In many countries, trust in institutions has eroded, undermining civic engagement, social cohesion, and political stability. This study analyzes the determinants of trust in government, civil servants, the judicial system, and the police, drawing on representative samples from six OECD countries (Germany, Italy, Japan, Slovenia, the United Kingdom, and the United States) between 2017 and early 2020. It employs survey data, experimental methods, and psychometric techniques to measure various dimensions of trust. The findings indicate that self-reported trust in institutions hinges primarily on perceived governance quality, encompassing both competence (responsiveness, effectiveness, and reliability) and integrity (values and ethical conduct). Specifically, perceived government reliability in the event of a natural disaster and the integrity of high-level officials emerge as the strongest predictors of self-reported trust in government, followed by satisfaction with security and education services. Although partisan affiliation also exerts some influence, its effect is comparatively modest. Overall, these results suggest that trust in institutions is amenable to policy interventions that enhance governance performance, thereby fostering higher levels of public trust through repeated, positive interactions with well-functioning public services.

This paper explores the effect of COVID-19 infection rates on individuals’ risk preferences using the Socio-Economic Panel (SOEP), a large population-wide random sample. Exploiting county-level variation in a difference-in-differences design, we find that risk preferences remain unchanged: the effect is precisely estimated at 2.1

Our study contributes to the literature on choice shifts in group decision-making by analyzing how the level of risk-taking within a group is influenced by its gender composition. In particular, we investigate experimentally whether group composition affects how preferences 'shift' when comparing individual and group choices. Consistent with hypotheses derived from previous literature, we show that male-dominated groups shift toward riskier decisions in a way that is not explained by any simple preference aggregation mechanism. We discuss potential channels for the observed pattern of choice shifts.

The formation of economic preferences in childhood and adolescence has long-term consequences for life-time outcomes. We study in an experiment with 525 teenagers how both birth order and siblings’ sex composition affect risk, time and social preferences. We find that second born children are typically less patient, less risk averse, and more trusting. However, siblings’ sex composition interacts importantly with birth order effects. Second born children are more risk taking only with same-sex siblings. For trust and trustworthiness, birth order effects are larger with mixed-sex siblings than in the single-sex case. Only for patience, siblings’ sex composition does not matter.

Financial decision making requires a sound handling of chance events. However, various studies have suggested that people are prone to illusion of control, i.e., the belief that prospects of a chancy event are better if they are involved in the randomisation process. This paper reports results from an experiment (N=420) suggesting that psychological characteristics moderate risk-taking behaviour under such circumstances. For example, we find that subjects high in sensation seeking buy more tickets of a risky lottery if they determine the winning numbers themselves and the random event lies in the future. The findings suggest that “illusion of control” effects are at least partly driven by underlying (idiosyncratic) emotions/preferences rather than an actual belief in control. Regarding applications, the results emphasise the importance of individual characteristics for the behaviour of decision makers in a financial context.

Evidence for ingroup bias is extensive, yet the distinct patterns of discrimination among dominant ethnic groups in the diverse societies of modern industrial nations such as the United States and Germany remain largely unexplored. Incentivized trust games in nationally-representative samples from both countries reveal biases of roughly equal size by non-Hispanic White Americans, Hispanic Americans, and African Americans against each outgroup. In Germany, the majority demonstrates twice as much bias against Turkish minorities compared to Eastern Europeans. Interestingly, both minority groups send similar amounts to ethnic Germans and members of their own groups. We examine the notion that outgroup discrimination by majority group members stems from stereotypes of minorities as economically unsuccessful, employing trust games with high-income counterparts. We find that majority senders’ bias against minority receivers declines when receivers are known to have high incomes, in line with that idea. Interestingly, some minority groups, especially Turkish descendants, display a negative propensity to transfer to rich members of their ingroup in comparison with outgroup members, relative to baseline. While we focus on differences in sending by ethnic pairing, we note that all participants send less to second movers identified as high income, and discuss possible explanations. We estimate that four-fifths of the observed ingroup bias is taste-based rather than due to expected trustworthiness differences. This estimation is robust to identifying the purely altruistic component of trust game sending toward each ethnic group, including one's own.

Switching to a diet lower in red meat has the potential to reduce greenhouse gas emissions. Using a unique time series of daily sales data from three German university canteens from 2017 to 2019, we analyse the effects of a monthly Veggie Day in a food-away-from-home context. We find that the temporary ban on meat dishes did not lead to a widespread boycott – as the heated public debates might have suggested. In our setting, a Veggie Day could reduce greenhouse gas emissions by up to 66%. However, especially at the site with a higher share of meat eaters on regular days, up to 22% of customers bypassed the meat-free main dishes on Veggie Days and ate at other on-site alternatives where meat was available. However, total on-site sales did not decrease significantly. Students were less likely to switch to alternatives than staff and guests. A less stringent implementation of a Veggie Day where only beef dishes were removed from the menu, did not result in a significant shift to alternatives but could reduce emissions by up to 51%.

