Job Market Paper

Confidence and College Applications: Evidence from a Randomized Intervention with Rustamdjan Hakimov and Camille Terrier, November 2022. (PDF)

Abstract This paper investigates the role self-confidence plays in college applications. Using experiments, we collect unique data on the self-confidence of more than 2,000 students applying to colleges in France. This data reveals that the best female and low-SES students significantly underestimate their rank in the grade distribution compared to male and high-SES students. By matching our survey data with administrative data on real college applications and admissions, we show that higher confidence leads to more prestigious college applications and admissions, conditional on ability. We then estimate the impact of a randomized intervention that corrects students' under- and overconfidence by informing them of their real rank in the grade distribution. The treatment reduces the impact of under- and overconfidence for college applications, to the point where it does not predict the application behavior of treated students. Providing feedback also makes the best students, who were initially underconfident, apply to more ambitious programs with stronger effects for female and low-SES students.
Presentations 2022
ESA Job Market Seminar (online)
KRTK KTI Seminar, Budapest
BSE Workshop on Gender Economics, Berlin
ESA World Meeting, Boston

Published Papers

Protecting the Ego: Motivated Information Selection and Updating with Alessandro Castagnetti,
European Economic Review, Vol. 142, 2022, 104007. (Link, WP)

Abstract We investigate how individuals search for ego-relevant information and then use this information to update their beliefs. In our lab experiment, subjects can select the information structure that gives them feedback regarding their rank in the IQ distribution (ego-relevant treatment) or regarding a random number (control). Subjects are incentivized to report their beliefs truthfully and receive feedback from information structures that they select into (endogenous treatment) or from information structures they are assigned to (exogenous treatment). We find that individuals in the ego-relevant treatment select information structures, in which negative feedback is less salient. When receiving such negative feedback with lower salience they update their beliefs less, but only when feedback is ego-relevant. Hence, subjects select information structures that allow them to misinterpret negative feedback in an ego-preserving way. Moreover, individuals in the ego-relevant treatment choose less informative feedback.
Presentations 2021
Beliefs, Memory and Narratives Workshop, Riederau
EEA Annual Congress 2020*
University of Vienna
Bogota Experimental Economics Conference*
Nordic Conference on Behavioral and Experimental Economics, Kiel*
Economic Science Association - European Meeting, Dijon*
Dr@w Forum, Warwick University*
Warwick PhD Conference*
DIW Micro Reading Group, Berlin
(* presented by coauthor)

Do prices and purchases respond similarly to soft drink tax increases and cuts? with Sinne Smed,
Economics and Human Biology, Vol. 37, 2020, 100864. (Link)

Abstract While in January 2012, Denmark increased the long-standing tax on sugary soft drinks, the tax was cut by half in July 2013 and then completely repealed in January 2014. In this study, we examine whether increases and cuts of the soft drink tax lead to symmetric over- or under-shifting to prices and to symmetric demand responses. We use longitudinal scanner data of 1,282 Danish households to estimate within-product changes in prices and within-household changes in purchase quantity. The tax hike was overshifted by a factor of 2.2 while the tax repeal was passed through with a factor of 1.2. On average, consumption was 13.4 percent lower the year after the tax increase compared to the year before. The repeal of the tax was associated with an increase in purchase quantity of 31.0 percent. This is equivalent to price elasticities of 1.1 and 1.3 respectively. The results suggest that consumers react stronger to tax cuts than to tax increases. Furthermore, the increase in consumption following a tax cut has no limiting effect on the consumption of other beverages suggesting an increase in the intake of calories. This might have implications for health in countries that consider repealing current taxes on soft drinks.

