages do not affect the labour supply sch... more The prevailing labour market models assume that minimum wages do not affect the labour supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have significant and lasting effects on subjects’ reservation wages. The temporary introduction of a minimum wage leads to a rise in subjects’ reservation wages that persists even after the minimum wage
Wireless sensor networks are a promising technology for ecological research due to their capabili... more Wireless sensor networks are a promising technology for ecological research due to their capability to make continuous and in-situ measurements. However, there are some challenges for the wide adoption of this technology by scientists, who may have various research focuses. First, the observation system needs to be rapidly and easily deployable at different remote locations. Second, the system needs to
This series presents research findings based either directly on data from the German Socio-Econom... more This series presents research findings based either directly on data from the German Socio-Economic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.
Field evidence suggests that people belonging to the same group often behave similarly, i.e., beh... more Field evidence suggests that people belonging to the same group often behave similarly, i.e., behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly
In this paper we provide controlled experimental evidence on the interaction of incentive schemes... more In this paper we provide controlled experimental evidence on the interaction of incentive schemes, sorting decisions and performance. In a first sequence of the ex- periment all subjects perform a real effort task under a piece-rate regime. Depending on the treatment they can then choose to work either under a piece-rate scheme or a fixed wage scheme (PR-treatment) or to work either under a tournament incentives or a fixed wage scheme (T-treatment). In both treatments subjects are then going through a series of other treatments to elicit social preferences and risk attitudes. In addition we collect questionnaire data on effort, self-assessment and personality. Our main findings are as follows: First, output is much higher in the variable pay schemes (piece-rate and tournament) compared to the fixed wage schemes. Second, this differ- ence is only in part driven by the different incentives. More important for the outcome differences is the sorting of subjects: the higher the ability t...
A key open question for theories of reference-dependent preferences is what determines the refere... more A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between
A key open question for theories of reference-dependent preferences is what determines the refere... more A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low.
Interpersonal conflicts are a common element of many social relationships. One possible process i... more Interpersonal conflicts are a common element of many social relationships. One possible process in rebuilding social relationships is the act of apologizing. Behavioral studies have shown that apologies promote forgiveness. However, the neural bases of receiving an apology and forgiveness are still unknown. Hence, the aim of the present fMRI study was to investigate brain processes involved in receiving an apology and active forgiveness of an ambiguous offense. We asked one group of participants (player A) to make decisions, which were either positive or negative for another group of participants (player B). The intention of player A was ambiguous to player B. In case of a negative impact, participants in the role of player A could send an apology message to participants in the role of player B. Subsequently players B were asked whether they wanted to forgive player A for making a decision with negative consequences. We found that receiving an apology yielded activation in the left inferior frontal gyrus, the left middle temporal gyrus, and left angular gyrus. In line with previous research we found that forgiving judgments activated the right angular gyrus. Citation: Strang S, Utikal V, Fischbacher U, Weber B, Falk A (2014) Neural Correlates of Receiving an Apology and Active Forgiveness: An fMRI Study. PLoS ONE 9(2): e87654.
Although both economists and psychologists seek to identify determinants of heterogeneity in beha... more Although both economists and psychologists seek to identify determinants of heterogeneity in behavior, they use different concepts to capture them. In this review we first analyze the extent to which economic preferences and psychological concepts of personality -such as the Big Five and locus of control -are related. We analyze data from incentivized laboratory experiments and representative samples and find only low degrees of association between economic preferences and personality. We then regress life outcomes -such as labor market success, health status and life satisfaction -simultaneously on preference and personality measures. The analysis reveals that the two concepts are rather complementary when it comes to explaining heterogeneity in important life outcomes and behavior.
