Armin Falk

Professor of Economics

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Armin Falk

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.

contact

Stefanie Sauter
Senior Organizational Manager
stefanie.sauter@briq-institute.org

working papers

Cao, Y., Enke, B., Falk, A., Giuliano, P., Nunn, N. Herding Warfare, and a Culture of Honor: Global Evidence.
Nadler, A., Wibral, M., Dohmen, T., Falk, A., Previtero, A., Weber, B., Camerer, C., Dreber, A., Nave, G. Does Testosterone Increase Willingness to Compete, Confidence, and Risk-taking in Men? Evidence from Two Randomized Placebo-Controlled Experiments.
Andre, P., Falk, A. What’s worth knowing? Economists’ opinions about economics..
We document individual willingness to fight climate change and its behavioral determinants in a large representative sample of US adults. Willingness to fight climate change – as measured through an incentivized donation decision – is highly heterogeneous across the population. Individual beliefs about social norms, economic preferences such as patience and altruism, as well as universal moral values positively predict climate preferences. Moreover, we document systematic misperceptions of prevalent social norms. Respondents vastly underestimate the prevalence of climate-friendly behaviors and norms among their fellow citizens. Providing respondents with correct information causally raises individual willingness to fight climate change as well as individual support for climate policies. The effects are strongest for individuals who are skeptical about the existence and threat of global warming.
Reporting private information is a key part of economic decision making. A recent literature has found that many people have a preference for honest reporting, contrary to usual economic assumptions. In this paper, we investigate whether preferences for honesty are malleable and what determines them. We experimentally measure preferences for honesty in a sample of children. As our main result, we provide causal evidence on the effect of the social environment by randomly enrolling children in a year-long mentoring programme. We find that, about four years after the end of the programme, mentored children are significantly more honest.
Standard consumption utility is linked in time to a consumption event, whereas the timing of prosocial utility flows is ambiguous. Prosocial utility may depend on the actual utility consequences for others – it is consequence-dated – or it may be related to the act of giving and is thus choice-dated. Even though most prosocial decisions involve intertemporal trade-offs, existing models of other-regarding preferences abstract from the time signature of utility flows, limiting their explanatory scope. Building on a canonical intertemporal choice framework, we characterize the behavioral implications of the time structure of prosocial utility. We conduct a high-stakes donation experiment that allows us to identify non-parametrically and calibrate structurally the different motives from their unique time profiles. We find that the universe of our choice data can only be explained by a combination of choice- and consequence-dated prosocial utility. Both motives are pervasive and negatively correlated at the individual level.
We study response behavior in surveys and show how the explanatory power of self-reports can be improved. First, we develop a choice model of survey response behavior under the assumption that the respondent has imperfect self-knowledge about her individual characteristics. In panel data, the model predicts that the variance in responses for different characteristics increases in self-knowledge and that the variance for a given characteristic over time is non-monotonic in self-knowledge. Importantly, the ratio of these variances identifies an individual’s level of self-knowledge, i.e., the latter can be inferred from observed response patterns. Second, we develop a consistent and unbiased estimator for self-knowledge based on the model. Third, we run an experiment to test the model’s main predictions in a context where the researcher knows the true underlying characteristics. The data confirm the model’s predictions as well as the estimator’s validity. Finally, we turn to a large panel data set, estimate individual levels of self-knowledge, and show that accounting for differences in self-knowledge significantly increases the explanatory power of estimates. Using a median split in self-knowledge and regressing risky behaviors on self-reported risk attitudes, we find that the R2can be multiple times larger for above- than below-median subjects. Similarly, gender gaps in risk attitudes are considerably larger when restricting samples to subjects with high self-knowledge. These examples illustrate how using the estimator may improve inference from survey data.
Inequality of opportunity strikes when two children with the same academic performance are sent to different quality schools because their parents differ in socio-economic status. Based on a novel dataset for Germany, we demonstrate that children are significantly less likely to enter the academic track if they come from low socio-economic status (SES) families, even after conditioning on prior measures of school performance. We then provide causal evidence that a low-intensity mentoring program can improve long-run education outcomes of low SES children and reduce inequality of opportunity. Low SES children, who were randomly assigned to a mentor for one year are 20 percent more likely to enter a high track program. The mentoring relationship affects both parents and children and has positive long-term implications for children’s educational trajectories.
