Welcome to the Frankfurt Laboratory for Experimental Economic Research
The Frankfurt Laboratory for Experimental Economic Research (FLEX) is a research center at the Faculty of Economics and Business Administration at Goethe University Frankfurt. It was founded in 2008 and is located on Campus Westend. FLEX also maintains a field office in Addis Ababa, Ethiopia. FLEX has been financially supported by a starting grant from the Alfons und Gertrud Kassel-Stiftung.
FLEX takes up a long tradition in experimental economics at Goethe University starting with the pioneering work of Nobel laureate Reinhard Selten and Heinz Sauermann in the late 1950s. Further contributors who worked in Frankfurt include Reinhard Tietz and Werner Güth.
Researchers at FLEX study human behavior and decision making in social and economic contexts employing experimental methods. We conduct experiments in the laboratory, via the Internet, and in the field. The purpose of experiments is manifold and ranges from testing economic theories, to the elicitation of preferences as well as policy and impact evaluations. Current research conducted at FLEX covers different areas including behavioral economics, development economics, organizational and personnel economics, and finance.
Luc-Alain Giraldeau, Philipp Heeb, Michael Kosfeld (Editors)
Strüngmann Forum Reports, Vol. 21, Julia Lupp, Series Editor
MIT Press, 2017
In the natural world, some agents (investors) employ strategies that provide resources, services, or information, while others (exploiters) gain advantages through these efforts. This behavior coexists and can be observed in many species and at many levels. For example, bacteria depend on the existence of biofilms to synthesize constituent proteins; cancerous cells employ angiogenesis to feed a tumor; and parents forgo vaccinating their children yet benefit from herd immunity. Two independent research traditions have developed to analyze this behavior—one couched in evolutionary theory championed by behavioral ecologists, the other in social science concepts advocated by economists. In this book experts from economics, evolutionary biology, behavioral ecology, public health, and anthropology look for commonalities in understanding and approach.
Guido Friebel, Matthias Heinz, Miriam Krueger, Nikolay Zubanov
The American Economic Review forthcoming
In a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus. The bonus increases both sales and number of customers dealt with by 3 percent. Each dollar spent on the bonus generates $3.80 in sales, and $2.10 in profit. Wages increase by 2.2 percent while inequality rises only moderately. The analysis suggests effort complementarities to be important, and the effectiveness of peer pressure in overcoming free-riding to be limited. After rolling out the bonus, treatment and control shops’ performance converge, suggesting long-term stability of the treatment effect.
Randolph Sloof, Ferdinand A. von Siemens
Experimental Economics forthcoming
We measure participants’ willingness to pay for transparently useless authority—the right to make a completely uninformed task decision. We further elicit participants’ beliefs about receiving their preferred outcome if they make the decision themselves, and if another participant makes the decision for them. We find that participants pay more to make the decision themselves if they also believe that they can thus increase the probability of getting their preferred outcome. Illusion of control therefore exists in a controlled laboratory environment with monetary incentives and is connected to peoples’ pursuit of authority.
Sascha Baghestanian, Paul Gortner, Baptiste Massenot
Experimental Economics forthcoming
In an experimental setting in which investors can entrust their money to traders, we investigate how compensation schemes affect liquidity provision and asset prices, two outcomes that are important for financial stability. Compensation schemes can drive a wedge between how investors and traders value the asset. Limited liability makes traders value the asset more than investors. To limit losses, investors should thus restrict liquidity provision to force traders to trade at a lower price. By contrast, bonus caps make traders value the asset less than investors. This should encourage liquidity provision and increase prices. In contrast to these predictions, we find that under limited liability investors increase liquidity provision and asset price bubbles are larger. Bonus caps have no clear effect on liquidity provision and they fail to tame bubbles. Overall, giving traders skin in the game fosters financial stability.
Heiner Schumacher, Iris Kesternich, Michael Kosfeld, Joachim Winter
Review of Economic Studies 84, 2017, 1346-1377
We experimentally analyze distributional preferences when a decider chooses the provision of a good that benefits herself or a receiver, and creates costs for a group of payers. The treatment variation is the number of payers. We observe that subjects provide the good even if there are many payers so that the costs of provision exceed the benefits by far. This result holds regardless of whether the provision increases the decider’s payoff or not. Intriguingly, it is not only selfish or maximin types who provide the good. Rather, we show that a substantial fraction of subjects are “insensitive to group size”: they reveal to care about the payoff of all parties, but attach the same weight to small and large groups so that they ignore large provision costs that are dispersed among many payers. Our results have important consequences for the approval of policies with concentrated benefits and large, dispersed cost, as well as the analysis of ethical behavior, medical decision making, and charity donations.
Michael Kosfeld, Susanne Neckermann, Xiaolan Yang
Economic Inquiry 55, 2017, 237-247
We manipulate workers’ perceived meaning of a job in a field experiment and interact meaning of work with both financial and recognition incentives. Results show that workers exert more effort when meaning is high. Money has a positive effect on performance that is independent of meaning. In contrast, meaning and recognition interact negatively. Our results provide new insights into the stability of incentive effects across important work contexts. They also suggest that meaning and worker recognition may operate via the same motivational channel.
Mark Bernard, Florian Hett, Mario Mechtel
European Economic Review 90, 2016, 4-17
We model individual identification choice as a strategic group formation problem. When choosing a social group to identify with, individuals appreciate high social status and a group stereotype to which they have a small social distance. A group׳s social status and stereotype are shaped by the (exogenous) individual attributes of its members and hence endogenous to individuals׳ choices. Unless disutility from social distance is strong enough, this creates a strategic tension as individuals with attributes that contribute little to group status would like to join high-status groups, thereby diluting the latters’ status and changing stereotypes. Such social free-riding motivates the use of soft exclusion technologies in high-status groups, which provides a unifying rationale for phenomena such as hazing rituals, charitable activities or status symbols that is not taste-based or follows a standard signaling mechanism.