Our decisions often have consequences for other people. Hence, self-interest and other-regarding ... more Our decisions often have consequences for other people. Hence, self-interest and other-regarding motives are traded off in many daily-life situations. Interindividually, people differ in their tendency to behave prosocial. These differences are captured by the concept of social value orientation (SVO), which assumes stable, trait-like tendencies to act selfish or prosocial. This study investigates group differences in prosocial decision making and addresses the question of whether prosocial individuals act intuitively and selfish individuals instead need to control egoistic impulses to behave prosocially. We address this question via the interpretation of neuronal and behavioral indicators. In the present fMRI-study participants were grouped into prosocial- and selfish participants. They made decisions in multiple modified Dictator-Games (DG) that addressed self- and other-regarding motives to a varying extent (self gain, non-costly social gain, mutual gain, costly social gain). Sel...
Apart from everyday duties, such as doing the laundry or cleaning the house, there are tasks we d... more Apart from everyday duties, such as doing the laundry or cleaning the house, there are tasks we do for pleasure and enjoyment. We do such tasks, like solving crossword puzzles or reading novels, without any external pressure or force; instead, we are intrinsically motivated: we do the tasks because we enjoy doing them. Previous studies suggest that external rewards, i.e., rewards from the outside, affect the intrinsic motivation to engage in a task: while performance-based monetary rewards are perceived as controlling and induce a business-contract framing, verbal rewards praising one's competence can enhance the perceived self-determination. Accordingly, the former have been shown to decrease intrinsic motivation, whereas the latter have been shown to increase intrinsic motivation. The present study investigated the neural processes underlying the effects of monetary and verbal rewards on intrinsic motivation in a group of 64 subjects applying functional magnetic resonance imag...
Humans often evaluate their abilities by comparing their personal performance with that of others... more Humans often evaluate their abilities by comparing their personal performance with that of others. For this process, it is critical whether the comparison turns out in one's favor or against it. Here, we investigate how social comparisons of performance are encoded and integrated on the neural level. We collected functional magnetic resonance images while subjects answered questions in a knowledge quiz that was related to their profession. After each question, subjects received a feedback about their personal performance, followed by a feedback about the performance of a reference group who had been quizzed beforehand. Based on the subjects' personal performance, we divided trials in downward and upward comparisons. We found that upward comparisons correlated with activity in the dorsolateral prefrontal cortex and the anterior insula. Downward comparisons were associated with increased activation in the ventral striatum (VS), the medial orbitofrontal cortex and the ventral a...
In this paper we study neural responses to inequitable distributions of rewards despite equal per... more In this paper we study neural responses to inequitable distributions of rewards despite equal performance. We specifically focus on differences between advantageous inequity (AI) and disadvantageous inequity (DI). AI and DI were realized in a hyperscanning functional magnetic resonance imaging (fMRI) experiment with pairs of subjects simultaneously performing a task in adjacent scanners and observing both subjects' rewards. Results showed (1) hypoactivation of the ventral striatum (VS) under DI but not under AI; (2) inequity induced activation of the right dorsolateral prefrontal cortex (DLPFC) that was stronger under DI than under AI; (3) correlations between subjective evaluations of AI evaluation and bilateral ventrolateral prefrontal and left insular activity. Our study provides neurophysiological evidence for different cognitive processes that occur when exposed to DI and AI, respectively. One possible interpretation is that any form of inequity represents a norm violation, but that important differences between AI and DI emerge from an asymmetric involvement of status concerns.
Experimental Economics The disciplines of social science, with the notable exception of psycholog... more Experimental Economics The disciplines of social science, with the notable exception of psychology, have traditionally steered clear of laboratory. The field of economics, and in particular econometrics, has amassed an imposing arsenal of quantitative and statistical methods for analyzing observational data in assessing economic theory and in making causal inferences. More recently, laboratory experiments carried out under controlled conditions and randomized field experiments carried out under natural conditions have gained some currency as complementary approaches. Falk and Heckman (p. 535 ) review the strengths and shortfalls of these recent developments.
