Monetary Endowment Research Articles

Computational Modeling Interpretation Underlying Elevated Risk-Taking Propensity in the Dynamic Risky Investment Process of Non-Labor Income.

Money source influences risk-taking behaviors. Although studies consistently indicated that individuals demonstrate a higher propensity to make risky investments when utilizing non-labor income as opposed to labor income, explanations as to why non-labor income leads to continuously blowing money into risky investments are scarce. The current study leverages a computational modeling approach to compare the differences in the dynamic risk investment process among individuals endowed with income from different sources (ie, non-labor income vs labor income) to understand the shaping force of higher risk-taking propensity in individuals with non-labor income. A total of 103 participants were recruited and completed the Balloon Analogue Risk Task (BART) with an equal monetary endowment, either as a token for completion of survey questionnaires (representing labor income) or as a prize from a lucky draw game (representing non-labor income). We found that individuals endowed with non-labor income made more risky investments in BART compared to those with labor income. With computational modeling, we further identified two key differences in the dynamic risk investment processes between individuals endowed with labor and those with non-labor income. Specifically, individuals endowed with non-labor income had a higher preset expectation for risk-taking and displayed desensitization towards losses during risk investments, in contrast to individuals with labor income. This study contributed to a better understanding of the psychological mechanisms of why individuals make more risk-taking behaviors with non-labor income, namely higher preset expectations of risk-taking and desensitization towards losses. Future research could validate these findings across diverse samples with varying backgrounds and adopt different manipulations of labor and non-labor income to enhance the external validity of our study.

Voluntary insurance vs. stabilization funds: An experimental analysis on bank runs

Banking crises have recurrently emphasized the crucial need for establishing effective mechanisms to prevent bank runs, and different organizations are exploring a range of potential measures. With the aim of contributing to this debate, we run a laboratory experiment to study the effectiveness of two untested devices: Stability funds that automatically limit depositors’ possibility of withdrawing their assets, and voluntary individual insurance against the risk of default. Depositors start the interaction with a monetary endowment deposited in a bank. They can then withdraw money before and after the bank suffers a liquidity loss. Such a loss can be either permanent or temporary, but its nature will only be discovered at the end of the interaction. The bank defaults if the desired withdrawals exceed its available liquidity. Our results show that the only effective mechanism in reducing bank defaults, compared to the baseline, is the stability fund with high coverage. When groups have a high share of female depositors, there is a significant reduction in the likelihood of bank runs, which can be explained by women’s higher propensity to buy insurance. When a critical liquidity signal is issued, indicating a dangerous situation, women’s lower propensity to withdraw disappears, bringing it to levels similar to that of men.

Lying about money and game points by men and women and its relation to the Self-Reported Lying Scale.

The present study was designed to examine the effect of monetary and non-monetary endowment on lying by men and women in the Ultimatum Game. Another goal was to examine to what extent the Self-Reported Lying Scale (SRLS), described here for the first time, predicts lying in the Ultimatum Game. Examinees (162, 82 women) were allocated to four experimental conditions in a 2 × 2 factorial design. Two endowment conditions (money and game points) were crossed with two sex conditions (men and women). Participants underwent an Ultimatum Game in which they were permitted to conceal part of the endowment from an unidentified partner. Finally, participants completed the SRLS. The results indicated that more cash than points were concealed from the partner, and men concealed more of their endowment than women. We further defined fake fairness in sharing that combined hiding a more significant portion of the endowment from the partner while presenting fair sharing of the remaining award. We found more fake fairness when money was shared than when points were concealed. Fake fairness is more significant for men than for women. For money and points alike, concealment was predicted by the global score of the SRLS and its five subscales (self-assessed lying ability, lie detection ability, the use of reason in lying, lie acceptability, and lie frequency). It was suggested that a monetary endowment is more sensitive to lying than game points and involves more fake fairness. Nevertheless, the differences are quantitative, and the same response pattern exists in the two endowment conditions. Replacing money with points is a proper solution whenever a monetary endowment presents difficulties. It was further suggested that sex differences exist in lying using an asymmetric information UG, where proposers were permitted to mislead responders about their endowment. Finally, the SRLS may contribute to a better understanding of the question of who lies.

