Without strong assumptions about how noise manifests in choices, we can infer little about whether there exist underlying common ratio preferences (CRP) given existing empirical observations of the common ratio effect (CRE). To solve this inferential challenge, we propose using paired valuations, which yield valid inference under common assumptions. Using this approach in an online experiment with 900 participants, we find no evidence of a systematic CRP. To reconcile our findings with existing evidence, we present the same participants with paired choice tasks, and demonstrate how noise can generate a CRE even for individuals without an associated CRP.
We examine how people redistribute income when there is uncertainty about the role luck plays in determining opportunities and outcomes. We elicit redistribution decisions from a U.S.-representative sample who observe worker outcomes and whether luck magnified workers' effort (``lucky opportunities'') or determined workers’ income directly (``lucky outcomes''). We find that participants redistribute less and are less reactive to changes in the importance of luck in environments with lucky opportunities. Our findings have implications for models that seek to understand and predict redistribution attitudes, and help to explain the gap between lab evidence on support for redistribution and U.S. inequality trends.
We test for a novel pattern of menu-dependent risk attitudes that forms the basis of some recent theories of risky choice: does expanding the range of potential prizes from lotteries in a choice set lead people to overweight those prizes and make riskier choices? Contrary to our hypothesis, we find no evidence of such a menu effect. Varying the potential prize offered by an actuarially unfavorable, high-risk lottery does not affect the likelihood of choosing a different, moderate-risk gamble in favor of a safer alternative. Our well-powered null results cast doubt on prominent theories of menu-dependent risk preferences, but are potentially consistent with either probability weighting or expected utility with heterogeneous risk preferences.
Many safety net program applications result in procedural denials due to the administrative burden associated with applying. We study the effect of an alternative application process for the Supplemental Nutrition Assistance Program designed to alleviate barriers to program access associated with the intake interview. Using a field experiment involving over 60,000 applicants in Los Angeles, we find that access to on-demand interviews expedites approvals and increases overall participation rates: early approvals nearly double and approval rates increase by six percentage points. Our findings highlight the importance of incorporating flexibility into the design of program integrity policies to minimize procedural denials.
We study the behavior of U.S. consumers' inflation expectations during the high inflation period of 2021-22 using data from the Survey of Consumers Expectations. Short- and, to a lesser extent, medium-term inflation expectations rose as inflation surged in 2021. Disagreement and uncertainty about future inflation increased significantly. Then, in 2022, even as inflation continued to climb, medium- and longer-term inflation expectations unexpectedly fell and medium- and longer-term deflation expectations increased. We find that respondents with deflation expectations tend to expect prices to mean revert and are more optimistic about the economic outlook.