Working Papers
Too Good to be True - Individual and Collective Decision-Making with Misleading Signals (with Sebastian Fehrler & Moritz Janas) R&R at Management Science.
This study is motivated by a peculiar ancient rule which highlights the need for thorough examination and dissent in decision-making processes. It is stated in the Babylonian Talmud and demands that if a defendant is unanimously convicted by all judges, they should be acquitted. In today’s world, too, there are many cases, where overwhelming evidence, such as fabricated customer reviews, can result in deceptive conclusions. We experimentally investigate individual and collective decision-making within information structures with correlated signals in one state of the world, where too much evidence has the potential to mislead, necessitating a level of sophistication for rational decision-making. Overall, participants’ performance is poor with only small differences in collective and individual decision-making accuracy. Interestingly, the more complex environment tends to encourage greater honesty within heterogeneous groups, as compared to the benchmark setting with independent signals, thus validating a rather subtle game-theoretic prediction.
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How Tinted Are Your Glasses? Gender Views, Beliefs and Recommendations in Hiring (with Markus Eberhardt, Giovanni Facchini, Valeria Rueda & Fabio Tufano). Submitted.
We study the gendered impact of recommendations at different stages of the hiring process. First, using a large sample of reference letters from the academic job market for economists, we document that women receive fewer ‘ability’ and more ‘grindstone’ letters. Next, we conduct two experiments — with academic economists and a broader, college-educated, population — analyzing both recommendation and recruitment stages. These confirm that recommendations are gendered and impact recruitment. We elicit gender views and beliefs about the effectiveness of different letter types, uncovering that gender attitudes and strategic behavior based on erroneous beliefs explain referees’ choices. Finally, we decompose gender recruitment gaps into two components: one capturing differences in treatment of candidates with identical qualities, the other reflecting recruiters’ failure to account for gendered patterns in recommendations. We show that recruiters’ failure to recognize the gendered nature of reference letters undermines visible efforts to improve diversity in hiring.
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Negative income shocks and distributive preferences. Submitted.
This paper investigates whether negative income shocks affect distribution decisions, using two experiments. While Study 1 randomises whether participants experience an income shock within the experiment, Study 2 examines real-world income shocks during the Covid-19 pandemic. Across both studies, I find that shocks significantly affect how participants distribute earned income. They allocate more to those who experienced a shock, regardless of whether they themselves or another person was affected. This behaviour can be explained by two mechanisms. First, losing income changes need considerations and thus utility-based distribution arguments. Second, the mere experience of a shock matters. Fixing current income levels, and thus need considerations, individuals still give more to a person who suffered a shock. This is in line with a theoretical framework where past earnings serve as fairness reference points, highlighting the role of earning histories in shaping fairness judgements.
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Does Inequality threaten Stability? Evidence from the Lab (with Abigail Barr & Silvia Sonderegger). Submitted.
We investigate the impact of rising inequality on social instability through a novel laboratory experiment where two groups interact repeatedly and have an incentive to coordinate. We then vary the extent of the inequality implied by coordination. Our results show that increasing inequality causes destabilisation. This effect is initiated by the disadvantaged and is observed even when the absolute situation of the disadvantaged is unchanging. These findings are consistent with a simple model incorporating disadvantageous inequality aversion and myopic best response. Finally, we show that history matters; responses to current inequality depend on past experiences of inequality and stability.
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To hide or not to hide? How fear and futility affect the decision to report a mistake (with Malte Baader, Sarah Bowen & Richard Mills). Submitted.
Even though reporting mistakes could substantially improve work processes and productivity within organisations, employees often hesitate to do so. This paper studies the role of fear (of being fired) and futility (i.e. reports being inconsequential) in explaining such employee silence. Drawing on a principal-agent framework with career concerns, we formalise mistakes as noisy signals of both agent quality and the work environment and show that optimal reporting decisions are affected by fear and futility considerations. We then use a novel experiment to exogenously manipulate the degree of fear and futility and test our theoretical predictions. In a 2x2 between-subject design, we vary the anonymity of reporting and the likelihood of organisational response. Results show that reducing fear and futility are complementary actions. Tackling both significantly increases reporting by about 20pp. This improvement in communication is accompanied by better organisational income, highlighting the value of improved reporting structures for firms and employees.
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