In a seminal contribution, Thaler and Johnson (1990) detected the existence of a house money effect which is defined as an increase in risk tolerance after previous gains resulting from a risky activity. Subsequent studies used the term house money effect also in case of windfall gains, i.e., easily acquired money like show-up fees or initial endowments in experiments which does not result from a risky investment. The present study is to the best of our knowledge the first that disentangles the house money effect and windfall gains. We find a clear and systematic pattern that windfall gains increase risk tolerance. In contrast, the house money effect is far less ubiquitous and seems to require skewed lotteries and/or a large number of rounds played. We, therefore, conclude that a careful distinction between windfall gains and the house money effect is warranted in future research.

Literature suggests that human perception and behavior vary with physical temperature. We conducted an experiment to study how different ambient temperatures impact social behavior and perception: subjects undertook a series of tasks measuring various aspects of social behavior and perception under three temperature conditions (cold vs. optimal vs. warm). Despite well-established findings on the effects of temperature, our data suggest that ambient temperature has no relevant influence on social behavior and perception. We corroborate our finding of a null effect using equivalence testing and provide a discussion considering recent failed replication attempts in this field of research and related studies on heat and violence.

State-ownership of commercial companies exists around the world, and it is important to understand its effect on financing and investment decisions. Empirically, firms that are partially state-owned (SOE) usually profit from easier access to capital. We propose a novel explanation for this: investors’ social preferences can affect capital allocation if SOEs are perceived as socially beneficial. In support of this we found that people attribute social benefits more to SOEs than to private firms, and their propensity to invest depends on this attitude. Further, in an incentivized modified stochastic public goods game, participants invested in risky options with positive externalities even when the aggregate of private return and externality was lower than the return of an investment option with only private returns. For the case of the EU, we discuss alternative explanations such as state guarantees and political lending in the light of regulations of state aid. We conclude that even if these regulations prohibit direct or indirect state aid for SOEs, state-ownership can affect capital allocation through investors’ social preferences.

The literature reports a tendency that future losses are discounted less than future gains, the so-called sign effect in intertemporal decision making. In this article, we study implications of the sign effect on risk taking: If future losses are discounted less than future gains, mixed lotteries involving both gains and losses should become less attractive when payments are delayed into the future. We refer to this phenomenon as Hyperopic Loss Aversion and provide experimental evidence for it: First, we provide a robust conceptual replication of the sign effect where we find non-positive discount rates for losses. Second, we confirm our hypothesis that mixed lotteries become less attractive over time. This effect can be attributed to Hyperopic Loss Aversion in our design, as a delay does not change the valuation of either pure gain and pure loss lotteries. Finally, we apply the notion of Hyperopic Loss Aversion to investment decisions and show that it offers a novel behavioral explanation for the equity premium puzzle. While our empirical analyses are entirely model-free, we also introduce a theoretical basis to analyze Hyperopic Loss Aversion. Our model, termed Discounted Prospect Theory, can be regarded as a natural extension of Prospect Theory to the intertemporal domain.

In a temporal context, sure outcomes may yield higher utility than risky ones as they are available for the execution of plans before the resolution of uncertainty. By observing a disproportionate preference for certainty, empirical research points to a fundamental difference between riskless and risky utility. Chance Theory (CT) accounts for this difference and, in contrast to earlier approaches to separate risky and riskless utility, does not violate basic rationality principles like first-order stochastic dominance or transitivity. CT evaluates the lowest outcome of an act with the riskless utility v and the increments over that outcome, called chances, by subjective expected utility (EU) with a risky utility u . As a consequence of treating sure outcomes differently to risky ones, CT is able to explain the EU-paradoxes of Allais ( Econometrica, 21 (4): 503–546, 1953) that rely on the certainty effect, and also the critique to EU put forward by Rabin ( Econometrica, 68 (5): 1281–1292, 2000). Moreover, CT separates risk attitudes in the strong sense, captured entirely by u , from attitude towards wealth reflected solely through the curvature of v .

Social norms, also called social comparison nudges, have been shown to be particularly effective in promoting healthy food choices and environmentally friendly behaviors. However, there is limited evidence on the effectiveness of these nudges for promoting sustainable and climate-friendly food choices and their potential to reduce greenhouse gas emissions and support the related SDGs. The paper reports a field experiment that tests the effectiveness of two social norms in a real-life setting based on revealed preferences. The study distinguishes between the widely researched descriptive norms and guessed norms, the latter being tested in this context for the first time. While descriptive norms communicate typical patterns of behavior (e.g., 50% of canteen visitors choose vegetarian meals), guessed norms are determined by the individual's best guess about the norm in a specific context. The results confirm a remarkable nudging effect of guessed norms: The higher the presumed proportion of vegetarian dishes sold, the lower the probability of choosing a vegetarian dish. Surprisingly, this effect is independent of the respective norm specification (meat or vegetarian norm). The paper provides advice for policy makers about when and how to use guessed norms.

Theoretical and empirical findings suggest that individuals are sensitive to the observability of their actions and the downstream consequences of this observability. We connect three streams of literature (social preferences, behavior change, and social norms) to investigate the conditions for which these claims are valid. Across multiple high-powered studies, we examine the mechanisms through which observability of one's actions affects pro-sociality, when and why it sometimes fails, and how to utilize social and economic incentives to enact behavior change. Our three main results are: (i) observability alone has very little positive effect and can even backfire; (ii) inequality aversion drives the observed backfiring of observability; (iii) increasing the salience of norms can mitigate unintended consequences and successfully increase pro-sociality. From a policy perspective, our results highlight the potential pitfalls of simple behavioral interventions.

Understanding the neural correlates of risk-sensitive skin conductance responses can provide insights into their connection to emotional and cognitive processes. To provide insights into this connection, we studied the cortical correlates of risk-sensitive skin conductance peaks using electroencephalography. Fluctuations in skin conductance responses were elicited while participants played a threat-of-shock card game. Precise temporal information about skin conductance peaks was obtained by applying continuous decomposition analysis on raw electrodermal signals. Shortly preceding skin conductance peaks, we observed a decrease in oscillatory power in the frequency range between 3 and 17 Hz in occipitotemporal cortical areas. Atlas-based analysis indicated the left lingual gyrus as the source of the power decrease. The oscillatory power averaged across 3-17 Hz showed a significant negative relationship with the skin conductance peak amplitude. Our findings indicate a possible interaction between attention and threat perception. NEW & NOTEWORTHY We studied neural oscillations associated with risk-sensitive skin conductance responses. Going beyond previous studies, we applied methods with high-temporal resolution to account for the temporal properties of the sympathetic activity. Preceding skin conductance peaks, we observed decreased occipital cortex oscillatory power and a relationship between the oscillatory power decrease and the skin conductance peak amplitude. Our study suggests an interaction between attention and emotion such as threat perception reflected in skin conductance responses.

Consumer reactions to firms? corporate social responsibility (CSR) communication range from favorable approval to outright skepticism toward the company. This paper contributes to the CSR literature by introducing a so-far overseen but relevant variable that helps to explain why consumer sometimes react positively and sometimes negatively to CSR communication: the ambient temperature. With a controlled 2 (CSR communication with ecological vs. economic motives) ? 3 (ambient temperature: warm vs. moderate vs. cold) between-subject laboratory experiment, the authors confirm that ambient temperature moderates consumer evaluations of CSR communications. In warmer ambient temperatures, reports of ecological (vs. economic) motives induce consumer skepticism toward the CSR communication from the firm; colder temperatures appear to have no influence, in line with prior findings suggesting that the human body has a greater tolerance for cold than heat. Our findings bear several implications for managers. If they lack knowledge about ambient temperature when placing CSR campaigns, firms may risk unexpected backfiring effects. If managers can control the ambient temperature (e.g., in retail stores), they are well-advised to be cautious when placing CSR-related advertisements in warm settings.

This study tests the prediction that perceived corruption reduces ethical behavior. Integrating a standard “cheating” experiment into a broad household survey in rural Thailand, we find clear support for this prediction: respondents who perceive corruption in state affairs are more likely to cheat and, thus, to fortify the negative consequences of corruption. Interestingly, there is a small group of non-conformers. The main relation is robust to consideration of socio-demographic, attitudinal, and situational control variables. Attendance of others at the cheating experiment, stimulating the reputational concern to be seen as honest, reduces cheating, thus indicating transparency as a remedy.

Economic theory suggests that the deterrence of deviant behavior is driven by a combination of severity and certainty of punishment. This paper presents the first controlled experiment to study a third important factor that has been mainly overlooked: the swiftness of formal sanctions. We consider two dimensions: the timing at which the uncertainty about whether one will be punished is dissolved and the timing at which the punishment is actually imposed, as well as the combination thereof. By varying these dimensions of delay systematically, we find a surprising non-monotonic relation with deterrence: either no delay (immediate resolution and immediate punishment) or maximum delay (both resolution and punishment as much as possible delayed) emerge as most effective at deterring deviant behavior and recidivism. Our results yield implications for the design of institutional policies aimed at mitigating misconduct and reducing recidivism.

We develop and implement a new measure for inequality aversion: two peers are endowed with identical binary lotteries and the only choice they make is whether they want to play out the lotteries independently or with perfect positive correlation (coupling). Coupling has the core reason to prevent outcome inequality. We implement the method in a survey in rural Thailand as well as in a supplemental sample in a lab in Germany. In line with previous literature, coupling is related to being more risk averse, to having social status concerns, and to relying more often on formal and informal insurance. However, coupling is not related to giving in the dictator game.