This study presents descriptive and causal evidence on the role of the social environment in shaping the accuracy of self-assessment. We introduce a novel incentivized measurement tool to measure the accuracy of self-assessment among children and use this tool to show that children from high socioeconomic status (SES) families are more accurate in their self-assessment, compared to children from low SES families. To move beyond correlational evidence, we then exploit the exogenous variation of participation in a mentoring program designed to enrich the social environment of children. We document that the mentoring program has a causal positive effect on the accuracy of children’s self-assessment. Finally, we show that the mentoring program is most effective for children whose parents provide few social and interactive activities for their children.
Why does patience vary across individuals and countries? We provide evidence on a widely-hypothesized mechanism, namely that higher longevity fosters patience. Using data on patience for 80,000 individuals in 76 countries, this paper relates exogenous variation in longevity across gender-age-country cells to variation in patience. We find that a ten-year increase in life expectancy implies a 5-percentage point higher discount factor. This relationship emerges for various sub-samples and is unaffected by other determinants including lifetime experiences regarding economic development, institutional quality, or violence. We provide a model to discuss the implications for the emergence of poverty traps.
We study the production and circulation of arguments justifying actions on the basis of morality. By downplaying externalities, exculpatory narratives allow people to maintain a positive image while acting selfishly. Conversely, responsibilizing narratives raise both direct and reputational stakes, fostering prosocial behavior. These rationales diffuse along a linear network, through both costly signaling and strategic disclosure. The norms that emerge reflect local correlation in agents’ incentives (reputation versus influence concerns), with low mixing generating both a polarization of beliefs across groups and less moral behavior on average. Imperatives (general precepts) constitute an alternative mode of moral influence. We analyze their costs and benefits relative to those of narratives, and when the two will be used as substitutes or complements.
We examine to what extent a personís moral preferences can be inferred from observing their choices, for instance via experiments, and in particular, how one should interpret certain behaviors that appear deontologically motivated. Comparing the performance of the direct elicitation (DE) and multiple-price list (MPL) mechanisms, we characterize in each case how (social or self) image motives ináate the extent to which agents behave prosocially. More surprisingly, this 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 reputation concerns, and greater under MPL when they become high enough. We then test the modelís predictions in an experiment in which nearly 700 subjects choose between money for themselves and implementing a 350€ donation that will, in expectation, save one human life. Interacting the elicitation method with the decision's level of visibility and salience, we find the key crossing effect predicted by the model. We also show theoretically that certain "Kantian" postures, turning down all prices inthe offered range, easily emerge under MPL when reputation becomes important enough.
Falk, A., Szech, N. Competing Image Concerns: Pleasures of Skill and Moral Values..
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.
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.
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.
Permanent working papers, which are not subject to further editing, can be found at the following link.
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publications

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 relationship between patience and comparative development through a combination of reduced-form analyses and model estimations. Based on a globally representative dataset on time preference in 76 countries, we document two sets of stylized facts. First, patience is strongly correlated with per capita income and the accumulation of physical capital, human capital and productivity. These correlations hold across countries, subnational regions, and individuals. Second, the magnitude of the patience elasticity strongly increases in the level of aggregation. To provide an interpretive lens for these patterns, we analyze an OLG model in which savings and education decisions are endogenous to patience, aggregate production ischaracterized by capital-skill complementarities, and productivity implicitly depends on patience through a human capital externality. In our model estimations, general equilibrium effects alone account for a non-trivial share of the observed amplification effects, yet meaningful externalities are needed to quantitatively match the empirical evidence.
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 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.
Bašić, Z., Falk, A., & Kosse, F. (2020). The development of egalitarian norm enforcement in childhood and adolescence. Journal of Economic Behavior and Organization, 179, 667-680.
