The standard procedure in experimental economics maintains anonymity among laboratory participants. Yet, many field interactions are conducted with neither complete anonymity nor complete familiarity. When we are involved in interactive situations in the field, we usually have some clues concerning the characteristics of others; however, in environments such as e-commerce, these clues may not be very substantial. The issue of trust and behavior in virtual business is quite relevant in the contemporary economy. How will people respond to varying degrees of anonymity and social distance? This paper compares the standard procedure of playing dictator and ultimatum games with the same games played by participants who knew the family name of their counterparts. When these names were revealed, dictators allocated a significantly larger portion of the pie. However, this information had no significant effect on the offers in the ultimatum game, as it appears that strategic considerations crowd out impulses toward generosity or charity. Our results also have direct applications to fund-raising andphilanthropic activities.

In this dissertation, I present several economic research papers. In my first paper, I test novel strategies for using incentives to reduce misbehavior, as well as test the role of social norms in determining the efficacy of audits. In my second paper, I examine preferences for and responses to redistributionary taxation in a real-effort laboratory experiment. In my third paper, I examine the characteristics and experiences of medical students which predict whether they enter primary care specialties. In my fourth paper I test the influence of exogenous testosterone on the tendency to cheat in a laboratory experiment. In my fifth paper I review and contrast various methodologies for measuring effort in economics experiments.

We study the following basic intuition: when faced with a decision how to split their investment between a risky lottery and an asset with a fixed return, people increase the proportion invested in the risky option the more they like the lottery. We find counter-examples to this, and in fact we find no simple relation between preferences between lotteries and the fraction invested in them. We use three well-documented biases (ambiguity aversion, the illusion of control and myopic loss aversion) to show this. First we replicate the previous results in a laboratory experiment with financial incentives, and then test whether participants are willing to explicitly pay a small sum of money in line with the bias (pay for less ambiguity, more perceived control, or more frequent information about portfolio performance). We then study how portfolio choice depends on these biases.

With the parameters chosen, the illusion of control was eliminated when participants were asked to pay to gain more control, and the bias did not affect investment behavior (i.e., participants invested in a risky option the same fraction when faced with more or less control). In the ambiguity treatment, people were willing to pay for less ambiguity, but again the level of ambiguity did not influence investment. Finally, in the myopic loss aversion treatment participants were willing to pay money to have more freedom to choose, even though (in line with the documented bias) they invested less when having more freedom to change their investment.

Are men more willing to take financial risks than women? The answer to this question has immediate relevance for many economic issues. We propose a novel approach in which we assemble the data from 10 sets of experiments with one simple underlying investment game. Most of these experiments were not designed to investigate gender differences and were conducted by different researchers in different countries, with different instructions, durations, payments, subject pools, etc. The fact that all data come from the same basic investment game allows us to test the robustness of the findings. We find a very consistent result that women invest less, and thus appear to be more financially risk averse than men.

Can incentives be effective when trying to encourage the development of good habits? We investigate the effect of paying people a non-trivial amount of money to attend an exercise facility a number of times during a one-month period. In two separate studies, we find that doing so leads to a large and significant increase in the average post-intervention attendance level relative to the control group. This result is entirely driven by the impact on people who did not previously attend the gym on a regular basis, as the average attendance rates for people who had already been using the gym regularly are either unchanged or diminished. In our second study, we also obtain biometric evidence that this intervention improves important health indicators such as weight, waist size, and pulse rate. Thus, even though personal incentives to exercise are already in place, it appears that providing financial incentive to attend the gym regularly for a month serves as a catalyst to get some people past the threshold of actually getting started with an exercise regimen. We argue that there is scope for financial intervention in habit formation, particularly in the area of health.

My dissertation examines the behavioral factors that affect the emergence of unethical behaviors and inequalities in today’s society. Using insights from behavioral economics and experimental methods, I investigate the drivers of phenomena such as corruption, dishonesty, ethnic-discrimination, and gender-based differences in preferences.

Chapter 1 explores the mechanism through which receiving bribes leads evaluators to distort choices. In both a laboratory experiment in the US and an experiment in a market in India, evaluators receive bribes that distort their quality recommendations. We show that the driver of distortion is greed and not reciprocity.

Chapter 2 examines how self-deception affects judgment distortion in the presence of incentives. We show that when evaluators can convince themselves that they are behaving ethically, they are more likely to distort their judgment. When self- deception is not possible, recommendations are more honest. This shows that in some cases people are able to behave unethically without suffering from feelings of guilt or shame, by convincing themselves that they are ethical.

Chapter 3 explores individuals’ unwillingness to provide negative feedback to others, which results in a “must lie situation”. By asking experimental subjects to evaluate others’ attractiveness, we show that individuals prefer to lie rather than tell an undesirable truth, even if lying comes at a monetary cost to both the person who gives the feedback and the person who receives it.

Chapter 4 studies prejudice-based ethnic discrimination, and shows that individuals are more likely to discriminate against others when discrimination can be disguised. We show that individuals do not discriminate in contexts where discrimination cannot be plausibly justified. However, discrimination emerges in contexts in which discriminatory behavior can be attributed to conformity to social or moral norms.

Chapter 5 explores gender differences in preferences for competitiveness, which have been suggested to partly account for the relative lack of success of women in many sectors of the labor market. We introduce a novel measure that captures the extent of competitiveness. We find that the gender gap in competitiveness is larger than what had been documented before, with strikingly lower ratios of women at the top of the competitiveness distribution.