The present research experimentally examines the influence of group identity on trust behavior in... more The present research experimentally examines the influence of group identity on trust behavior in an investment game. In one treatment, group identity is manipulated only through the creation of artificial (minimal) groups. In other treatments group members are additionally related by outcome interdependence established in a prior public goods game. In moving from the standard investment game (where no group identity is prompted) to minimal group identity to two-dimensional group identity, we find no significant differences ...
Ethnographers have recorded many instances of tokens donated as gifts to attract new partners or ... more Ethnographers have recorded many instances of tokens donated as gifts to attract new partners or strengthen ties to existing ones. We study whether gifts are an effective pledge of the donor’s trustworthiness through an experiment modeled on the trust game. We vary whether the trustee can send a token before the trustor decides whether to transfer money; whether one of the tokens is rendered salient through experimental manipulations (a vote or an incentive-compatible rule of purchase for the tokens); and whether the subjects interact repeatedly or are randomly re-matched in each round. Tokens are frequently sent in all studies in which tokens are available, but repeated interaction, rather than gifts, is the leading behavioral driver in our data. In the studies with random pairs, trustors send significantly more points when the trustee has sent a token. Subjects in a fixed matching achieve comparable levels of trust and trustworthiness in the studies with and without tokens. The tr...
This paper experimentally investigates indirect tax evasion that requires the cooperation of an i... more This paper experimentally investigates indirect tax evasion that requires the cooperation of an intermediary. We explore the effectiveness of the introduction of a principal witness regulation as a means to facilitate tax compliance. Reactions show a significant drop in tax compliance that, surprisingly, is vastly different across gender with the effect being mainly driven by women. As a result, women decrease their tax compliance significantly reaching an even lower level than men who in turn do not react to the institutional change.
This paper investigates, from an experimental perspective, on the tax payers behaviour in a dynam... more This paper investigates, from an experimental perspective, on the tax payers behaviour in a dynamic context and more precisely tries to cope with three main topics related to tax evasion. The first aspect analysed regards the effects produced by a repetitive dynamic choice process on the subjects ’ attitude towards risk and on the ability to learn to cope with risk. The second theme treated is about the effects produced on the tax payers by the inclusion in the experimental design of psychological moral constraints. The final topic is on the effects produced by the specific experimental context chosen (the simulation of a fiscal environment compared with other simulated environments). The main results emerged from the 8 experiments carried out confirmed the importance of the psychological factors in determining the tax payers actual behaviours and shown the complex dynamic that the agents activate to cope with risk.
Handbook of Behavioural Economics and Smart Decision-Making
In this paper we defend the view that people living in traditional societies, although not fully ... more In this paper we defend the view that people living in traditional societies, although not fully rational in their behaviors, have in many cases formed institutions that decrease conflict in environments characterized by endemic warfare and intense competition for resources. We discuss the Kula of the Trobriand Island natives as a social norm that acts as a source of coordination. Key aspects of this norm are gift exchanges, indirect and delayed reciprocation, and informal monitoring and sanctioning. Two further case studies from Papua-New Guinea suggest that institutions are key in order to decrease conflict in traditional societies.
This paper extends choice theory by allowing for the interaction between cognitive costs and soci... more This paper extends choice theory by allowing for the interaction between cognitive costs and social norms. The authors experimentally investigate the role of imitation and temporal decisional patterns when participants face a task which is costly in cognitive terms. They identify two main reasons for imitative behavior. First, individuals belonging to a community might want to conform to others to obey to social norms. Second, individuals might be boundedly rational and consider imitation as a decisional device when comparing alternatives is cognitively demanding. In order to empirically disentangle the two effects, the authors present a laboratory experiment in which they model the choice of different alternatives through high or low cognitive costs and feedback information given to subjects. Their results do not provide strong evidence for imitative behavior. They find instead a temporal pattern in the distribution of choices, both in the high-cost and low-cost conditions.