Habersaat, K., Betsch, C., Danchin, M., Sunstein, C., Böhm, R., Falk, A., Brewer, N. T., Omer, S. B., Scherzer, M., Sah, S., Fischer, E. F., Scheel, A. E., Fancourt, D., Kitayama, S., Dubé, E., Leask, J., Dutta, M., MacDonald, N. E., Temkina, A., Lieberoth, A., Jackson, M., Lewandowsky, S., Seale, H., Fietje, N., Schmid, P., Gelfand, M., Korn, L., Eitze, S., Felgendreff, L., Sprengholz, P., Salvi, C., & Butler, R. (2020). Ten considerations for effectively managing the COVID-19 transition. Nature Human Behaviour, 4, 677-687.
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.
Governments around the world increasingly acknowledge the role of happiness as a societal objective and implement policies that target national wellbeing levels. Knowledge about the determinants of happiness, however, is still limited. A longstanding candidate is prosocial behavior. Our study empirically investigates the causal effect of prosocial behavior on happiness in a high-stakes decision experiment. While we confirm previous findings of a positive effect in the short term, our findings distinctly show that this effect is short lived and even reverses after some time. This study documents that prosocial behavior does not unequivocally increase happiness because prosocial spending naturally requires giving up something else, which may decrease happiness in its own right.Does prosocial behavior promote happiness? We test this longstanding hypothesis in a behavioral experiment that extends the scope of previous research. In our Saving a Life paradigm, every participant either saved one human life in expectation by triggering a targeted donation of 350 euros or received an amount of 100 euros. Using a choice paradigm between two binary lotteries with different chances of saving a life, we observed subjects intentions at the same time as creating random variation in prosocial outcomes. We repeatedly measured happiness at various delays. Our data weakly replicate the positive effect identified in previous research but only for the very short run. One month later, the sign of the effect reversed, and prosocial behavior led to significantly lower happiness than obtaining the money. Notably, even those subjects who chose prosocially were ultimately happier if they ended up getting the money for themselves. Our findings revealed a more nuanced causal relationship than previously suggested, providing an explanation for the apparent absence of universal prosocial behavior.
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.
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.
Falk, A., Pinger, P., & Kosse, F. (2020). Re-Revisiting the marshmallow test: A direct comparison of studies by Shoda, Mischel, and Peake (1990) and Watts, Duncan, and Quan (2018). Psychological Science, 31(1), 100-104.
Altmann, S., Falk, A., Heidhues, P., Jayaraman, R., & Teirlinck, M. (2019). Defaults and donations: Evidence from a field experiment. The Review of Economics and Statistics, 101(5), 808-826.
Falk, A., Becker, A., Dohmen, T., Enke, B., Huffman, D., & Sunde, U. (2018). Global evidence on economic preferences. The Quarterly Journal of Economics, 133(4), 1645-1692.
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.
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.
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.
This paper investigates physiological responses to perceptions of unfair pay.We use an integrated approach that exploits complementarities between controlled laboratory and representative panel data. In a simple principal–agent experiment, agents produce revenue by working on a tedious task. Principals decide how this revenue is allocated between themselves and their agents. Throughout the experiment we record agents’ heart rate variability, which is an indicator of stress-related impaired cardiac autonomic control and which has been shown to predict coronary heart disease in the long run. Our findings establish a link between unfair payment and heart rate variability. Building on these findings, we further test for potential adverse health effects of unfair pay using observational data from a large representative panel data set. Complementary to our experimental findings we show a strong and significant negative association between unfair pay and health outcomes, in particular cardiovascular health.
Dohmen, T., Falk, A., Golsteyn, B., Huffman, D., & Sunde, U. (2017). Risk attitudes across the life course. The Economic Journal, 127(605), F95-F116.
In this paper we examine individuals’ attitudes toward the timing of information. We test a theoretical prediction that people prefer to get information “clumped together” rather than piecewise. We conduct a controlled lab experiment where subjects participate in a lottery and can choose between different resolutions of uncertainty (clumped or piecewise) and analyze which kind of resolution is preferred. Two additional treatments allow us to get a quantitative measure of subjects’ preferences over different information structures. Our data provide little support for a systematic aversion to piecewise information on the aggregate level. In additional treatment conditions, we demonstrate the robustness of our findings and explore potential explanations.