Charitable giving: The role of framing and information.

We investigate how different levels of information influence the allocation decisions of donors who are entitled to freely distribute a fixed monetary endowment between themselves and a charitable organization in both giving and taking frames. Participants donate significantly higher amounts, when the decision is described as taking rather than giving. This framing effect becomes smaller if more information about the charity is provided.

Human-centred mechanism design with Democratic AI

Building artificial intelligence (AI) that aligns with human values is an unsolved problem. Here we developed a human-in-the-loop research pipeline called Democratic AI, in which reinforcement learning is used to design a social mechanism that humans prefer by majority. A large group of humans played an online investment game that involved deciding whether to keep a monetary endowment or to share it with others for collective benefit. Shared revenue was returned to players under two different redistribution mechanisms, one designed by the AI and the other by humans. The AI discovered a mechanism that redressed initial wealth imbalance, sanctioned free riders and successfully won the majority vote. By optimizing for human preferences, Democratic AI offers a proof of concept for value-aligned policy innovation.

Impact of the “when the fun stops, stop” gambling message on online gambling behaviour: a randomised, online experimental study

Safer gambling messages are a common freedom-preserving method of protecting individuals from gambling-related harm. Yet, there is little independent and rigorous evidence assessing the effectiveness of safer gambling messages. In our study, we aimed to test the effect of the historically most commonly-used UK safer gambling message on concurrent gambling behaviour of people who gamble in the UK. In this study, three preregistered, incentivised, and randomised online experiments, testing the UK's "when the fun stops, stop" message, were carried out via the crowdsourcing platform Prolific. Adults based in the UK who had previously participated in the gambling activities relevant to each experiment were eligible to participate. Experiments 1 and 3 involved bets on real soccer events, and experiment 2 used a commercially available online roulette game. Safer gambling message presence was varied between participants in each experiment. In experiment 2, exposed participants could be shown either a yellow or a black-and-white version of the safer gambling message. Participants were provided with a monetary endowment with which they were allowed to bet. Any of this money not bet was afterwards paid to participants as a bonus, in addition to the payouts from any winning bets. In experiment 2 participants had the opportunity to re-wager any winnings from the roulette game. The primary outcome in experiment 1 was participants' decisions to accept (or reject) a series of football bets, which varied in their specificity (and payoffs), and the primary outcomes of experiments 2 and 3 were the proportion of available funds bet, which were defined as the total amount of money bet by a participant out of the total that could have been bet. Participants for all three experiments were recruited between May 17, 2019, and Oct 17, 2020. Of the 506 participants in experiment 1, 41·3% of available bets were made by the 254 participants in the gambling message condition, which was not significantly different (p=0·15, odds ratio 1·22 [95% CI 0·93 to 1·61]) to the 37·8% of available bets made by the 252 participants in the control condition. In experiment 2, the only credible difference between conditions was that the 501 participants in the condition with the yellow version of the gambling message bet 3·64% (95% Bayesian credibility interval 0·00% to 7·27%) more of available funds left over than the 499 participants in the control condition. There were no credible differences between the bets made by the 500 participants in the black-and-white gambling message condition and the other conditions. In experiment 3, there were no credible differences between the 502 participants in the gambling message condition and the 501 participants in the control condition, with the largest effect being a 5·87% (95% Bayesian credibility interval -1·44% to 13·20%) increase in the probability of betting everything in the gambling message condition. In our study, no evidence was found for a protective effect of the most common UK safer gambling message. Alternative interventions should be considered as part of an evidence-based public health approach to reducing gambling-related harm. University of Warwick, British Academy and Leverhume, Swiss National Science Foundation.

Easy to shove, difficult to show: Effect of educative and default nudges on financial self-management

Default nudges tend to improve financial well being. How do educative nudges, providing simple individually targeted financial literacy training, fare in comparison? In a preregistered experiment on the self-management of online retirement accounts, we compared the effects of educative and default nudges on savings, financial errors, and institutional trust. Participants allocated monetary endowments between alternative savings accounts with varying risk and rates of return, some of which were pay-off dominated. Defaults substantially increased savings and decreased errors, but educative nudges had no impact. We explored the cognitive correlates of financial decisions using tests of cognitive reflection, financial institutional knowledge, and financial literacy that distinguish between the comprehension of annual interest and interest compounding. Tendency for cognitive reflection and financial literacy in general and the comprehension of interest compounding in particular predicted successful financial self-management. Educative nudges are promising, but better educative techniques are needed to complement or replace default nudges.

