Lying to Yourself: A Mechanism of Self-deception

This paper studies how people deceive themselves in order to maintain a favorable self-image. I present an experiment in which a donation made to a charity gets transformed into an ambiguous lottery (i.e. a lottery in which probabilities are unknown). In the experiment, subjects make a charitable donation and also state their belief about the probability with which the charity will get the higher amount. Next, subjects participate in another task that elicits their true belief about the same probability. I find that selfish subjects self-servingly misstate their beliefs – to themselves, no less – while altruistic subjects do not. That is, selfish subjects deceive themselves in order to maintain an altruistic self-image. Altruistic subjects, who have already demonstrated their altruism to themselves, are honest with themselves. The experiment demonstrates a mechanism of self-deception in which subjects behave selfishly and then manipulate their beliefs to absolve themselves – or rather their altruism – from being responsible for their selfish behavior. 

Genetic Data Sharing as a Risky Investment

 (with Bradley Malin, Eugene Vorobeychick, and Myrna Wooders)

How can people’s value of genetic data privacy be estimated? We address this question using methods of behavioral/experimental economics. Through decision-making tasks, in two different frames involving risk of loss of privacy of data, in one case genetic data and in the other case financial data, we elicit people’s risk attitudes towards their genetic data relative to their risk attitudes towards their financial data. We find that people are more willing to risk a loss of genetic data privacy for health benefits than they are willing to risk a loss of financial data privacy for financial benefits. We conduct related experiments to better understand people’s motivations for willingness to share their genetic data and undertake the risk of doing so. The results of these experiments suggest that individuals are primarily motivated by private benefits, whether they are health or monetary and little to none by altruism and trust. 

False Consensus Bias: A Mechanism Design Approach

Work-in-progress. Draft available on request. 

This paper explores the mechanism behind the false-consensus bias, which states that people overestimate the commonness of their own responses. The reason individuals hold this bias is because they develop incorrect beliefs about the distribution of types, rather than the mode-average of types. In particular, individuals incorrectly believe the distribution to be skewed towards them. That is, they think that every point on the distribution is closer to them than it really is. The first part of the paper develops a theoretical model that explains this idea. The second part of the paper provides empirical evidence for this mechanism through a laboratory experiment. In the experiment, subjects first play a dictator game and then guess the distribution of choices made by others. The hypothesis, that distribution-skewing is what drives the false-consensus bias, will be confirmed if subjects predict the distribution to be systematically skewed towards themselves relative to the true distribution.

Behavioral Effects of a Minimum Wage Law

Work-in-progress. Draft available on request. 

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What happens to the wage of informal sector workers when a minimum wage is implemented in the formal sector? I answer this question by using a difference-in-differences model to analyze data from Pakistan, which has a sizable informal sector (contributing to about 20% of the country’s GDP). My data set, which is called the Labor Force Survey of Pakistan, contains country-wide, household-level variables for multiple years before and after the introduction of the first minimum wage law. My main result is that minimum wage increases positively impact informal sector wages even though the law is not enforced in the informal sector. This result is consistent with the hypothesis that informal sector employers are motivated by a concern for social reputation. In addition, I find that the impact on informal sector wages is greater in poorer regions of the country, where the minimum wage law has a greater ‘bite’.