Deckers, T., Falk, A., & Schildberg-Hörisch, H. (2016). Nominal or real? The impact of regional price levels on satisfaction with life. The B.E. Journal of Economic Analysis & Policy, 16(3), 1337-1358.
Falk, A., & Szech, N. (2015). Institutions and morals: A reply. European Journal of Political Economy, 40(B), 391-394.
Lindner, M., Rudorf, S., Birg, R., Falk, A., Weber, B., & Fliessbach, K. (2015). Neural patterns underlying social comparisons of personal performance. Social Cognitive and Affective Neuroscience, 10(4), 569-576.
Our decisions often have consequences for other people. Hence, self-interest and other-regarding motives are traded off in many daily-life situations. Interindividually, people differ in their tendency to behave prosocial. These differences are captured by the concept of social value orientation (SVO), which assumes stable, trait-like tendencies to act selfish or prosocial. This study investigates group differences in prosocial decision making and addresses the question of whether prosocial individuals act intuitively and selfish individuals instead need to control egoistic impulses to behave prosocially. We address this question via the interpretation of neuronal and behavioral indicators. In the present fMRI-study participants were grouped into prosocial- and selfish participants. They made decisions in multiple modified Dictator-Games (DG) that addressed self- and other-regarding motives to a varying extent (self gain, non-costly social gain, mutual gain, costly social gain). Selfish participants reacted faster than prosocial participants in all conditions, except for decisions in the non-costly social condition, in which selfish participants displayed the longest decision times. In the total sample we found enhanced neural activity in the ventromedial prefrontal cortex (vmPFC) and dorsomedial prefrontal cortex (dmPFC/BA 9) during decisions that resulted in non-costly social benefits. These areas have been implicated in cognitive control processes and deliberative value integration. Decisively, these effects were stronger in the group of selfish individuals. We believe that selfish individuals require more explicit and deliberative processing during prosocial decisions. Our results are compatible with the assumption that prosocial decisions in prosocials are more intuitive, whereas they demand more active reflection in selfish individuals.
Falk, A., Huffman, D., & MacLeod, W. B. (2015). Institutions and contract enforcement. Journal of Labor Economics, 33(3), 571-590.
Apart from everyday duties, such as doing the laundry or cleaning the house, there are tasks we do for pleasure and enjoyment. We do such tasks, like solving crossword puzzles or reading novels, without any external pressure or force; instead, we are intrinsically motivated: we do the tasks because we enjoy doing them. Previous studies suggest that external rewards, i.e., rewards from the outside, affect the intrinsic motivation to engage in a task: while performance-based monetary rewards are perceived as controlling and induce a business-contract framing, verbal rewards praising one's competence can enhance the perceived self-determination. Accordingly, the former have been shown to decrease intrinsic motivation, whereas the latter have been shown to increase intrinsic motivation. The present study investigated the neural processes underlying the effects of monetary and verbal rewards on intrinsic motivation in a group of 64 subjects applying functional magnetic resonance imaging (fMRI). We found that, when participants received positive performance feedback, activation in the anterior striatum and midbrain was affected by the nature of the reward; compared to a non-rewarded control group, activation was higher while monetary rewards were administered. However, we did not find a decrease in activation after reward withdrawal. In contrast, we found an increase in activation for verbal rewards: after verbal rewards had been withdrawn, participants showed a higher activation in the aforementioned brain areas when they received success compared to failure feedback. We further found that, while participants worked on the task, activation in the lateral prefrontal cortex was enhanced after the verbal rewards were administered and withdrawn.
Abeler, J., Becker, A., & Falk, A. (2014). Representative evidence on lying costs. Journal of Public Economics, 113, 96-104.
Lallement, J. H., Kuss, K., Trautner, P., Weber, B., Falk, A., & Fliessbach, K. (2014). Effort increases sensitivity to reward and loss magnitude in the human brain. Social Cognitive and Affective Neuroscience, 9(3), 342-349.
