Persuading an audience: Testing information design in the laboratory
Governments, central banks, and private organizations frequently face the challenge of convincing their audience to take a specific action. One key choice is whether to send a public message that can coordinate the audience's actions or to rely instead on private messages that may differ across audience members and thereby miscoordinate actions. This paper uses a laboratory experiment to test whether public or private messages are more persuasive and how this depends on the audience's strategic environment. In the experiment, public signals are more persuasive than predicted by economic theory. The results match the theoretical prediction that public persuasion works best when the receivers' strategic environment features strategic complements. However, contrary to theory, public signals are equally persuasive as private ones under strategic substitutes. Senders respond to this pattern by engaging more frequently in public communication, especially when the receivers' environment features strategic complements.
Revise & resubmit at the Journal of the European Economic Association. Joint work with Giorgia Romagnoli & Theo Offerman.
We examine how the erosion of morals, norms and norm compliance in markets depend on the market power of individual traders. Previously studied markets allow traders to trade at most one unit and provide market power to individual traders by de-activating the roles of two forces: (i) the replacement logic, whereby immoral trading is justified by the belief that others would trade otherwise; (ii) market selection, by which the least moral trader determines quantities. In an experiment, we compare single-unit to (more common) multi-unit markets which may activate these forces. We find that multi-unit markets result in partial norm erosion; moreover, in contrast to single-unit markets, they lead to a full erosion of morals and norm compliance. The replacement logic is the main mechanism driving this finding.
IAREP/SABE 2021 student paper award (second place).
Why are open ascending auctions popular? The role of information aggregation and behavioral biases
In Quantitative Economics (2022). Joint work with Theo Offerman & Giorgia Romagnoli.
The popularity of open ascending auctions is often attributed to the fact that openly observable bidding allows to aggregate dispersed information. Another reason behind the frequent utilization of open auction formats may be that they activate revenue-enhancing biases. In an experiment, we compare three auctions that differ in how much information is revealed and in the potential activation of behavioral biases: (i) the ascending Vickrey auction, a closed format; and two open formats, (ii) the Japanese-English auction and (iii) the Oral Outcry auction. Even though bidders react to information conveyed in others’ bids, information aggregation fails in both open formats. In contrast, the Oral Outcry raises higher revenue than the other two formats, by stimulating bidders to submit unprofitable jump bids and triggering a quasi-endowment effect.
Publications outside economics
Improving the Affordability of Anticancer Medicines Demands Evidence-Based Policy Solutions
In Cancer Discovery (2022). Joint work with Nora Franzen, Giorgia Romagnoli, Valesca Retèl, Theo Offerman & Wim van Harten.
The high cost of many new anticancer medicines significantly impedes breakthrough discoveries from reaching patients. A commonly heard refrain is that high prices are necessary to compensate for the high costs of research and development (R&D). Yet, there are promising policy proposals aimed at improving affordability without compromising innovation. In seeking new policy solutions, we argue for a shift away from entrenched opinion toward an evidence-based discourse that is grounded in experiments and real-world pilot studies. We offer a novel perspective and practical recommendations on how empirical evidence could and should be gathered to inform evidence-based policy interventions that lead to sustainable medicine prices in oncology.
Affordable Prices Without Threatening the Oncological R&D Pipeline—An Economic Experiment on Transparency in Price Negotiations
In Cancer Research Communications (2022). Joint work with Nora Franzen, Giorgia Romagnoli, Valesca Retèl, Theo Offerman & Wim van Harten.
The high prices of innovative medicines endanger access to care worldwide. Sustainable prices need to be affordable while sufficiently incentivizing research and development (R&D) investments. A proposed solution is increased transparency. Proponents argue that price and R&D cost confidentiality are drivers of high prices. On the contrary, supporters of confidentiality claim that confidentiality enables targeted discounts which make treatments affordable; moreover, pharmaceutical companies argue that R&D investments would suffer with more transparency. Despite the political relevance, limited empirical evidence exists on the effects of transparency regulations. We contribute to fill this gap with an experiment where we replicate the EU pharmaceutical market in a laboratory setting. In a randomized controlled study, we analyzed how participants, 400 students located in four European countries, negotiated in the current system of Price Secrecy in comparison with innovative bargaining settings where either prices only (Price Transparency) or prices and R&D costs (Full Transparency) were made transparent to buyers. We found that Price transparency had no statistically significant effect on average prices or number of patients treated and made R&D investments significantly smaller (−16.86%; P: 0.0024). On the other hand, Full Transparency reduced prices (−26%; P: 0.0004) and held the number of patients constant at the level of Price Secrecy. It produced price convergence between countries with low and high health budgets, and, despite lower prices, had no effect on R&D investments. Our findings provide novel evidence that combining price and R&D cost transparency could be an effective policy to contribute to sustainable medicine prices.
Press coverage: Süddeutsche Zeitung