Social Image Concerns and Welfare Take-Up with Jana Friedrichsen and Tobias König,
Journal of Public Economics, Vol. 168, 2018, pp. 174-192. (Link, WP)

Abstract Using a laboratory experiment, we present first evidence that social image concerns causally reduce the take-up of an individually beneficial transfer. Our design manipulates the informativeness of the take-up decision by varying whether transfer eligibility is based on ability or luck, and how the transfer is financed. We find that subjects avoid the inference both of being low-skilled (ability stigma) and of being willing to live off others (free-rider stigma). Using a placebo treatment, we exclude other explanations for the observed stigma effects. Although stigma reduces take-up, elicitation of political preferences reveals that only a minority of “taxpayers” vote for the public transfer.
Presentations 2017
Nordic Conference on Behavioral and Experimental Economics, Gothenburg*
VfS Annual Congress, Vienna*
Lindau Meeting Of The Laureates Of The Sveriges Riksbank, Lindau*
European Economic Association - Annual Congress, Lisbon
Maastricht Behavioral and Experimental Economics Symposium, Maastricht*
ZEW Public Finance Conference, Mannheim*
International Meeting on Experimental and Behavioral Social Sciences (IMEBESS), Barcelona
"Arne Ryde Workshop on Identity, Image and Economic Behavior, Image", Lund*
Economic Science Association - European Meeting, Bergen
Micro Reading Group, Berlin
(* presented by coauthor)

Working Papers

Sin Taxes and Self Control with Sinne Smed.
conditionally accepted at AEJ: Economic Policy
CRC TRR 190 Discussion Paper No. 250, July 2020. (PDF)

Abstract "Sin taxes" are high on the political agenda in the global fight against obesity. According to theory, they are welfare improving if consumers with low self-control are at least as price responsive as consumers with high self-control, even in the absence of externalities. In this paper, we investigate if consumers with low and high self-control react differently to sin tax variation. For identification, we exploit two sets of sin tax reforms in Denmark: first, the increase of the soft drink tax in 2012 and its repeal in 2014 and, second, the fat tax introduction in 2011 and its repeal in 2013. We assess the purchase response empirically using a detailed homescan household panel. Our unique dataset comprises a survey measure of self-control linked to the panelists, which we use to divide the sample into consumers with low and high levels of self-control. We find that consumers with low self-control reduce purchases less strongly than consumers with high self-control when taxes go up, but increase purchases to a similar extent when taxes go down. Hence, we document an asymmetry in the responsiveness to increasing and decreasing prices. We find empirical and theoretical support that habit formation shapes the differential response by self-control. The results suggest that price instruments are not an effective tool for targeting self-control problems.
Presentations 2020
Bridges Seminar, University of Warwick
ZEW Mannheim
MPI for Tax Law and Public Finance, Munich
University of Essex
Risky Health Behaviors Workshop, Hamburg
CEBI at University of Copenhagen
FAIR at NHH, Bergen
Linnaeus University, Växjö
European Economic Association - Annual Congress, Manchester
International Institute of Public Finance (IIPF) - Annual Congress, Glasgow
Institute for Fiscal Studies (IFS), London
Applied Micro Workshop, Hertie School of Governance, Berlin
Retreat of the CRC TRR 190 "Rationality and Competition", Schwanenwerder
Food and Health Economics Workshop, Toulouse
DIW GC Summer Workshop, Potsdam
DIW Cluster Seminar, Berlin
Behavioral Welfare Economics Workshop, Berlin
IFRO Behavioral Economics Seminar, Copenhagen

Earn More Tomorrow: Overconfident Income Expectations and Consumer Indebtedness with Antonia Grohmann, Lukas Menkhoff and Christoph Merkle.
R&R at Journal of Money, Credit and Banking
CRC TRR 190 Discussion Paper No. 152, April 2019. (PDF)

Abstract This paper examines whether biased income expectations due to overconfidence lead to higher levels of debt-taking. In a lab experiment, participants can purchase goods by borrowing against their future income. We exogenously manipulate income expectations by letting income depend on relative performance in hard and easy quiz tasks. We successfully generate biased income expectations and show that participants with higher income expectations initially borrow more. Overconfident participants scale back their consumption after feedback. However, at the end of the experiment they remain with higher debt levels, which represent real financial losses. To assess the external validity, we find further evidence for the link between overcondence and borrowing behavior in a representative survey (GSOEP-IS).