Interpersonal conflicts are a common element of many social relationships. One possible process in rebuilding social relationships is the act of apologizing. Behavioral studies have shown that apologies promote forgiveness. However, the neural bases of receiving an apology and forgiveness are still unknown. Hence, the aim of the present fMRI study was to investigate brain processes involved in receiving an apology and active forgiveness of an ambiguous offense. We asked one group of participants (player A) to make decisions, which were either positive or negative for another group of participants (player B). The intention of player A was ambiguous to player B. In case of a negative impact, participants in the role of player A could send an apology message to participants in the role of player B. Subsequently players B were asked whether they wanted to forgive player A for making a decision with negative consequences. We found that receiving an apology yielded activation in the left inferior frontal gyrus, the left middle temporal gyrus, and left angular gyrus. In line with previous research we found that forgiving judgments activated the right angular gyrus.
Altmann, S., Falk, A., Grunewald, A., & Huffman, D. (2014). Contractual incompleteness, unemployment, and labor market segmentation. The Review of Economic Studies, 81(1), 30-56.
This study investigates how induced relative status affects satisfaction with different relative payoffs. We find that participants with lower status are more satisfied with disadvantageous payoff inequalities than equal or higher status participants. In contrast, when receiving an advantageous payoff, status does not affect satisfaction. Our findings suggest that relative social status has important implications for the acceptance of income inequalities.
Falk, A., & Szech, N. (2013). The systematic place of morals in markets—Response. Science, 341(6147), 714.
Vischer, T., Dohmen, T., Falk, A., Huffman, D., Schupp, J., Sunde, U., & Wagner, G. G. (2013). Validating an ultra-short survey measure of patience. Economics Letters, 120(2), 142-145.
Falk, A., Meier, S., & Zehnder, C. (2013). Do lab experiments misrepresent social preferences? The case of self‐selected student samples. Journal of the European Economic Association, 11(4), 839-852.
Falk, A., & Szech, N. (2013). Morals and markets. Science, 340(6133), 707-711.
Falk, A., & Zehnder, C. (2013). A city-wide experiment on trust discrimination. Journal of Public Economics, 100, 15-27.
Falk, A., & Zimmermann, F. (2013). A taste for consistency and survey response behavior. CESifo Economic Studies, 59(1), 181-193.
Kuss, K., Falk, A., Trautner, P., Elger, C. E., Weber, B., & Fliessbach, K. (2013). A reward prediction error for charitable donations reveals outcome orientation of donators. Social Cognitive and Affective Neuroscience, 8(2), 216-223.
Intertemporal choices between a smaller sooner and a larger delayed reward are one of the most important types of decisions humans face in their everyday life. The degree to which individuals discount delayed rewards correlates with impulsiveness. Steep delay discounting has been associated with negative outcomes over a wide range of behaviors such as addiction. However, little is known about the biological foundations of delay discounting. Here, we examine a potential causal link between delay discounting and testosterone, a hormone which has been associated with other types of impulsive behavior. In our double-blind placebo-controlled study 91 healthy young men either received a topical gel containing 50 mg of testosterone (N = 46) or a placebo (N = 45) before participating in a delay discounting task with real incentives. Our main finding is that a single dose administration of testosterone did not lead to significant differences in discount rates between the placebo and the testosterone group. Within groups and in the pooled sample, no significant relationship between testosterone and discount rates was observed. At the same time, we do replicate standard findings from the delay discounting literature such as a magnitude-of-rewards effect on discount rates. In sum, our findings suggest that circulating testosterone does not have a significant effect on delay discounting in young men.
Falk, A., Fischbacher, U., & Gächter, S. (2013). Living in two neighborhoods—Social interaction effects in the laboratory. Economic Inquiry, 51(1), 563-578.