We experimentally test the effect of aggressive audit strategies on tax compliance. Taxpayers fir... more We experimentally test the effect of aggressive audit strategies on tax compliance. Taxpayers first go through a phase of audits managed by a human tax agent who is requested to follow a rule imposed by a fair random device. However, the tax agent can freely decide to break the rule and over-inspect. Afterward, taxpayers are exposed to a genuinely random audit process governed by an algorithm, which makes compliance a strategically dominated option. We find that taxpayers are generally over-inspected by the human tax agents and react to this with nearly full compliance. Our main result is that these high levels of compliance also persist when controls are implemented by the algorithm. This suggests that tax authorities can use aggressive audit strategies to raise and sustain tax compliance.
Business sustainability and real options are closely connected, as real options are managerial fl... more Business sustainability and real options are closely connected, as real options are managerial flexibility that allows organizations to adapt to changes in their environment, thus making the organization more robust and economically sustainable. Studies in real options theory abound, yet there is still a lack of evidence on whether people make decisions consistently with the predictions made by real options models. We run a laboratory experiment to study the role of option value and the laboratory time required to resolve uncertainty in individuals’ decision to price and adopt an option to wait. Specifically, we compare decision makers’ choices in two investment scenarios: One with a short time to maturity (implying a low option value), and another with a longer time to maturity (implying a high option value). In the lab, both scenarios are implemented with the waiting time of twenty and sixty minutes. Our results show that decision makers deviate from the theoretical predictions, r...
We ask whether the corporate law provisions establishing that the conduct of the manager is subje... more We ask whether the corporate law provisions establishing that the conduct of the manager is subject to review by the investors (monitoring) and that managers are held to an honorable behavior (moral suasion) can increase trust and trustworthiness in organizations. We answer this question through a laboratory experiment. We find that moral suasion increases the investors' trust. Monitoring also increases trust but only when the manager is not aware of the experimental identity of the monitor. The manager returns more to those investors who trust more but appropriates around 50% of the available resources. The trustworthiness of the manager is, however, unaffected by monitoring or moral suasion. We discuss possible causes of the difference between the investors' expectations regarding the behavior of the manager and the observed behavior of the manager.
In the present study we explore the conflicting finding that delayed feedback on tax audits appar... more In the present study we explore the conflicting finding that delayed feedback on tax audits apparently results in higher tax compliance, although delaying feedback is associated with lower perceptions of procedural fairness. In a repeated rounds design the timing of feedback (delayed vs. immediate) is investigated in combination with a reduction of wealth in some periods, presented either as a rather unfair intervention of the authorities, or due to a comparatively neutral manipulation. The results reveal a strong impact of timing of feedback on tax compliance: participants in conditions of delayed feedback show significantly higher compliance than those in conditions of immediate feedback. In addition, participants receiving delayed feedback are more likely to state that the probability of audit is high as well as that fines in case of detection are severe, but on the other hand perceive the timing of feedback and the authorities as more unfair. No main effect of the reason for the wealth reduction could be identified. The finding that the difference in compliance between delayed and immediate feedback on tax audits develops over time supports the assumption that in decisions based on experience the probabilities of rare events are underweighted, while in decisions based on descriptions people make choices as if they overweight probabilities of rare events.
In this paper we study how norms of symmetry and centricity affect the functioning of two ways to... more In this paper we study how norms of symmetry and centricity affect the functioning of two ways to allocate resources described in the economic anthropology literature, namely reciprocity and redistribution. The baseline reciprocity study, with no explicit priming of the norm of symmetry, features near-zero levels of allocative efficiency. Consistent with the anthropological framework we use throughout, we find that priming the norm of symmetry among the players through pre-play communication dramatically increases efficiency. Next we study a game of redistribution and find that in the final stages of the game allocative efficiency levels consistently approach 100%, regardless of how the chief comes to acquire centricity in the group. We conclude that reciprocity and redistribution can seldom allocate resources efficiently in the absence of norms of symmetry and centricity in the institutional design. By way of comparison, we confirm a robust finding in the experimental economics lit...