Preferences for sin taxes with Tobias König.
CESifo Working Paper No. 10046, October 2022. (PDF)

Abstract Sin taxes have become a widely suggested policy instrument to discourage the consumption of goods deemed harmful to individuals and society. Using surveys and experiments on a representative sample of the US population, we provide evidence on how individuals think and reason about such corrective policies. We reveal that preferences for taxes on sugar-sweetened beverages (SSBs) are driven by normative considerations, including efficiency-related ideas and distributional concerns. In contrast, self-interested motives play only a minor role. Among the efficiency arguments, people place relatively large weight on externality correction, and motives to correct health cost misperceptions matter more than motives to correct a lack of self-control. However, anti-paternalistic attitudes and regressivity concerns are also prevalent, which helps to explain why the majority of respondents oppose SSB taxes, even though they agree that behavioral biases and externalities are relevant. Preferences for SSB taxes turn out to be malleable. Explaining to individuals the idea behind corrective taxation yields significant increases in the support for SSB taxes and the general openness to paternalistic intervention.
Presentations 2022
VfS Annual Congress, Basel
EEA Annual Congress, Milan
IIPF, Linz

Fairness in Matching Markets: Experimental Evidence with Tobias König, Dorothea Kübler and Lydia Mechtenberg, May 2021. (PDF)

Abstract The fairness of allocation procedures has received considerable attention in the literature on matching markets. We consider fairness as the absence of justified envy, that is, an allocation is unfair if an agent who has priority over another agent prefers that agent's outcome to her own. We ask whether this fairness criterion plays a role for preferences over mechanisms. In two laboratory experiments, we let participants vote between the envy-free assortative matching and the Boston mechanism where some subjects are sincere by design while others can submit their rank-order lists strategically, leading to justified envy. To assess fairness preferences, we rely on veil-of-ignorance and spectator designs. We find that individuals have an aversion to justified envy, mainly in environments where the priorities at schools are based on earned entitlements. However, a persistently high share of individuals is willing to accept justified envy by voting for the Boston mechanism. Our findings indicate that many individuals believe that clever strategic behavior creates an entitlement of its own.

Soft Drink Taxation and Habit Formation
Working Paper, May 2020. (PDF)

Abstract Despite its popularity among policymakers, the effectiveness of taxation in reducing soft drink consumption is still under dispute. To date, most studies using discrete choice demand models and scanner data do not consider the role of habit formation. This paper uses a structural demand model to analyze the impact of soft drink taxes in the presence of habit formation and stockpiling. The model is estimated using nested logit and incorporates unobserved heterogeneity in tastes. The estimated model is used to simulate short-run and long-run price elasticities, as well as the simulated impact of different soft drink taxes. The results show that long-run price elasticities are approximately 20 percent larger than short-run elasticities due to habit formation. Moreover, excise taxes on sugary soft drinks are more effective in reducing sugar consumption than ad valorem taxes and excise taxes that do not distinguish between sugary and diet beverages.

Work in Progress

Behavioral Factors in Dynamic Matching Mechanisms with Rustamdjan Hakimov and Camille Terrier.
Status: Data collection completed.

When is Exploiting Loopholes Accepted? with Tobias König and Lydia Mechtenberg.
Status: Data collection in preparation.

Motivated Health Cost Denial and Taxes with Zarko Kalamov, Tobias König, and Marco Runkel.
Status: Data collection in preparation.

Policy Work

Zuckersteuern können zu einer gesünderen Ernährung beitragen: Kommentar, DIW Wochenbericht 12/2020, March 2020. (Link)

Wie sinnvoll ist eine Zuckersteuer? Gastbeitrag, Redaktionsnetzwerk Deutschland, 14.03.2020. (Link)

Fear of Stigmatization Prevents Individuals from Claiming Benefits (with Jana Friedrichsen), DIW Weekly Report 26-27/2019, June 2019. (Link, In German: Link)

Softdrinksteuer: Proportionale Steuer ist der vielversprechendste Ansatz, DIW Aktuell 10, May 2018. (Link)

Eine Softdrinksteuer zur fiskalischen Konsumsteuerung, DIW Roundup 103, November 2016. (Link)