Lying is a pervasive phenomenon with important social and economic implications. However, despite substantial interest in the prevalence and determinants of lying, little is known about its biological foundations. Here we study a potential hormonal influence, focusing on the steroid hormone testosterone, which has been shown to play an important role in social behavior. In a double-blind placebo-controlled study, 91 healthy men (24.32±2.73 years) received a transdermal administration of 50 mg of testosterone (n = 46) or a placebo (n = 45). Subsequently, subjects participated in a simple task, in which their payoff depended on the self-reported outcome of a die-roll. Subjects could increase their payoff by lying without fear of being caught. Our results show that testosterone administration substantially decreases lying in men. Self-serving lying occurred in both groups, however, reported payoffs were significantly lower in the testosterone group (p<0.01). Our results contribute to the recent debate on the effect of testosterone on prosocial behavior and its underlying channels.
Falk, A., & Kosfeld, M. (2012). It’s all about connections: Evidence on network formation. Review of Network Economics, 11(3).
Becker, A., Deckers, T., Dohmen, T., Falk, A., & Kosse, F. (2012). The relationship between economic preferences and psychological personality measures. Annual Review of Economics, 4, 453-478.
Brown, M., Falk, A., & Fehr, E. (2012). Competition and relational contracts: The role of unemployment as a disciplinary device. Journal of the European Economic Association, 10(4), 887-907.
Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2012). The intergenerational transmission of risk and trust attitudes. The Review of Economic Studies, 79(2), 645-677.
In this paper we study neural responses to inequitable distributions of rewards despite equal performance. We specifically focus on differences between advantageous inequity (AI) and disadvantageous inequity (DI). AI and DI were realized in a hyperscanning functional magnetic resonance imaging (fMRI) experiment with pairs of subjects simultaneously performing a task in adjacent scanners and observing both subjects' rewards. Results showed (1) hypoactivation of the ventral striatum (VS) under DI but not under AI; (2) inequity induced activation of the right dorsolateral prefrontal cortex (DLPFC) that was stronger under DI than under AI; (3) correlations between subjective evaluations of AI evaluation and bilateral ventrolateral prefrontal and left insular activity. Our study provides neurophysiological evidence for different cognitive processes that occur when exposed to DI and AI, respectively. One possible interpretation is that any form of inequity represents a norm violation, but that important differences between AI and DI emerge from an asymmetric involvement of status concerns.
Altmann, S., Falk, A., & Wibral, M. (2012). Promotions and incentives: The case of multistage elimination tournaments. Journal of Labor Economics, 30(1), 149-174.
Dohmen, T., Falk, A., Huffman, D., Sunde, U., Schupp, J., & Wagner, G. G. (2011). Individual risk attitudes: Measurement, determinants, and behavioral consequences. Journal of the European Economic Association, 9(3), 522-550.
Falk, A., Kuhn, A., & Zweimüller, J. (2011). Unemployment and right‐wing extremist crime. The Scandinavian Journal of Economics, 113(2), 260-285.
A key open question for theories of reference-dependent preferences is: what determines the reference point? One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based, reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low.
This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament, or a revenue-sharing scheme. We find that output is higher in the variable-payment schemes compared to the fixed-payment scheme. This difference is largely driven by productivity sorting. In addition, different incentive schemes systematically attract individuals with different attitudes, such as willingness to take risks and relative self-assessment as well as gender, which underlines the importance of multidimensional sorting.
Dohmen, T., Falk, A., Fliessbach, K., Sunde, U., & Weber, B. (2011). Relative versus absolute income, joy of winning, and gender: Brain imaging evidence. Journal of Public Economics, 95(3-4), 279-285.
Purpose – This paper aims to present the IZA Evaluation Dataset, a newly created data source allowing for the evaluation of active labor market policies in Germany.
Design/methodology/approach – The paper’s approach is a description of the sampling and contents of the IZA Evaluation Dataset and an outline of its research potential.
Findings – The evaluation of active labor market policies is often confronted with a lack of adequate empirical data. The IZA Evaluation Dataset may serve as a role model for the provision of such data.
Research limitations/implications – The scope of active labor market policy instruments that can be analyzed with the IZA Evaluation Dataset is mainly restricted to measures for unemployed individuals.
Originality/value – In recent years, many countries have opened their administrative databases for evaluation studies. However, information that might be relevant for economic modeling is often absent. The IZA Evaluation Dataset aims to overcome such limitations for Germany by complementing administrative data from the Federal Employment Agency with innovative survey data.