The Role of Financing Higher Education in Nigerian Universities in Achieving Sustainable Development

The current study aims to identify the role of financing higher education in Nigerian universities in the state of Kano and its impact on sustainable development. The study problem lies in the low funding of higher education in Nigerian universities, which will negatively affect the sustainability of higher education and sustainable development. The importance of the study is highlighted by highlighting the importance of financing higher education in Nigerian universities and the sources of obtaining this funding as one of the most important factors through which students can complete their studies. The study followed the qualitative approach with the aim of obtaining more accurate information about traditional higher education financing sources and its impact on the sustainability of education and achieving sustainable development. The study population reached the number of three Nigerian universities, which are a governmental, federal and private university, to learn about the impact of financing higher education in Nigerian universities on sustainable development. The sample of the study was about three out of five of those responsible for financing higher education in Nigerian universities. Also, the study followed unstructured or open interviews in order to obtain more information about financing higher education and whether or not it is suitable for the idea of a monetary endowment. The results of the study showed that the sources of financing for higher education in traditional Nigerian universities are varied, including what can be obtained through the endowment and donations fund that can be made through community initiatives, and the results of the study also indicated that the idea of a monetary endowment faces great challenges in its application, so the idea is subject to acceptance and rejection. According to the nature of the university and the nature of the subjects taught. The study recommended the necessity of expanding the study of the impact of financing higher education in Nigerian universities by expanding the scope of study to include all Nigerian states.

Cashless gambling and the pain of paying: effects of monetary format on slot machine gambling

Advances in cashless technologies create a dilemma for gambling regulators. Research indicates that cash purchases entail a ‘pain of paying’ that is attenuated with more abstract forms of payment, yet limited research has directly tested the impact of mode of payment on gambling behavior. Across two experiments, community-recruited gamblers were randomized to use an authentic slot machine in the laboratory, under different conditions of monetary endowment. In Experiment 1 (n = 61), participants were endowed with funds to play the slot machine, in either a cash or voucher format. In Experiment 2 (n = 48), participants acquired the cash endowment as a windfall or from an earning task. In session-level analyses, bet size and bet volume did not vary as a function of monetary condition. In more sensitive trial-level analyses, no interactions involving the monetary manipulations were consistent across the two experiments. Data from both experiments indicated faster spin initiation latencies as a function of losing streak length, and slower spin initiation latencies and larger bet size as a function of the prior win magnitude. These trial-level analyses show systematic influences on gambling behavior in the laboratory environment, supporting the basic sensitivity of our design. Overall, our data provide weak evidence for the hypothesis that monetary factors influence gambling tendencies. Acknowledging the possibility of the null hypothesis, these data also highlight the methodological challenges with manipulating monetary value in gambling research, including the use of endowed funds, and controlling for sources of variability when using authentic slot machines.

Risk Attitude and Capital Market Participation: Is There a Gender Investment Gap in Germany?

Do women invest differently than men? We contribute to the answer of this question by analysing the Panel on Household Finances (PHF) of the German Bundesbank. This representative panel collects a wide variety of behavioural and financial variables in the area of household finance. We find that participation in risky assets is generally lower among women than among men. Once risk attitude is controlled for, this effect shrinks to only 2.6 percent. We find no difference when single women are compared to single men – even irrespective of other demographic variables. The raw gap in capital market participation is mainly explained by different risk attitudes and monetary endowments, but women would participate even less in the capital market if they reacted as sensitively to risk aversion as their male counterparts. Lastly, given participation in the market, we find that both genders hold comparable portions of risky assets in their portfolios. Within their risky assets, men invest more in certificates and listed shares whereas women invest more in funds.

Risk attitude and capital market participation: is there a gender gap in Germany?

