Looking into Crystal Balls: A Laboratory Experiment on Reputational Cheap Talk, with Debrah Meloso and Marco Ottaviani, Management Science, 2023, 69(9): 4973–5693, Replication Data, Show/Hide AbstractWe experimentally study information transmission by experts motivated by their reputation for being well informed. In our game of reputational cheap talk, a reporter privately observes information about a state of the world and sends a message to an evaluator; the evaluator uses the message and the realized state of the world to assess the reporter’s informativeness. We manipulate the key driver of misreporting incentives: the uncertainty about the phenomenon to forecast. We highlight three findings. First, misreporting information is pervasive, even when truthful information transmission can be an equilibrium strategy. Second, consistent with the theory, reporters are more likely to transmit information truthfully when there is more uncertainty on the state. Third, evaluators have difficulty learning reporters’ strategies and, contrary to the theory, assessments react more strongly to message accuracy when reporters are more likely to misreport. In a simpler environment with computerized evaluators, reporters learn to best reply to evaluators’ behavior and, when the state is highly uncertain and evaluators are credulous, to transmit information truthfully.
Positive Spillovers from Negative Campaigning, with Vincenzo Galasso and Tommaso Nannicini, American Journal of Political Science, 2023, 67(1): 5–21, Online Appendix, Replication Data, Media: La Nación, Show/Hide AbstractNegative advertising is frequent in electoral campaigns, despite its ambiguous effectiveness: negativity may reduce voters’ evaluation of the targeted politician but have a backlash effect for the attacker. We study the effect of negative advertising in electoral races with more than two candidates with a large scale field experiment during an electoral campaign for mayor in Italy and a survey experiment in a fictitious mayoral campaign. In our field experiment, we find a strong, positive spillover effect on the third main candidate (neither the target nor the attacker). This effect is confirmed in our survey experiment, which creates a controlled environment with no ideological components nor strategic voting. The negative ad has no impact on the targeted incumbent, has a sizable backlash effect on the attacker, and largely benefits the idle candidate. The attacker is perceived as less cooperative, less likely to lead a successful government, and more ideologically extreme.
- Recent studies of clientelism predominantly focus on how elites use rewards to influence vote choices and turnout. This article shifts attention towards citizens and their choices beyond the ballot box. Under what conditions does clientelism influence citizens’ decisions to express political preferences publicly? When voters can obtain post-election benefits by declaring support for victorious candidates, their choices to display political paraphernalia on their homes or bodies may reflect more than just political preferences. We argue that various factors — such as the size of rewards and punishments, the competitiveness of the election, and whether multiple candidates employ clientelism — affect citizens’ propensity to declare support in response to clientelist inducements. Building on insights from fieldwork, formal analyses reveal how and why such factors can distort patterns of political expression observed dur- ing electoral campaigns. We conduct an experiment in Brazil, which predominantly corroborates predictions about declared support and clientelism.
- We present a theory of war onset and war duration in which power is multidimensional and can evolve through conflict. The resources players can secure without fighting are determined by their political power, while the ability of appropriating resources with violence is due to their military power. When deciding whether to wage a war, players evaluate the consequences on the current allocation of resources as well as on the future distribution of military and political power. We deliver three main results: a key driver of war is the mismatch between military and political power; dynamic incentives may amplify static incentives, leading forward-looking players to be more belligerent; and a war is more likely to last for longer if political power is initially more unbalanced than military power and the politically under-represented player is militarily advantaged. Our results are robust to allowing the peaceful allocation of resources to be a function of both political and military power. Finally, we provide empirical correlations on inter-state wars that are consistent with the theory.
Dynamic Legislative Bargaining with Veto Power: Theory and Experiments, Games and Economic Behavior, 2021, 126: 186–230, Show/Hide AbstractIn many domains, committees bargain over a sequence of policies and a policy remains in effect until a new agreement is reached. In this paper, I argue that, in order to assess the consequences of veto power, it is important to take into account this dynamic aspect. I analyze an infinitely repeated divide-the-dollar game with an endogenous status quo policy. I show that full appropriation by the veto player is the only stable policy when legislators are sufficiently impatient; and that, irrespective of legislators’ patience and the initial division of resources, there is always an equilibrium where policy eventually gets arbitrarily close to full appropriation by the veto player. In this equilibrium, increasing legislators’ patience or decreasing the veto player’s ability to set the agenda makes convergence to this outcome slower and the veto player supports reforms that decrease his allocation. The main predictions of the theory find support in controlled laboratory experiments.