Dohmen, T., & Falk, A. (2010). You get what you pay for: Incentives and selection in the education system. The Economic Journal, 120(546), F256-F271.
Jaeger, D. A., Dohmen, T., Falk, A., Huffman, D., Sunde, U., & Bonin, H. (2010). Direct evidence on risk attitudes and migration. The Review of Economics and Statistics, 92(3), 684-689.
This paper investigates whether there is a link between cognitive ability, risk aversion, and impatience, using a representative sample of roughly 1,000 German adults. Subjects participate in choice experiments with monetary incentives measuring risk aversion, and impatience over an annual horizon, and conduct two different, widely used, tests of cognitive ability. We find that lower cognitive ability is associated with greater risk aversion, and more pronounced impatience. These relationships are significant, and robust to controlling for personal characteristics, education, income, and measures of credit constraints. We perform a series of additional robustness checks, which help rule out other possible confounds.
Collecting biomarkers as part of general purpose surveys offers scientists – and social scientists in particular – the ability to study biosocial phenomena, e.g. the relation between genes and human behavior. We explore the feasibility of collecting buccal cells for genetic analyses with normal interviewers as part of a pretest for the German Socio-economic Panel Study (SOEP) using a probability sample. We introduce a new non-invasive technique for collecting cell material for genetic analyses and test its quality. We found no technical diculties in collecting the genetic material and almost all samples collected could be analyzed. However, one third of interviewers reported it was hard to convince panel members to participate. The “biomarker wave” showed no reduction in response rate compared to the previous wave that included no biomarkers and the sample exhibited very little selectivity. We conclude that collecting cell material for genetic analyses with normal interviewers is feasible with no apparent same-wave attrition, though so far we cannot rule out attrition in subsequent waves.
Dohmen, T., Falk, A., Huffman, D., Marklein, F., & Sunde, U. (2009). Biased probability judgment: Evidence of incidence and relationship to economic outcomes from a representative sample. Journal of Economic Behavior & Organization, 72(3), 903-915.
Falk, A., & Heckman, J. J. (2009). Lab experiments are a major source of knowledge in the social sciences. Science, 326(5952), 535-538.
Behavioral economists have proposed that money illusion, which is a deviation from rationality in which individuals engage in nominal evaluation, can explain a wide range of important economic and social phenomena. This proposition stands in sharp contrast to the standard economic assumption of rationality that requires individuals to judge the value of money only on the basis of the bundle of goods that it can buy—its real value—and not on the basis of the actual amount of currency—its nominal value. We used fMRI to investigate whether the brain's reward circuitry exhibits money illusion. Subjects received prizes in 2 different experimental conditions that were identical in real economic terms, but differed in nominal terms. Thus, in the absence of money illusion there should be no differences in activation in reward-related brain areas. In contrast, we found that areas of the ventromedial prefrontal cortex (vmPFC), which have been previously associated with the processing of anticipatory and experienced rewards, and the valuation of goods, exhibited money illusion. We also found that the amount of money illusion exhibited by the vmPFC was correlated with the amount of money illusion exhibited in the evaluation of economic transactions.
Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2009). Homo reciprocans: Survey evidence on behavioural outcomes. The Economic Journal, 119(536), 592-612.
Falk, A., & Gächter, S. (2008). Experimental labor economics. The New Palgrave Dictionary of Economics, Second Edition.
Falk, A., Fehr, E., & Fischbacher, U. (2008). Testing theories of fairness—Intentions matter. Games and Economic Behavior, 62(1), 287-303.
Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2008). Representative trust and reciprocity: Prevalence and determinants. Economic Inquiry, 46(1), 84-90.
Bonin, H., Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2007). Cross-sectional earnings risk and occupational sorting: The role of risk attitudes. Labour Economics, 14(6), 926-937.
Fliessbach, K., Weber, B., Trautner, P., Dohmen, T., Sunde, U., Elger, C. E., & Falk, A. (2007). Social comparison affects reward-related brain activity in the human ventral striatum. Science, 318(5854), 1305-1308.