Do women invest differently than men? Using the Deutsche Bundesbank Panel on Household Finances (PHF), we replicate earlier findings that participation in stocks and the conditional share held in equity are generally lower among women than among men, even when we account for risk aversion and other relevant factors. Above and beyond most previous literature, we also analyse financial wealth held in fund shares, fixed-income securities and certificates. Adjusted for controls, women hold less wealth in certificates but more in fund shares than men. We also report novel results when we decompose the raw gender gap in capital market participation rates. This gap is mainly explained by different risk attitudes and monetary endowments, but women would participate even less in the capital market if they reacted to risk aversion in the same way as their male counterparts, implying that risk-averse men may shy away from risky assets much more than similar women.

Do Investors Rely on Robots? Evidence from an Experimental Study

Robo advice has moved its first steps in the Anglo-Saxon countries and is now rapidly gaining market share at a global level. The phenomenon fueled a growing and still not conclusive institutional debate about potential benefits and risks to financial consumers, based also on investors’ biases and behaviours that online platforms could trigger to the detriment of robo advisees. The present paper provides some insights into attitudes and behaviours that might prevail in a digital environment among young investors, representing the category of users potentially more involved by the development of the automated advice. In detail, the study investigates whether individuals’ propensity to follow the recommendation received from an advisor changes depending on whether the advisor is a human or a robot. The analysis is based on data collected through an ad hoc developed laboratory experiment run in the Cesare Lab of LUISS University with a sample of 180 students. Students were given an initial monetary endowment and were asked to choose between six different portfolios of financial activities; after being profiled through a questionnaire aimed at eliciting their risk tolerance (Grable and Lytton’s Risk Tolerance Quiz; 2003), they received the advice, either from a human advisor or from a robo advisor (i.e. via a computer platform) depending on the treatment they had randomly assigned before entering the experimental session. Then, they were asked again to choose among the six portfolios in order to capture whether the propensity to follow the recommendation depends on its source (human versus robo). Finally, participants were asked to answer several questions eliciting risk preferences, financial literacy (actual and perceived) and digital literacy, serving as control variables when modelling the probability to follow the advice. Our results show that the probability to follow the advice does not depend on the source of the recommendation but rather on the alignment between the self-directed choice made before receiving the advice and the recommendation subsequently received: the propensity to follow the advisor (either human or robo) increases if the advice confirms individual’s own beliefs about her/his investor profile. This result might be explained by referring to individuals’ attitude towards the so called ‘confirmation bias’. However, when the self-directed choice differs from the recommendation received, participants may be more likely to follow the advice given by a human advisor and less likely to follow the advice formulated by an algorithm. Also the gender of the advisor seems to matter: women tend to follow the advice provided by a female advisor more frequently compared to the case of the recommendation given by a male advisor. This work is part of a wider research on FinTech that CONSOB started in 2016, in collaboration with several Italian universities, with the aim of exploring opportunities and risks for investor protection and the financial system as a whole, related to the application of technological innovation to the provision of financial services. In particular, supplementing Lener, Linciano and Soccorso (2019, edited by) and Caratelli et al. (2019), this document widens the field of investigation by referring to a specific target of the population - the so called millennials and post-millennials – and using complementary and innovative methods. According to an evidence-based approach, insights from the present study may suggest specific investor protection initiatives, also in terms of financial education activities designed for a clearly-identified segment of the population (the so called millennials and post-millennials, in this case). Evidence from the present work might be extended further with respect to the consumers’ perception of the fairness of algorithms used to provide financial services, the cognitive heuristics and biases underlying decision making process and investments in the digital environment and nudges which may be used to enhance investor protection.

Walrasian Dynamics in Multi-Unit Markets

In a multi-unit market, a seller brings multiple units of a good and tries to sell them to a set of buyers that have monetary endowments. While a Walrasian equilibrium does not always exist in this model, natural relaxations of the concept that retain its desirable fairness properties do exist. We study the dynamics of (Walrasian) envy-free pricing mechanisms in this environment, showing that for any such pricing mechanism, the best response dynamic starting from truth-telling converges to a pure Nash equilibrium with small loss in revenue and welfare. Moreover, we generalize these bounds to capture all the (reasonable) Nash equilibria for a large class of (monotone) pricing mechanisms. We also identify a natural mechanism, which selects the minimum Walrasian envy-free price, in which for n=2 buyers the best response dynamic converges from any starting profile. We conjecture convergence of the mechanism for any number of buyers and provide simulation results to support our conjecture.

