Fangfang Tan

This study experimentally examines the effect of electoral delegation on providing global public goods shared by several groups. Each group elects one delegate who can freely decide on each group member's contribution to the global public goods. Our results show that people mostly vote for delegates who assign equal contributions for every group member. However, in contrast to standard theoretical predictions for our delegation mechanism, unequal contributions across groups drive cooperation… Show more

This study experimentally examines the effect of electoral delegation on providing global public goods shared by several groups. Each group elects one delegate who can freely decide on each group member's contribution to the global public goods. Our results show that people mostly vote for delegates who assign equal contributions for every group member. However, in contrast to standard theoretical predictions for our delegation mechanism, unequal contributions across groups drive cooperation down over time, and it decreases efficiency by almost 50% compared to the selfish benchmark. This pattern is not driven by delegates trying to exploit their fellow group members, as indicated by theory. It is driven by conditional cooperation of delegates across groups. Since one of the potential sources of the resulting inefficiency is the polycentric nature of global public goods provision together with other-regarding preferences, we use the term P-inefficiency to describe our finding. Show less

This essay aims at sharing some of my thoughts transitioning from academia to industry. Concretely, it summarizes some common types of roles economists are currently taking at tech companies, outlines some mindset challenges during the transition and suggestions to overcome them.

We study the impact of progress feedback on players'​ performance in multi-battle team contests, in which team members'​ efforts are not directly substitutable. In particular, we employ a real-effort laboratory experiment to understand, in a best-of-three-contest setting, how players'​ strategic mindsets change when they compete on a team compared to when they compete individually. Our data corroborate the theoretical predictions for teams: Neither a lead nor a lag in the first component… Show more

We study the impact of progress feedback on players'​ performance in multi-battle team contests, in which team members'​ efforts are not directly substitutable. In particular, we employ a real-effort laboratory experiment to understand, in a best-of-three-contest setting, how players'​ strategic mindsets change when they compete on a team compared to when they compete individually. Our data corroborate the theoretical predictions for teams: Neither a lead nor a lag in the first component contest affects a team's performance in the subsequent contests. In individual tournaments, however, contrary to the theoretical prediction, we observe that leaders perform worse - but laggards perform better - after learning the outcome of the first battle. Our findings offer the first empirical evidence from a controlled laboratory on the impact of progress feedback between team and individual contests, and contribute new insight on team incentives. Show less

Most existing e-commerce recommender systems aim to recommend the right products to a consumer, assuming the properties of each product are fixed. However, some properties, including price discount, can be personalized to respond to each consumer's preference. This paper studies how to automatically set the price discount when recommending a product, in light of the fact that the price will often alter a consumer's purchase decision. The key to optimizing the discount is to predict consumer's… Show more

Most existing e-commerce recommender systems aim to recommend the right products to a consumer, assuming the properties of each product are fixed. However, some properties, including price discount, can be personalized to respond to each consumer's preference. This paper studies how to automatically set the price discount when recommending a product, in light of the fact that the price will often alter a consumer's purchase decision. The key to optimizing the discount is to predict consumer's willingness-to-pay (WTP), namely, the highest price a consumer is willing to pay for a product. Purchase data used by traditional e-commerce recommender systems provide points below or above the decision boundary. In this paper we collected training data to better predict the decision boundary. We implement a new e-commerce mechanism adapted from laboratory lottery and auction experiments that elicit a rational customer's exact WTP for a small subset of products, and use a machine learning algorithm to predict the customer's WTP for other products. The mechanism is implemented on our own e-commerce website that leverages Amazon's data and subjects recruited via Mechanical Turk. The experimental results suggest that this approach can help predict WTP, and boost consumer satisfaction as well as seller profit. Show less

Punishment can lose its legitimacy if the enforcer can profit from delivering punishment. We examine how justification can promote the legitimacy of punishment in a one-shot sender–receiver game where an independent third party can punish the sender upon seeing whether the sender lied. Most third parties who can profit from punishment punish the senders regardless of how the senders behave. However, when they have to provide explanations for their punishment decisions, significantly more third… Show more

Punishment can lose its legitimacy if the enforcer can profit from delivering punishment. We examine how justification can promote the legitimacy of punishment in a one-shot sender–receiver game where an independent third party can punish the sender upon seeing whether the sender lied. Most third parties who can profit from punishment punish the senders regardless of how the senders behave. However, when they have to provide explanations for their punishment decisions, significantly more third parties punish the sender if and only if the sender lies, and senders are also more likely to perceive punishment as legitimate and behave honestly. Show less