Falk, A. (2007). Gift exchange in the field. Econometrica, 75(5), 1501-1511.
Falk, A., & Huffman, D. (2007). Studying labor market institutions in the lab: Minimum wages, employment protection, and workfare. Journal of Institutional and Theoretical Economics JITE, 163(1), 30-45.
Falk, A., Fehr, E., & Zehnder, C. (2006). Fairness perceptions and reservation wages: The behavioral effects of minimum wage laws. The Quarterly Journal of Economics, 121(4), 1347-1381.
This article presents a discussion among leading economists on how to do empirical research in economics. The participants discuss their reasons for starting research projects, data base construction, the methods they use, the role of theory, and their views on the main alternative empirical approaches. The article ends with a discussion of a set of articles which exemplify best practice in empirical work.
We analyze the consequences of control on motivation in an experimental principalagent game, where the principal can control the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our results show that control entails hidden costs since most agents reduce their performance as a response to the principal’s controlling decision. Overall, the effect of control on the principal’s payoff is nonmonotonic. When asked for their emotional perception of control, most agents who react negatively say that they perceive the controlling decision as a signal of distrust and a limitation of their choice autonomy.
Falk, A., & Ichino, A. (2006). Clean evidence on peer effects. Journal of Labor Economics, 24(1), 39-57.
Falk, A., Lalive, R., & Zweimüller, J. (2005). The success of job applications: A new approach to program evaluation. Labour Economics, 12(6), 739-748.
Falk, A., Fehr, E., & Fischbacher, U. (2005). Driving forces behind informal sanctions. Econometrica, 73(6), 2017-2030.
Falk, A., & Knell, M. (2004). Choosing the Joneses: Endogenous goals and reference standards. The Scandinavian Journal of Economics, 106(3), 417-435.
Brown, M., Falk, A., & Fehr, E. (2004). Relational contracts and the nature of market interactions. Econometrica, 72(3), 747-780.
Falk, A., & Fehr, E. (2003). Why labour market experiments?. Labour Economics, 10(4), 399-406.
Falk, A., Fehr, E., & Fischbacher, U. (2003). Reasons for conflict: Lessons from bargaining experiments. Journal of Institutional and Theoretical Economics JITE, 159(1), 171-187.
Falk, A., Fehr, E., & Fischbacher, U. (2003). On the nature of fair behavior. Economic Inquiry, 41(1), 20-26.
Falk, A., & Fischbacher, U. (2002). “Crime” in the lab-detecting social interaction. European Economic Review, 46(4-5), 859-869.
Fehr, E., & Falk, A. (2002). Psychological foundations of incentives. European Economic Review, 46(4-5), 687-724.
Gächter, S., & Falk, A. (2002). Reputation and reciprocity: Consequences for the labour relation. The Scandinavian Journal of Economics, 104(1), 1-26.
Falk, A., & Fischbacher, U. (2001). Distributional consequences and intentions in a model of reciprocity. Annales d'Economie et de Statistique 63-64, 63/64, 111-129.
Falk, A., Gächter, S., & Kovács, J. (1999). Intrinsic motivation and extrinsic incentives in a repeated game with incomplete contracts. Journal of Economic Psychology, 20(3), 251-284.
Fehr, E., & Falk, A. (1999). Wage rigidity in a competitive incomplete contract market. Journal of Political Economy, 107(1), 106-134.
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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
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dissertation advisees

  • Zvonimir Basic (2018)
    First position: MPI, Bonn
  • Thomas Graeber (2018)
    First position: Harvard University
  • Jana Willrodt (2018)
    First position: DICE, Düsseldorf
  • Anke Becker (2016)
    First position: Harvard University
  • Benjamin Enke (2016)
    First position: Harvard University
  • Frederick Schwerter (2016)
    First position: University of Cologne
  • Fabian Kosse (2015)
    First position: University of Bonn
  • Florian Zimmermann (2013)
    First position: UHZ University of Zurich
  • Johannes Abeler (2008)
    First position: University of Nottingham
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