Most People Keep Their Word Rather Than Their Money.

Promises are crucial for human cooperation because they allow people to enter into voluntary commitments about future behavior. Here we present a novel, fully incentivized paradigm to measure voluntary and costly promise-keeping in the absence of external sanctions. We found across three studies (N = 4,453) that the majority of participants (61%–98%) kept their promises to pay back a specified amount of a monetary endowment, and most justified their decisions by referring to obligations and norms. Varying promise elicitation methods (Study 1a) and manipulating stake sizes (Study 2a) had negligible effects. Simultaneously, when others estimated promise-keeping rates (using two different estimation methods), they systematically underestimated promise-keeping by up to 40% (Studies 1b and 2b). Additional robustness checks to reduce potential reputational concerns and possible demand effects revealed that the majority of people still kept their word (Study 3). Promises have a strong normative power and binding effect on behavior. Nevertheless, people appear to pessimistically underestimate the power of others’ promises. This behavior–estimation gap may prevent efficient coordination and cooperation.

The role of ventromedial prefrontal cortex and temporo-parietal junction in third-party punishment behavior

Third parties punish, sacrificing personal interests, offenders who violate either fairness or cooperation norms. This behavior is defined altruistic punishment and the degree of punishment typically increases with the severity of the norm violation. An opposite and apparently paradoxical behavior, namely anti-social punishment, is the tendency to spend own money to punish cooperative or fair behaviors. Previous fMRI studies correlated punishment behavior with increased activation of brain areas belonging to the reward system (e.g. the ventromedial prefrontal cortex, VMPFC), the mentalizing (e.g. the temporoparietal junction, TPJ) and central-executive networks. In the present study, we aimed at investigating the causal role of VMPFC and TPJ in punishment behaviors through the application of anodal transcranial direct current stimulation (tDCS).Sixty healthy participants were randomly assigned to three tDCS conditions: (1) anodal tDCS over VMPFC, (2) anodal tDCS over right TPJ (rTPJ), (3) sham stimulation. At the end of the stimulation, participants played a third-party punishment game, consisting in viewing a series of fair or unfair monetary allocations between unknown proposers and recipients. Participants were asked whether and how much they would punish the proposers using their own monetary endowment. To test membership effects, proposers and recipients could be either Italian or Chinese.Anodal tDCS over VMPFC increased altruistic punishment behavior whereas anodal tDCS over rTPJ increased anti-social punishment choices compared with sham condition, while membership did not influence participant's choices. Our results support the idea that the two types of punishment behaviors rely upon different brain regions, suggesting that reward and mentalizing systems underlie, respectively, altruistic and anti-social punishment behaviors.

Turkers of the World Unite: Multilevel In-Group Bias Among Crowdworkers on Amazon Mechanical Turk

Crowdsourcing has become an indispensable tool in the behavioral sciences. Often, the “crowd” is considered a black box for gathering impersonal but generalizable data. Researchers sometimes seem to forget that crowdworkers are people with social contexts, unique personalities, and lives. To test this possibility, we measure how crowdworkers (N = 2,337, preregistered) share a monetary endowment in a Dictator Game with another Mechanical Turk (MTurk) worker, a worker from another crowdworking platform, or a randomly selected stranger. Results indicate preferential in-group treatment for MTurk workers in particular and for crowdworkers in general. Cooperation levels from typical anonymous economic games on MTurk are not a good proxy for anonymous interactions and may generalize most readily only to the intragroup context.

A distinct inferential mechanism for delusions in schizophrenia.

