Research

Should policymakers intervene to reduce social segregation? The answer depends on the effect of increased contact among those who would not seek it out on their own. We conduct a field experiment in the context of political segregation in Brazil to measure the joint distribution of aversion to cross-partisan interactions and the treatment effects of actual interactions on outgroup hostility. To do so, we randomize participants into interactions offering incentives of twice the daily minimum wage for compliance. We find evidence of a segregation trap: the most hostile partisans avoid interactions because they incorrectly believe they will be unpleasant and unproductive. Actual interactions correct these beliefs and lead to large, long-lasting reductions in hostility. Importantly, these effects are largest among partisans with high levels of baseline hostility and aversion to outgroup interactions, and lead to an increase in demand for future interactions. In a cost-benefit analysis, we find that current policy interventions targeting volunteer participants are outperformed by incentive-based interventions at any level of budget. Finally, we show that a lower-cost intervention that substitutes a video for actual interactions can produce similarly beneficial effects.

Optimal behavior often requires planning future actions when choosing what to do today. We propose that individuals’ ability or willingness to plan ahead is limited, leading to systematic decision errors. In an online experiment, participants face sequential consumption–savings problems with two periods, or equivalent one-period versions with identical information, available actions, and payment timing. Participants are 18 p.p. less likely to spend optimally in the two-period decision problem and, on average, overspend early on. In treatments where subjects actively search for information, we show that timing shapes attention: in one-quarter of sequential problems, participants ignore future actions entirely, behaving like there is no tomorrow, and even those who look ahead prioritize information about the present.

We study exploding offers by considering the strategic interaction between a low-tier firm and a set of workers within a large job market. Each worker has a private value for the firm and may receive offers from preferred top-tier firms according to an exogenous stochastic process. We show that workers receive exploding offers whenever their probability of receiving a top-tier offer is relatively small with respect to their risk aversion, and that there is a level of risk aversion beyond which a worker only receives offers that expire as soon as possible---independently of what all other firms are doing. In markets in which exploding offers are prevalent and workers' and the firm's preferences satisfy a weak form of positive correlation, workers' expected welfare is maximized if and only if exploding offers are banned. Furthermore, any minimal offer length that does not ban exploding offers may lead to workers falling through the cracks. All results are robust to a range of sequentially-rational strategies for the workers. Our predictions match existing evidence and have implications for policies regulating exploding offers.

Expectations are a critical factor in determining actions in a great variety of economic interactions. Hence, being able to measure beliefs is important in many economic environments. In this article, we review the approaches that have been used to measure beliefs and make comparisons of their effectiveness. We also discuss belief elicitation when the truth is not verifiable. We find that introspection (non-incentivized responses) seems to do as well as rather complex incentivized methods. We conjecture that simple and easy-to-comprehend incentivized methods are superior to introspection, in fact there are very few studies making such comparisons; this is an avenue for future research. We also discuss ways in which relatively complex methods could be made easier for usage in experimental work.