The Political Economy of Public Debt: A Laboratory Study, with Marco Battaglini and Thomas R. Palfrey, Journal of the European Economic Association, 2020, 18(4): 1969–2012, Online Appendix, Replication Data, Show/Hide AbstractThis paper reports the results from a laboratory experiment designed to study political distortions in the accumulation of public debt. A legislature bargains over the levels of a public good and of district specific transfers in two periods. The legislature can issue or purchase risk-free bonds in the first period and the level of public debt creates a dynamic linkage across policymaking periods. In line with the theoretical predictions, we find that public policies are inefficient and efficiency is increasing in the size of the majority requirement, with higher investment in public goods and lower debt associated with larger majority requirements. Debt is lower when the probability of a negative shock to the economy in the second period is higher indicating that even in a political equilibrium debt is used to smooth consumption and to insure against economic uncertainty. Also in line with the theoretical predictions, we find that dynamic distortions are eliminated when the first period proposer can commit to a policy for both periods. The experiment, however, highlights two phenomena that are surprising in terms of standard theory and have not been previously documented. First, balancing the budget in each period is a focal point, leading to lower distortions than predicted. Second, higher majority requirements induce significant delays in reaching an agreement.
The Economic Effects of Electoral Rules: Evidence from Unemployment Benefits, with Vincenzo Galasso, Quarterly Journal of Political Science, 2019, 14(3): 259–291, Replication Data, Show/Hide AbstractThis paper provides a novel test of the link from electoral rules to economic policies. We focus on unemployment benefits because their classification as a broad or targeted transfer may vary — over time and across countries — according to the geographical dispersion of unemployed citizens, the main beneficiaries of the program. A simple theoretical model delivers unambiguous predictions on the interaction between electoral institutions and the unemployment rate in contestable and safe districts. Due to electoral incentives, the difference in the unemployment generosity between majoritarian and proportional systems depends on the difference in the unemployment rate between contestable and safe districts. We test this prediction using a novel dataset with information on electoral competitiveness and unemployment rates at district level, and different measures of unemployment benefit generosity for 16 OECD countries between 1980 and 2011. The empirical analysis strongly supports the theoretical predictions.
Durable Coalitions and Communication: Public versus Private Negotiations, with Renee Bowen and David Baron, Journal of Public Economics, 2017, 156: 1–13, Online Appendix, Replication Data, Show/Hide AbstractWe present a laboratory experiment to study the effect of communication on durable coalitions — coalitions that support the same allocation from one period to the next. We study a bargaining setting where the status quo policy is determined by the policy implemented in the previous period. Our main experimental treatment is the opportunity for subjects to negotiate with one another through unrestricted cheap-talk communication before a proposal is made and comes to a vote. We compare committees with no communication, committees where communication is public and messages are observed by all committee members, and committees where communication is private and any committee member can send a private message to any other committee member. We find that the opportunity to communicate has a significant impact on outcomes and coalitions. When communication is public, there are more universal coalitions and fewer majoritarian coalitions. With private communication, there are more majoritarian coalitions and fewer universal coalitions. With either type of communication coalitions occur more frequently and last longer than with no communication. The volume and content of communication is correlated with coalition type. These findings suggest a coordination role for communication that varies with the mode of communication.
- How does political polarization affect the welfare of the electorate? We analyze this question using a framework in which two policy and office motivated parties compete in an infinite sequence of elections. We propose two novel measures to describe the degree of conflict among agents: antagonism is the disagreement between parties; extremism is the disagreement between each party and the representative voter. These two measures do not coincide when parties care about multiple issues. We show that forward-looking parties have an incentive to implement policies favored by the representative voter, in an attempt to constrain future challengers. This incentive grows as antagonism increases. On the other hand, extremism decreases the electorate’s welfare. We discuss the methodological and empirical implications for the existing measures of political actors’ ideal points and for the debate on elite polarization.
Gambler's Fallacy and Imperfect Best Response in Legislative Bargaining, with Jan Zapal, Games and Economic Behavior, 2016, 99: 275–294, Supplementary Material, Show/Hide AbstractWe investigate the implications of imperfect best response—in combination with different assumptions about correct (QRE) or incorrect beliefs (Quantal-Gambler’s Fallacy or QGF)—in the alternating offer multilateral bargaining game. We prove that a QRE of this game exists and characterize the unique solution to the proposer’s problem—that is, the proposal observed most frequently in a QRE. We structurally estimate this model on data from laboratory experiments, and show that it explains behavior better than the model with perfect best response: receivers vote probabilistically; proposers allocate resources mostly within a minimum winning coalition of legislators but do not fully exploit their bargaining power. Incorporating history-dependent beliefs about the future distribution of proposal power into the QRE model (QGF) leads to an even better match with the data, as this model implies slightly lower shares to the proposer, maintaining similar or higher frequencies of minimum winning coalitions and similar voting behavior.
Quantal Response and Nonequilibrium Beliefs Explain Overbidding in Maximum-Value Auctions, with Colin Camerer and Thomas R. Palfrey, Games and Economic Behavior, 2016, 98: 243–263, Replication Data, Show/Hide AbstractWe report new experimental data on a simple common value auction to investigate the extent to which bidding can be explained by logit QRE, in combination with different models about bidder beliefs: cursed equilibrium, level-k, and cognitive hierarchy. There is a close correspondence between the predicted bidding patterns in those models and the distribution of observed bids. The pattern of median bids in the data consists of a combination of overbidding with low signals, and near-value-bidding with higher signals. Logit QRE with heterogeneous bidders approximates this pattern. Combining QRE with any of the other models of belief formation leads to a closer match with the data. All the estimated models predict only small treatment effects across different versions of the game, consistent with the data. We also reanalyze an earlier dataset for the same game (Ivanov et al., 2010), which exhibited much more overbidding, and reach similar qualitative conclusions.
The Dynamic Free Rider Problem: A Laboratory Study, with Marco Battaglini and Thomas R. Palfrey, American Economic Journal: Microeconomics, 2016, 8(4): 268–308, Replication Data, Show/Hide AbstractWe report the results of an experiment that investigates free riding in the accumulation of durable public goods. We consider economies with reversibility, where contributions can be positive or negative; and economies with irreversibility, where contributions are nonnegative. Aggregate outcomes support the qualitative predictions of the Markov Perfect Equilibria (MPE) characterized in Battaglini, Nunnari, and Palfrey (2014): steady state levels of public good are lower with reversibility than irreversibility; accumulation is inefficiently slow; and the public good is under-provided in both regimes. On the other hand, public good levels are higher than MPE, and some evidence of history dependence is detected.World democracies widely differ in legislative, executive, and legal institutions. Different institutional environments induce different mappings from electoral outcomes to the distribution of power. We explore how these mappings affect voters’ participation in an election. We show that the effect of such institutional differences on turnout depends on the distribution of voters’ preferences. We uncover a novel contest effect: Given the preferences distribution, turnout increases and then decreases when we move from a more proportional to a less proportional power-sharing system; turnout is maximized for an intermediate degree of power sharing. Moreover, we generalize the competition effect, common to models of endogenous turnout: Given the institutional environment, turnout increases in the ex ante preferences evenness, and more so when the overall system has lower power sharing. These results are robust to a wide range of modeling approaches, including ethical voter models, voter mobilization models, and rational voter models.We study the Markov equilibria of a model of free riding in which n infinitely lived agents choose between private consumption and irreversible contributions to a durable public good. We show that the set of equilibrium steady states converges to a unique point as depreciation converges to zero. For any level of depreciation, moreover, the highest steady state converges to the efficient level as agents become increasingly patient. These results are in contrast to the case with reversible investments, where a continuum of inefficient equilibrium steady states exists for any level of depreciation, discount factor, and size of population.
Legislative Bargaining and the Dynamics of Public Investment, with Marco Battaglini and Thomas R. Palfrey, American Political Science Review, 2012, 106(2): 407–429, Online Appendix, Show/Hide AbstractWe present a legislative bargaining model of the provision of a durable public good over an infinite horizon. In each period, there is a societal endowment that can either be invested in the public good or consumed. We characterize the optimal public policy, defined by the time path of investment and consumption. In a legislature representatives of each of n districts bargain over the current period’s endowment for investment in the public good and transfers to each district. We analyze the Markov perfect equilibrium under different voting q-rules where q is the number of yes votes required for passage. We show that the efficiency of the public policy is increasing in q because higher q leads to higher investment in the public good and less pork. We examine the theoretical equilibrium predictions by conducting a laboratory experiment with five-person committees that compares three alternative voting rules: unanimity (q = 5), majority (q = 3), and dictatorship (q = 1).
Negative Emission Technologies and Climate Cooperation, with Michela Boldrini and Valentina Bosetti, Show/Hide AbstractNegative Emissions Technologies (NETs) — a range of methods to remove carbon dioxide from the atmosphere — are a crucial innovation in meeting temperature targets set by international climate agreements. However, mechanisms which undo the adverse consequences of short-sighted actions (as NETs) can fuel substitution effects and crowd out virtuous behaviors (e.g., mitigation efforts). For this reason, the impact of NETs on environmental preservation is an open question among scientists and policy-makers. We model this problem through a novel restorable common-pool resource game and use a laboratory experiment to exogenously manipulate key features of NETs and assess their consequences. We show that crowding out only emerges when NETs are surely available and cheap. The availability of NETs does not allow experimental communities to either conserve the common resource for longer or accrue higher earnings and makes the earnings distribution more unequal.
- We experimentally study how cognitive noise affects behavior in coordination games. Our key testable prediction is that equilibrium behavior depends on context — which we define as the distribution from which games are drawn. This prediction arises from players efficiently using their limited cognitive resources; furthermore, this prediction distinguishes cognitive noise from a large class of alternative behavioral game theory and learning models. Experimentally, we find that the frequency with which subjects coordinate depends systematically on context. We argue that cognitive noise can microfound the global games approach, while also generating novel predictions that we observe in our experimental data.
Meta-Analysis of Distributional Preferences Estimates, with Massimiliano Pozzi, Invited to Revise and Resubmit at the Economic Journal, Show/Hide AbstractWe conduct a large-scale interdisciplinary meta-analysis to aggregate the knowledge from empirical estimates of distributional preferences reported from 1999 to 2022. In particular, we examine 289 estimates of sensitivity to inequality from 40 articles in economics, psychology, neuroscience and computer science which structurally estimate the Fehr and Schmidt (1999) model. Our analysis indicates that individuals are inequality averse: mean sensitivity to disadvantageous inequality is 0.467 with a 95% probability that the true value lies in the interval [0.302, 0.642]; mean sensitivity to advantageous inequality is 0.331 with a 95% probability that the true value lies in the interval [0.266, 0.396]. We observe high levels of heterogeneity, both across studies and across individuals, with estimated parameters sensitive to some features of the study design (namely, the experimental task and the subject population). Finally, we do not find compelling evidence of selective reporting or publication bias.
- This paper develops a model of voters' and politicians' behavior based on the notion that voters focus disproportionately on and, hence, overweigh the policies in which politicians' platforms differ more. We introduce focusing in a model of electoral competition between differentiated candidates who invest resources to improve the quality of their policies in multiple common value issues. We show that voters' attention distortion leads to greater investment in policy development, greater platform differentiation (with politicians standing out in the policies they are more competent in), and greater investment in divisive policies. Finally, we show that focusing can contribute to explain puzzling stylized facts such as the entry of single-issue parties with no electoral chances or the inverse correlation between income inequality and redistribution.
Audi Alteram Partem: An Experiment on Selective Exposure to Information, with Giovanni Montanari, Show/Hide AbstractWe report the results of an experiment on selective exposure to information. A decision maker interested in learning about an uncertain state of the world can acquire information from one of two sources which have opposite biases: when informed on the state, they report it truthfully; when uninformed, they report their favorite state. A Bayesian decision maker is better off seeking confirmatory information unless the source biased against the prior is sufficiently more reliable. In line with the theory, subjects are more likely to seek confirmatory information when sources are symmetrically reliable. On the other hand, when sources are asymmetrically reliable, subjects are more likely to consult the more reliable source even when prior beliefs are strongly unbalanced and this source is less informative. Our experiment suggests that base rate neglect and simple heuristics (e.g., listen to the most reliable source) are important drivers of the endogenous acquisition of information.
Work in Progress
Reciprocity and Democratic Accountability, with Benjamin Blumenthal, Show/Hide AbstractThis paper introduces reciprocity in a model of political agency. Voters are uncertain about politicians' competence and, after observing a policy outcome which depends both on the incumbent's competence and on her effort, must decide whether to re-elect the incumbent or replace her with a challenger. I assume voters are both forward-looking — that is, interested in selecting competent politicians — and retrospective — that is, have a preference for rewarding kind actions and punishing unkind actions; and I investigate how this affects the behavior of incumbent politicians who seek re-election. I show that reciprocity increases democratic accountability — that is, it provides better incentives for politicians to take costly effort — if and only if voters are sufficiently informed on the incumbent's effort and moderately reciprocal. Moreover, I show that keeping voters' reciprocity into account can overturn results from standard models of electoral accountability and has important normative implications: increasing the degree of voters' information about the incumbent's effort and reducing the benefits from office improves effective accountability if and only if voters are sufficiently reciprocal.
Intelligence and Voting Behavior, with Eugenio Proto and Aldo Rustichini, Show/Hide AbstractVoting theories are predicated on the belief that citizens accurately assess the comparative advantages of different policy options. However, many policies produce outcomes through indirect or equilibrium effects, such as lifting price controls, expanding or constructing roads, implementing Pigouvian taxes, and monetizing fiscal deficits. The average citizen might not fully appreciate these equilibrium effects, leading to misjudgments about the efficacy of certain policies. Recent research by Dal Bo, Dal Bo, and Eyster (2018) demonstrates that individuals often vote against policies that, despite imposing direct costs, would resolve social dilemmas and enhance overall welfare. This raises an important research question: How do cognitive abilities influence preference formation regarding policies? Specifically, what is the underlying mechanism? Our study proposes a simple theoretical framework and an experimental approach to explore a potential pathway: enhanced cognitive skills may lead to a better understanding of the indirect effects of untested policies.
Resources for Experimental Economics
oTree App for Bargaining in Ad Hoc Committees (i.e., Legislative Bargaininig à la Baron and Ferejohn 1989)