Delusions, a core symptom of psychosis, are false beliefs that are rigidly held with strong conviction despite contradictory evidence. Alterations in inferential processes have long been proposed to underlie delusional pathology, but previous attempts to show this have failed to yield compelling evidence for a specific relationship between inferential abnormalities and delusional severity in schizophrenia. Using a novel, incentivized information-sampling task (a modified version of the beads task), alongside well-characterized decision-making tasks, we sought a mechanistic understanding of delusions in a sample of medicated and unmedicated patients with schizophrenia who exhibited a wide range of delusion severity. In this novel task, participants chose whether to draw beads from one of two hidden jars or to guess the identity of the hidden jar, in order to minimize financial loss from a monetary endowment, and concurrently reported their probability estimates for the hidden jar. We found that patients with higher delusion severity exhibited increased information seeking (i.e. increased draws-to-decision behaviour). This increase was highly specific to delusion severity as compared to the severity of other psychotic symptoms, working-memory capacity, and other clinical and socio-demographic characteristics. Delusion-related increases in information seeking were present in unmedicated patients, indicating that they were unlikely due to antipsychotic medication. In addition, after adjusting for delusion severity, patients as a whole exhibited decreased information seeking relative to healthy individuals, a decrease that correlated with lower socioeconomic status. Computational analyses of reported probability estimates further showed that more delusional patients exhibited abnormal belief updating characterized by stronger reliance on prior beliefs formed early in the inferential process, a feature that correlated with increased information seeking in patients. Other decision-making parameters that could have theoretically explained the delusion effects, such as those related to subjective valuation, were uncorrelated with both delusional severity and information seeking among the patients. In turn, we found some preliminary evidence that subjective valuation (rather than belief updating) may explain group differences in information seeking unrelated to delusions. Together, these results suggest that abnormalities in belief updating, characterized by stronger reliance on prior beliefs formed by incorporating information presented earlier in the inferential process, may be a core computational mechanism of delusional ideation in psychosis. Our results thus provide direct empirical support for an inferential mechanism that naturally captures the characteristic rigidity associated with delusional beliefs.

Turkers of the World Unite: Multilevel In-Group Bias Amongst Crowdworkers on Amazon Mechanical Turk

Crowdsourcing has become an indispensable tool in the behavioral sciences. Often, the “crowd” is considered a black box for gathering impersonal but generalizable data. Researchers sometimes seem to forget that crowdworkers are people with social contexts, unique personalities, and lives. To test this possibility, we measure how crowdworkers (N=2337, pre-registered) share a monetary endowment in a Dictator Game with another MTurk worker, a worker from another crowdworking platform, or a randomly selected stranger. Results indicate preferential in-group treatment for MTurk workers in particular and for crowdworkers in general. Cooperation levels from typical anonymous economic games on MTurk are not a good proxy for anonymous interactions and may generalize most readily only to the intragroup context.

The Lender of Last Resort in a General Equilibrium Framework

This paper models the role of the lender of last resort (LoLR) in a general equilibrium framework. We allow for heterogeneous agents and a risk-averse banking sector, and incorporate the frictions of endogenous default, liquidity, and money. Adverse supply shocks in monetary endowments trigger default, leading to deterioration in the value of bank assets, and subsequent bank illiquidity in some states of the world. LoLR intervention is then assessed with regards to its economy-wide effect on welfare, bank profitability, and the level of default. The results provide a rationalisation for constructive ambiguity and the ‘too big to fail’ problem.

Other-regarding attention focus modulates third-party altruistic choice: An fMRI study

Third-party altruistic decision-making has been shown to be modulated by other-regarding attention (e.g., focusing on the offender’s crime or the victim’s situation especially in judicial judgment). However, the neural mechanisms underlying this modulation remain poorly understood. In this fMRI study, participants voluntarily decided if they wanted to punish the first-party offender or help the second-party victim using their own monetary endowment in an unfair context. Particularly, before deciding they were asked to focus on the (un)fairness of the offender proposing the offer (offender-focused block, OB), the feeling of the victim receiving this offer (victim-focused block, VB), or without any specific focus (baseline block, BB). We found that compared to BB participants punished more frequently and prolonged help choices in OB, whereas they helped more frequently in VB. These findings were accompanied by an increased activation in the temporo-parietal junction (TPJ) during decision making in OB and VB. Moreover, regions relevant to cognitive control (esp. IFG/AI and the dorsal anterior cingulate cortex) were strongly recruited during specific choices conflicting the attention focus (e.g., choosing help in OB). Our findings revealed how other-regarding attention modulates third-party altruistic decision-making at the neural level.