Essays in Experimental Economics

Abstract

This thesis has three chapters and employs experimental methods to study human behaviour. Chapter 1 presents a framed interactive online experiment conducted on Amazon Mechanical Turk (MTurk) during the first COVID-19 lockdown. The experiment studies social distancing using a repeated game where subjects interact in groups of 5 on a fixed network. We find that both the network position and the disease contagiousness matter for social distancing. Furthermore, fines for non-adherence to social distancing are effective at promoting this behaviour, whereas informational nudges have a limited impact. Finally, we find that political ideology is strongly correlated with subjects’ distancing choices. Instrumental variable (IV) analysis suggests that ideology in the US may be causally related to one’s propensity to practice social distancing, with political conservatives exhibiting lower adherence. Chapter 2 builds upon the methods and findings of Chapter 1. Here, we study the effectiveness of contact tracing and quarantine programs aimed at containing the spread of infectious diseases, and further investigate the role of political ideology in driving behaviour in the US. Using a dynamic game, we investigate the relative effectiveness of mandatory and optional tracing and quarantine regimes. We find that a system where both contact tracing and quarantine are mandatory works best. However, even a fully optional program is better than no program at all, but making only one element mandatory has no added benefit. Interestingly, none of the programs have a consistent long-run effect on economic activity. Using a pre-registered IV, we find that political ideology is causally related to behaviour. Political conservatives are less likely to reduce their economic activity and sign up to the contact tracing programs. Using simulations, we show that this heterogeneity may be important for welfare of ideologically homogeneous groups. Chapter 3 presents a laboratory experiment studying stated beliefs and play in one-shot normal-form games. The experiment relies on 15 games, characterised by an explicit strategic structure -- ie strategic complementarity or substitutability. We find that subjects’ stated beliefs about the actions of their opponents are generally inconsistent with standard models of strategic thinking. Moreover, we observe that the shape of stated beliefs is systematically affected by the strategic structure of the game as well as the number of opponents faced by the player. Next, about 35-40% of subjects' decisions in the experiment are not consistent in the sense of expected payoff maximisation. Our data does not support the hypothesis that the inconsistencies are driven by `mistakes' committed in identifying best response to one's own stated beliefs, or lack of precision in stating one's true beliefs. Rather, it suggests that strategic uncertainty and risk are the key drivers behind the inconsistency. JEL codes: C91, C99, D01, D83, D91, I12, I18.