To Örebro University

Findings in the traffic safety literature suggest that people value traffic risk reductions less when framed as a public good (e.g. infrastructure improvements) compared to when framed as a private good (e.g. personal safety equipment). This study contributes to this literature by reporting empirical evidence for the importance of controlling for the attributes of the goods used in such valuations. We focus on risks faced by vulnerable road users such as cyclists and pedestrians and compare valuations across private and public goods that vary in their attributes. When the goods are of an identical nature, we find no significant difference in valuations, resolving the controversy in previous findings. We find significant effects on valuations from using private or public provision, from offering the good as voluntary or mandated in use, and from changing the framing of the good between the private and the public versions. This adds further weight to the importance of controlling for many attributes.

Does the desirability of social institutions for public goods provision depend on the extent to which they include mechanisms for endogenous enforcement of cooperative behavior? We consider alternative institutions that vary the use of direct punishments to promote social cooperation. In one institution, subjects participate in a public goods experiment in which an initial stage of voluntary contribution is followed by a second stage of voluntary, costly sanctioning. Another institution consists of the voluntary contribution stage only, with no subsequent opportunity to sanction. In a third stage subjects vote for which institution they prefer for future interactions: do they prefer one that does allow sanctions or one that does not allow sanctions? Our results show that even though sanctions are frequently used when available, the clear majority of individuals vote for the institution that does not allow sanctions. Thus, a distinction is required between the principles that guide the choice of institutions and the principles that apply to actions guided by institutions. Our results indicate that it is the wealth generated by the institution that determines its desirability.

When imposing traffic congestion pricing around downtown commercial centers, there is a concern that commercial activities will have to consider relocating due to reduced demand, at a cost to merchants. