Armin Falk

Armin Falk

Professor of Economics

Contact

Stefanie Sauter

+49 228 38 94 701

about

Armin Falk is Professor of Economics at the University of Bonn and Chief Executive Officer of briq. His main fields are behavioral, experimental and labor economics. Falk’s research focuses on determinants and consequences of time, risk and social preferences, sources of inequality, early childhood development, and the malleability of moral behavior. He has received two ERC grants and was awarded the Gossen Prize in 2008, the Leibniz Prize in 2009, as well as the Yrjö Jahnsson Award in 2011. As organizer or keynote speaker, he has been involved in numerous conferences and summer schools. He is Fellow of the European Economic Association, Director of the Bonn Laboratory for Experimental Economics, and affiliated with Hausdorff Center for Mathematics, Institute for New Economic Thinking, Institute of Labor Economics (IZA), German Institute for Economic Research (DIW), Centre for Economic Policy (CEPR), CESifo, and the Max Planck Institute for Research on Collective Goods.

working papers

By downplaying externalities, magnifying the cost of moral behavior, or suggesting not being pivotal, exculpatory narratives can allow individuals to maintain a positive image when in fact acting in a morally questionable way. Conversely, responsibilizing narratives can help sustain better social norms. We investigate when narratives emerge from a principal or the actor himself, how they are interpreted and transmitted by others, and when they spread virally. We then turn to how narratives compete with imperatives (general moral rules or precepts) as alternative modes of communication to persuade agents to behave in desirable ways.

We investigate how much of a person'’s deep moral preferences can be retrieved from observing their choices, for instance via experiments, and in particular how one should interpret behaviors that appear deontologically rather than consequentially motivated. Comparing the performance of the direct elicitation (DE) and multiple-price list or Becker-DeGroot-Marschak (BDM) mechanisms, we characterize in each case how (social or self) image motives infl‡ate the extent to which agents behave prosocially –e.g., refuse “bribes ”for causing harm. More surprisingly, the signaling bias is shown to depend on the elicitation method, both per se and interacted with the level of visibility: it is greater under DE for low enough reputation concerns, and greater under BDM when they become high enough. We also provide conditions ensuring a single crossing. We further show that, even when all agents are consequentialists, certain Kantian behaviors and postures easily emerge under BDM (but not DE) when reputation becomes important enough, with both high and low-morality agents turning down all prices within the offered range.

A large literature has used choice experiments involving time-dated monetary rewards, to test whether time discounting is exponential or hyperbolic, with mixed results. One explanation, proposed by the psychologist Daniel Read (2001), is that the observed choice patterns reflect a type of framing effect, known as sub-additivity, rather than hyperbolic or exponential discounting. An alternative explanation, however, has emerged from a recent literature in economics, which points out various confounds that might affect the traditional intertemporal choice experiment, as well as challenges of inference from typically small or idiosyncratic samples. This paper makes two main contributions: (1) It re-visits the sub-additivity hypothesis, but using a design that addresses the key methodological confounds; (2) it uses large representative samples, to assess the pervasiveness and importance of anomalous choice patterns like sub-additivity. The analysis finds intertemporal choices that are consistent with sub-additivity, and rules out explanations based on confounds. Furthermore, subadditivity is pervasive, being observed across all sub-populations studied in the analysis, and constituting the majority choice pattern at the individual level. The results underline that sub-additivity is an important feature of intertemporal choice, they raise caveats about how intertemporal choice experimens have often been interpreted, and they suggest some directions for methodological improvements.

This paper studies the causal effect of status differences on moral disengagement and violence. To measure violent behavior, in the experiment, a subject can inflict a painful electric shock on another subject in return for money. We exogenously vary relative status in the realm of sexual attractiveness. In three between-subject conditions, the assigned other subject is either of higher, lower or equal status. The incidence of electric shocks is substantially higher among subjects matched with higher- and lower-status others, relative to subjects matched with equal-status others. This causal evidence on the role of status inequality on violence suggests an important societal cost of economic and social inequalities.

The concern for a positive self-image is a central assumption in a large class of signaling models. In this paper, we exogenously vary self-image concerns by manipulating self-directed attention and study the impact on moral behavior. The choice context in the experiment is whether subjects inflict a painful electric shock on another subject to receive a monetary reward. In the main treatment, subjects see their own face on the decision screen in a real-time video feed. In three control conditions, subjects see either no video at all or a neutral video, or they see themselves in a mirror. We find that the exogenous increase in self-image
concerns significantly reduces the fraction of subjects inflicting pain. The finding emphasizes the importance of self-awareness for moral decision making with implications for theory as well as practical applications to promote socially desirable outcomes.

This study provides insights on the role of early childhood family environment within the process of preference formation. We start by presenting evidence showing that breastfeeding duration is a valid measure of the quality of early childhood environment. In the main analysis, we then investigate how early childhood environment affects the formation of fundamental economic preferences such as time, risk, and social preferences. In a sample of preschool children we find that longer breastfeeding duration is associated with higher levels of patience and altruism as well as lower willingness to take risk. Repeating the analysis on a sample of young adults indicates that the observed pattern is replicable and persists into adulthood. Importantly, in both data sets our findings are robust, when controlling for cognitive ability and parental socio-economic status. We can further rule out that the results are purely driven by nutritional effects of breastfeeding. Altogether, our findings strongly suggest that early childhood environment as measured by breatsfeeding duration systematically and persistently affects preference formation.

Beliefs are a central determinant of behavior. Recent models assume that beliefs about or the anticipation of future consumption have direct utility-consequences. This gives rise to informational preferences, i.e., preferences over the timing and structure of information. Using a novel and purposefully simple set-up, we experimentally analyze preferences for information along four dimensions. We find evidence that the majority of subjects prefers receiving information sooner. This preference, however, is not uniform but depends on context. When the environment allows subjects to not focus attention on (negative) consumption events, later information becomes more attractive. We also identify an aversion towards piecemeal information. Variations in prior distributions do not seem to affect information preferences.

We study how the diffusion of being pivotal affects immoral outcomes. In our main experiment, subjects decide about agreeing to kill mice and receiving money versus objecting to kill mice and foregoing the monetary amount. In a baseline condition, subjects decide individually about the life of one mouse. In the main treatment, subjects are organized into groups of eight and decide simultaneously. Eight mice are killed if at least one subject opts for killing. The fraction of subjects agreeing to kill is significantly higher in the main condition compared with the baseline condition. In a second experiment, we run the same baseline and main conditions but use a charity context and additionally study sequential decision making. We replicate our finding from the mouse paradigm. We further show that the observed effects increase with experience, i.e., when we repeat the experiment for a second time. For both experiments, we elicit beliefs about being pivotal, which we validate in a treatment with non-involved observers. We show that beliefs are a main driver of our results.

The behavioral relevance of non-binding defaults is well established. While most research has focused on decision makers’ responses to a given default, we argue that this individual decision making perspective is incomplete. Instead, a comprehensive understanding of default effects requires to take account of the strategic interaction between default setters and decision makers. We analyze theoretically and empirically which defaults emerge in such interactions, and under which conditions defaults are behaviorally most relevant. Our analysis demonstrates that the alignment of interests between default setters and decision makers, as well as their relative level of information are key drivers of default effects. In particular, default effects are more pronounced if the interests of the default setter and decision makers are more closely aligned. Moreover, decision makers are more likely to follow default options the less they are privately informed about the relevant decision environment.

This paper presents an experimentally validated survey module to measure six key economic preferences – risk aversion, discounting, trust, altruism, positive and negative reciprocity – in a reliable, parsimonious and cost-effective way. The survey instruments included in the module were the best predictors of preferences revealed in incentivized choice experiments. We also offer a streamlined version of the module that has been optimized and piloted for applications where time efficiency and simplicity are paramount, such as international telephone surveys.

This paper studies the role of heterogeneity in time preference for comparative development. The empirical analysis is based on a simple OLG model in which patience drives the accumulation of physical capital, human capital, productivity improvements, and hence income. Based on a globally representative dataset on patience in 76 countries,we study the implications of themodel through a combination of reduced-form estimations and simulations. In the data, patience is strongly correlated with income levels, income growth, and the accumulation of physical capital, human capital, and productivity. These relationships hold across countries, subnational regions, and individuals. In the reduced-form analyses, the quantitative magnitude of the relationship between patience and income strongly increases in the level of aggregation. A simple parameterized version of the model generates comparable aggregation effects as a result of production complementarities and equilibrium effects, and illustrates that variation in preference endowments can account for a considerable part of the observed variation in per capita income.

Using novel globally representative preference data, this paper shows that the structure and timing of the migratory movements of our very early ancestors have left a footprint in the contemporary cross-country distributions of risk, time, and social preferences. Across a wide range of regression specifications, differences in preferences between populations are significantly increasing in the length of time elapsed since the respective groups shared common ancestors, as proxied by genetic, linguistic, and predicted migratory distance data. The results are strongest for risk aversion and the prosocial traits altruism, positive reciprocity, and trust; similar, but weaker, findings hold for patience and negative reciprocity. These patterns point to the very long-run roots of the global variation in preferences and associated economic behaviors.

publications

This paper explores inequalities in IQ and economic preferences between children from high and low socio-economic status (SES) families. We document that children from high SES families are more intelligent, patient and altruistic, as well as less risk-seeking. To understand the underlying causes and mechanisms, we propose a framework of how parental investments as well as maternal IQ and economic preferences influence a child’s IQ and preferences. Within this framework, we allow SES to influence both the level of parental time and parenting style investments, as well as the productivity of the investment process. Our results indicate that disparities in the level of parental investments hold substantial importance for SES gaps in economic preferences and, to a lesser extent, IQ. In light of the importance of IQ and preferences for behaviors and outcomes, our findings offer an explanation for social immobility.

The equal division of goods is a long-existing social norm present in societies around the world. In order to ensure that the egalitarian norm is followed, people engage in costly enforcement of norm-violating behavior. Despite its importance, little is known about the emergence of this enforcement and how it develops over time. Therefore, we take the most commonly-used third-party punishment game where a third party is added to a dictator game, adapt it for children and run an experiment with 9–18 year-old children and adolescents. We show that already at 9–10 years of age, a small but non-negligible proportion of subjects are costly enforcing the egalitarian norm. We find that this behavior then strongly develops in the following years: The proportion of egalitarian norm enforcers increases, becoming the most common behavioral type with 11–12 years of age, and the punishers’ behavior fully develops until 13–14 years of age. Following those developmental changes, the enforcing behavior remains stable until adulthood. We find that some norm enforcers do not only punish selfish, but also generous deviations from the egalitarian norm. Looking at the dictators’ behavior, we observe that they increase their transfer in the direction of the egalitarian norm primarily in the same period as we observe developmental changes on the punishers’ side.

Preferences concerning time, risk, and social interactions systematically shape human behavior and contribute to differential economic and social outcomes between women and men. We present a global investigation of gender differences in six fundamental preferences. Our data consist of measures of willingness to take risks, patience, altruism, positive and negative reciprocity, and trust for 80,000 individuals in 76 representative country samples. Gender differences in preferences were positively related to economic development and gender equality. This finding suggests that greater availability of and gender-equal access to material and social resources favor the manifestation of gender-differentiated preferences across countries.

This study presents descriptive and causal evidence on the role of social environment for the formation of prosociality. In a frst step, we show that socio-economic status (SES) as well as the intensity of mother-child interaction and mothers' prosocial attitudes are systematically related to elementary school children's prosocialty. In a second step, we present evidence on a randomly-assigned variation of the social environment, providing children with a mentor for the duration of one year. Our data include a two-year follow-up and reveal a significant and persistent increase in prosociality in the treatment relative to the control group. Moreover, enriching the social environment bears the potential to close the observed gap in prosociality between low and high SES children. A mediation analysis of the observed treatment effect suggests that prosociality develops in response to stimuli in the form of prosocial role models and intense social interactions.

Beliefs are often found to be sticky and rather immune to new information. In this paper we highlight a specific mechanism that raises resistance to incorporate new information. We provide results from a lab study in the context of an estimation task where subjects need to provide an estimate about an objective state of the world. In this context we provide causal evidence that commitment to a first opinion leads to a neglect of new and challenging information. Investigating the sources of this effect, we show that our findings are well explained by an internal desire to act consistently. We also present a simple model that formalizes how a desire for consistency can produce our pattern of findings.

We conduct a large-scale field experiment in the German labor market to investigate how information provision affects job seekers’ employment prospects and labor market outcomes. Individuals assigned to the treatment group of our experiment received a brochure that informed them about job search strategies and the consequences of unemployment, and motivated them to actively look for new employment. We study the causal impact of the brochure by comparing labor market outcomes of treated and untreated job seekers in administrative data containing comprehensive information on individuals’ employment status and earnings. While our treatment yields overall positive effects, these tend to be concentrated among job seekers who are at risk of being unemployed for an extended period of time. Specifically, the treatment effects in our overall sample are moderately positive but mostly insignificant. At the same time, we do observe pronounced and statistically significant effects for individuals who exhibit an increased risk of long-term unemployment. For this group, the brochure increases employment and earnings in the year after the intervention by roughly 4%. Given the low cost of the intervention, our findings indicate that targeted information provision can be a highly effective policy tool in the labor market.

We study how defaults affect charitable donations. In a field experiment that was conducted on a large online platform for charitable giving, we exogenously vary the default options in the donation form in two distinct choice dimensions. The first pertains to the primary donation decision, namely, how much to contribute to the charitable cause. The second relates to a “codonation” decision of how much to contribute to supporting the online platform itself. We find a strong impact of defaults on individual behavior: in each of our treatments, the modal positive contributions in both choice dimensions invariably correspond to the specified default amounts. Defaults, nevertheless, have no significant effects on average donation levels. This is because defaults in the donation domain induce some people to donate more and others to donate less. In contrast, higher defaults in the secondary choice dimension unambiguously induce higher average contributions to the online platform. We complement our experimental results by setting up and estimating a structural model that explores whether personalizing defaults based on individuals’ donation histories can help the online platform to increase donation revenues.

Many decisions of individuals are a combination of internal preferences and mental processes related to cognitive ability. As Frederick (2005) argued in this journal, “there is no good reason for ignoring the possibility that general intelligence or various more specific cognitive abilities are important causal determinants of decision making.” Since then, a number of empirical studies have focused on the relationship between cognitive ability and decision making in different contexts. This paper will focus on the relationship between cognitive ability and decision making under risk and uncertainty. Taken as a whole, this research indicates that cognitive ability is associated with risktaking behavior in various contexts and life domains, including incentivized choices between lotteries in controlled environments, behavior in non‐experimental settings, and self‐reported tendency to take risks.

teaching

Experimental Economics

Behavioral Labor Economics

Neuroeconomics

Empirical Measurement of Preferences

Theory of the Firm and the Labor Market

Microeconomics and Game Theory

Management and Economics