The present research experimentally examines the influence of group identity on trust behavior in... more The present research experimentally examines the influence of group identity on trust behavior in an investment game. In one treatment, group identity is manipulated only through the creation of artificial (minimal) groups. In other treatments group members are additionally related by outcome interdependence established in a prior public goods game. In moving from the standard investment game (where no group identity is prompted) to minimal group identity to two-dimensional group identity, we find no significant differences ...
Ethnographers have recorded many instances of tokens donated as gifts to attract new partners or ... more Ethnographers have recorded many instances of tokens donated as gifts to attract new partners or strengthen ties to existing ones. We study whether gifts are an effective pledge of the donor’s trustworthiness through an experiment modeled on the trust game. We vary whether the trustee can send a token before the trustor decides whether to transfer money; whether one of the tokens is rendered salient through experimental manipulations (a vote or an incentive-compatible rule of purchase for the tokens); and whether the subjects interact repeatedly or are randomly re-matched in each round. Tokens are frequently sent in all studies in which tokens are available, but repeated interaction, rather than gifts, is the leading behavioral driver in our data. In the studies with random pairs, trustors send significantly more points when the trustee has sent a token. Subjects in a fixed matching achieve comparable levels of trust and trustworthiness in the studies with and without tokens. The tr...
This paper experimentally investigates indirect tax evasion that requires the cooperation of an i... more This paper experimentally investigates indirect tax evasion that requires the cooperation of an intermediary. We explore the effectiveness of the introduction of a principal witness regulation as a means to facilitate tax compliance. Reactions show a significant drop in tax compliance that, surprisingly, is vastly different across gender with the effect being mainly driven by women. As a result, women decrease their tax compliance significantly reaching an even lower level than men who in turn do not react to the institutional change.
This paper investigates, from an experimental perspective, on the tax payers behaviour in a dynam... more This paper investigates, from an experimental perspective, on the tax payers behaviour in a dynamic context and more precisely tries to cope with three main topics related to tax evasion. The first aspect analysed regards the effects produced by a repetitive dynamic choice process on the subjects ’ attitude towards risk and on the ability to learn to cope with risk. The second theme treated is about the effects produced on the tax payers by the inclusion in the experimental design of psychological moral constraints. The final topic is on the effects produced by the specific experimental context chosen (the simulation of a fiscal environment compared with other simulated environments). The main results emerged from the 8 experiments carried out confirmed the importance of the psychological factors in determining the tax payers actual behaviours and shown the complex dynamic that the agents activate to cope with risk.
Handbook of Behavioural Economics and Smart Decision-Making
In this paper we defend the view that people living in traditional societies, although not fully ... more In this paper we defend the view that people living in traditional societies, although not fully rational in their behaviors, have in many cases formed institutions that decrease conflict in environments characterized by endemic warfare and intense competition for resources. We discuss the Kula of the Trobriand Island natives as a social norm that acts as a source of coordination. Key aspects of this norm are gift exchanges, indirect and delayed reciprocation, and informal monitoring and sanctioning. Two further case studies from Papua-New Guinea suggest that institutions are key in order to decrease conflict in traditional societies.
This paper extends choice theory by allowing for the interaction between cognitive costs and soci... more This paper extends choice theory by allowing for the interaction between cognitive costs and social norms. The authors experimentally investigate the role of imitation and temporal decisional patterns when participants face a task which is costly in cognitive terms. They identify two main reasons for imitative behavior. First, individuals belonging to a community might want to conform to others to obey to social norms. Second, individuals might be boundedly rational and consider imitation as a decisional device when comparing alternatives is cognitively demanding. In order to empirically disentangle the two effects, the authors present a laboratory experiment in which they model the choice of different alternatives through high or low cognitive costs and feedback information given to subjects. Their results do not provide strong evidence for imitative behavior. They find instead a temporal pattern in the distribution of choices, both in the high-cost and low-cost conditions.