This paper adds to the economic-psychological research on tax compliance by experimentally testing a simple auditing rule that induces strategic uncertainty among taxpayers. Under this rule, termed the bounded rule, taxpayers are informed of the maximum number of audits by a tax authority, so that the audit probability depends on the joint decisions among the taxpayers. We compare the bounded rule to the widely studied flat-rate rule, where taxpayers are informed that they will be audited with… Show more

This paper adds to the economic-psychological research on tax compliance by experimentally testing a simple auditing rule that induces strategic uncertainty among taxpayers. Under this rule, termed the bounded rule, taxpayers are informed of the maximum number of audits by a tax authority, so that the audit probability depends on the joint decisions among the taxpayers. We compare the bounded rule to the widely studied flat-rate rule, where taxpayers are informed that they will be audited with a constant probability. The experimental evidence shows that, as theoretically predicted, the bounded rule induces the same level of compliance as the flat-rate rule when strategic uncertainty is low, and a higher level of compliance when strategic uncertainty is high. The bounded rule also induces distinctive tax evasion dynamics compared to the flat-rate rule. The results suggest that increasing the level of strategic uncertainty among taxpayers could be an effective device to deter tax evasion.
► We examine a bounded rule inducing strategy uncertainty among taxpayers.
► We experimentally compare the bounded rule with a flat-rate audit rule.
► Under the bounded rule, participants are informed of the maximum audit number.
► The bounded rule deters cheaters more effectively when strategic uncertainty is high.
► The evasion dynamics of the bounded rule differs from that of the flat-rate rule. Show less

Previous experimental results on one-shot sequential two-player games show that group decisions are closer to the subgame-perfect Nash equilibrium than individual decisions. We extend the analysis of intergroup versus interindividual decision-making by running both one-shot and repeated sessions of a simple two-player sequential market game (Stackelberg duopoly). Whereas in one-shot markets we find no significant differences in the behavior of groups and individuals, in repeated markets we find… Show more

Previous experimental results on one-shot sequential two-player games show that group decisions are closer to the subgame-perfect Nash equilibrium than individual decisions. We extend the analysis of intergroup versus interindividual decision-making by running both one-shot and repeated sessions of a simple two-player sequential market game (Stackelberg duopoly). Whereas in one-shot markets we find no significant differences in the behavior of groups and individuals, in repeated markets we find that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. To a large extent, this result is independent of the method of eliciting choices (sequential or strategy method), the matching protocol (random- or fixed-matching), and the econometric method used to account for observed first- and second-mover behavior. We discuss various possible explanations for the differential effect that the time horizon of interaction has on the extent of individual and group playersʼ (non)conformity with subgame perfectness. Show less

In a prisoner’s dilemma experiment, compared with the case when the implicated parties are allowed to punish each other, both the cooperation rate and the earnings are lower when the enforcement of punishment requires approval from an independent third party.
► Sanction requests often need approvals from an independent third party.
► Cooperation rate and average earnings are lower when a third party can veto sanctions.
► The intervention of independent third parties reduces the… Show more

In a prisoner’s dilemma experiment, compared with the case when the implicated parties are allowed to punish each other, both the cooperation rate and the earnings are lower when the enforcement of punishment requires approval from an independent third party.
► Sanction requests often need approvals from an independent third party.
► Cooperation rate and average earnings are lower when a third party can veto sanctions.
► The intervention of independent third parties reduces the severity of punishment. Show less

We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The… Show more

We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The punishment system can condition on type and contribution history. The results indicate that the most effective regime, in terms of contributions and earnings, is one that allows punishment of low contributors only, regardless of productivity. Nevertheless, only a minority of sessions converge to this system, indicating a tendency for the voting process to lead to suboptimal institutional choice. Show less

Although it is widely recognized that sanction increases cooperation in a public good game, comparatively little attention has been paid to a scenario in which agents have heterogeneous productivities (i.e. asymmetric impact on the group account). This paper examines the extent to which sanction works in this scenario by varying marginal per capita return (MPCR) among group members. Experimental results indicate that in the absence of sanctions, productivity heterogeneity hampers cooperation… Show more

Although it is widely recognized that sanction increases cooperation in a public good game, comparatively little attention has been paid to a scenario in which agents have heterogeneous productivities (i.e. asymmetric impact on the group account). This paper examines the extent to which sanction works in this scenario by varying marginal per capita return (MPCR) among group members. Experimental results indicate that in the absence of sanctions, productivity heterogeneity hampers cooperation. Allowing punishment in these groups significantly enhances average contributions of group members, but does not increase welfare. In groups in which cooperation is highly successful, high-productivity agents actively punish low-productivity agents in initial periods. However, conditional on individual contributions, high-productivity agents receive more punishment, and behave more responsively by raising their contributions in the next period. The results mirror the reality in which elites in a society are under higher pressure, since their choices are likely to have a deeper impact on a society. Show less