It is ecologically adaptive that the amount of effort invested to achieve a reward increases the ... more It is ecologically adaptive that the amount of effort invested to achieve a reward increases the relevance of the resulting outcome. Here, we investigated the effect of effort on activity in reward and loss processing brain areas by using functional magnetic resonance imaging. In total, 28 subjects were endowed with monetary rewards of randomly varying magnitude after performing arithmetic calculations that were either difficult (high effort), easy (low effort) or already solved (no effort). Subsequently, a forced donation took place, where a varying part of the endowment was transferred to a charity organization, causing a loss for the subject. Results show that reward magnitude positively modulates activity in reward-processing brain areas (subgenual anterior cingulate cortex and nucleus accumbens) only in the high effort condition. Furthermore, anterior insular activity was positively modulated by loss magnitude only after high effort. The results strongly suggest an increasing relevance of outcomes with increasing previous effort.
The prevailing labour market models assume that minimum wages do not affect the labour supply sch... more The prevailing labour market models assume that minimum wages do not affect the labour supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have significant and lasting effects on subjects’ reservation wages. The temporary introduction of a minimum wage leads to a rise in subjects’ reservation wages that persists even after the minimum wage
Wireless sensor networks are a promising technology for ecological research due to their capabili... more Wireless sensor networks are a promising technology for ecological research due to their capability to make continuous and in-situ measurements. However, there are some challenges for the wide adoption of this technology by scientists, who may have various research focuses. First, the observation system needs to be rapidly and easily deployable at different remote locations. Second, the system needs to
This series presents research findings based either directly on data from the German Socio-Econom... more This series presents research findings based either directly on data from the German Socio-Economic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.
Field evidence suggests that people belonging to the same group often behave similarly, i.e., beh... more Field evidence suggests that people belonging to the same group often behave similarly, i.e., behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly
In this paper we provide controlled experimental evidence on the interaction of incentive schemes... more In this paper we provide controlled experimental evidence on the interaction of incentive schemes, sorting decisions and performance. In a first sequence of the ex- periment all subjects perform a real effort task under a piece-rate regime. Depending on the treatment they can then choose to work either under a piece-rate scheme or a fixed wage scheme (PR-treatment) or to work either under a tournament incentives or a fixed wage scheme (T-treatment). In both treatments subjects are then going through a series of other treatments to elicit social preferences and risk attitudes. In addition we collect questionnaire data on effort, self-assessment and personality. Our main findings are as follows: First, output is much higher in the variable pay schemes (piece-rate and tournament) compared to the fixed wage schemes. Second, this differ- ence is only in part driven by the different incentives. More important for the outcome differences is the sorting of subjects: the higher the ability t...
A key open question for theories of reference-dependent preferences is what determines the refere... more A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between
A key open question for theories of reference-dependent preferences is what determines the refere... more A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low.
Interpersonal conflicts are a common element of many social relationships. One possible process i... more Interpersonal conflicts are a common element of many social relationships. One possible process in rebuilding social relationships is the act of apologizing. Behavioral studies have shown that apologies promote forgiveness. However, the neural bases of receiving an apology and forgiveness are still unknown. Hence, the aim of the present fMRI study was to investigate brain processes involved in receiving an apology and active forgiveness of an ambiguous offense. We asked one group of participants (player A) to make decisions, which were either positive or negative for another group of participants (player B). The intention of player A was ambiguous to player B. In case of a negative impact, participants in the role of player A could send an apology message to participants in the role of player B. Subsequently players B were asked whether they wanted to forgive player A for making a decision with negative consequences. We found that receiving an apology yielded activation in the left inferior frontal gyrus, the left middle temporal gyrus, and left angular gyrus. In line with previous research we found that forgiving judgments activated the right angular gyrus. Citation: Strang S, Utikal V, Fischbacher U, Weber B, Falk A (2014) Neural Correlates of Receiving an Apology and Active Forgiveness: An fMRI Study. PLoS ONE 9(2): e87654.