We experimentally test the effect of aggressive audit strategies on tax compliance. Taxpayers fir... more We experimentally test the effect of aggressive audit strategies on tax compliance. Taxpayers first go through a phase of audits managed by a human tax agent who is requested to follow a rule imposed by a fair random device. However, the tax agent can freely decide to break the rule and over-inspect. Afterward, taxpayers are exposed to a genuinely random audit process governed by an algorithm, which makes compliance a strategically dominated option. We find that taxpayers are generally over-inspected by the human tax agents and react to this with nearly full compliance. Our main result is that these high levels of compliance also persist when controls are implemented by the algorithm. This suggests that tax authorities can use aggressive audit strategies to raise and sustain tax compliance.
Business sustainability and real options are closely connected, as real options are managerial fl... more Business sustainability and real options are closely connected, as real options are managerial flexibility that allows organizations to adapt to changes in their environment, thus making the organization more robust and economically sustainable. Studies in real options theory abound, yet there is still a lack of evidence on whether people make decisions consistently with the predictions made by real options models. We run a laboratory experiment to study the role of option value and the laboratory time required to resolve uncertainty in individuals’ decision to price and adopt an option to wait. Specifically, we compare decision makers’ choices in two investment scenarios: One with a short time to maturity (implying a low option value), and another with a longer time to maturity (implying a high option value). In the lab, both scenarios are implemented with the waiting time of twenty and sixty minutes. Our results show that decision makers deviate from the theoretical predictions, r...
We ask whether the corporate law provisions establishing that the conduct of the manager is subje... more We ask whether the corporate law provisions establishing that the conduct of the manager is subject to review by the investors (monitoring) and that managers are held to an honorable behavior (moral suasion) can increase trust and trustworthiness in organizations. We answer this question through a laboratory experiment. We find that moral suasion increases the investors' trust. Monitoring also increases trust but only when the manager is not aware of the experimental identity of the monitor. The manager returns more to those investors who trust more but appropriates around 50% of the available resources. The trustworthiness of the manager is, however, unaffected by monitoring or moral suasion. We discuss possible causes of the difference between the investors' expectations regarding the behavior of the manager and the observed behavior of the manager.
In the present study we explore the conflicting finding that delayed feedback on tax audits appar... more In the present study we explore the conflicting finding that delayed feedback on tax audits apparently results in higher tax compliance, although delaying feedback is associated with lower perceptions of procedural fairness. In a repeated rounds design the timing of feedback (delayed vs. immediate) is investigated in combination with a reduction of wealth in some periods, presented either as a rather unfair intervention of the authorities, or due to a comparatively neutral manipulation. The results reveal a strong impact of timing of feedback on tax compliance: participants in conditions of delayed feedback show significantly higher compliance than those in conditions of immediate feedback. In addition, participants receiving delayed feedback are more likely to state that the probability of audit is high as well as that fines in case of detection are severe, but on the other hand perceive the timing of feedback and the authorities as more unfair. No main effect of the reason for the wealth reduction could be identified. The finding that the difference in compliance between delayed and immediate feedback on tax audits develops over time supports the assumption that in decisions based on experience the probabilities of rare events are underweighted, while in decisions based on descriptions people make choices as if they overweight probabilities of rare events.
In this paper we study how norms of symmetry and centricity affect the functioning of two ways to... more In this paper we study how norms of symmetry and centricity affect the functioning of two ways to allocate resources described in the economic anthropology literature, namely reciprocity and redistribution. The baseline reciprocity study, with no explicit priming of the norm of symmetry, features near-zero levels of allocative efficiency. Consistent with the anthropological framework we use throughout, we find that priming the norm of symmetry among the players through pre-play communication dramatically increases efficiency. Next we study a game of redistribution and find that in the final stages of the game allocative efficiency levels consistently approach 100%, regardless of how the chief comes to acquire centricity in the group. We conclude that reciprocity and redistribution can seldom allocate resources efficiently in the absence of norms of symmetry and centricity in the institutional design. By way of comparison, we confirm a robust finding in the experimental economics lit...
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Papers by Luigi Mittone