Although both economists and psychologists seek to identify determinants of heterogeneity in beha... more Although both economists and psychologists seek to identify determinants of heterogeneity in behavior, they use different concepts to capture them. In this review we first analyze the extent to which economic preferences and psychological concepts of personality -such as the Big Five and locus of control -are related. We analyze data from incentivized laboratory experiments and representative samples and find only low degrees of association between economic preferences and personality. We then regress life outcomes -such as labor market success, health status and life satisfaction -simultaneously on preference and personality measures. The analysis reveals that the two concepts are rather complementary when it comes to explaining heterogeneity in important life outcomes and behavior.
Our decisions often have consequences for other people. Hence, self-interest and other-regarding ... more Our decisions often have consequences for other people. Hence, self-interest and other-regarding motives are traded off in many daily-life situations. Interindividually, people differ in their tendency to behave prosocial. These differences are captured by the concept of social value orientation (SVO), which assumes stable, trait-like tendencies to act selfish or prosocial. This study investigates group differences in prosocial decision making and addresses the question of whether prosocial individuals act intuitively and selfish individuals instead need to control egoistic impulses to behave prosocially. We address this question via the interpretation of neuronal and behavioral indicators. In the present fMRI-study participants were grouped into prosocial- and selfish participants. They made decisions in multiple modified Dictator-Games (DG) that addressed self- and other-regarding motives to a varying extent (self gain, non-costly social gain, mutual gain, costly social gain). Sel...
Apart from everyday duties, such as doing the laundry or cleaning the house, there are tasks we d... more Apart from everyday duties, such as doing the laundry or cleaning the house, there are tasks we do for pleasure and enjoyment. We do such tasks, like solving crossword puzzles or reading novels, without any external pressure or force; instead, we are intrinsically motivated: we do the tasks because we enjoy doing them. Previous studies suggest that external rewards, i.e., rewards from the outside, affect the intrinsic motivation to engage in a task: while performance-based monetary rewards are perceived as controlling and induce a business-contract framing, verbal rewards praising one's competence can enhance the perceived self-determination. Accordingly, the former have been shown to decrease intrinsic motivation, whereas the latter have been shown to increase intrinsic motivation. The present study investigated the neural processes underlying the effects of monetary and verbal rewards on intrinsic motivation in a group of 64 subjects applying functional magnetic resonance imag...
Humans often evaluate their abilities by comparing their personal performance with that of others... more Humans often evaluate their abilities by comparing their personal performance with that of others. For this process, it is critical whether the comparison turns out in one's favor or against it. Here, we investigate how social comparisons of performance are encoded and integrated on the neural level. We collected functional magnetic resonance images while subjects answered questions in a knowledge quiz that was related to their profession. After each question, subjects received a feedback about their personal performance, followed by a feedback about the performance of a reference group who had been quizzed beforehand. Based on the subjects' personal performance, we divided trials in downward and upward comparisons. We found that upward comparisons correlated with activity in the dorsolateral prefrontal cortex and the anterior insula. Downward comparisons were associated with increased activation in the ventral striatum (VS), the medial orbitofrontal cortex and the ventral a...
In this paper we study neural responses to inequitable distributions of rewards despite equal per... more In this paper we study neural responses to inequitable distributions of rewards despite equal performance. We specifically focus on differences between advantageous inequity (AI) and disadvantageous inequity (DI). AI and DI were realized in a hyperscanning functional magnetic resonance imaging (fMRI) experiment with pairs of subjects simultaneously performing a task in adjacent scanners and observing both subjects' rewards. Results showed (1) hypoactivation of the ventral striatum (VS) under DI but not under AI; (2) inequity induced activation of the right dorsolateral prefrontal cortex (DLPFC) that was stronger under DI than under AI; (3) correlations between subjective evaluations of AI evaluation and bilateral ventrolateral prefrontal and left insular activity. Our study provides neurophysiological evidence for different cognitive processes that occur when exposed to DI and AI, respectively. One possible interpretation is that any form of inequity represents a norm violation, but that important differences between AI and DI emerge from an asymmetric involvement of status concerns.
Uploads
Papers by Armin Falk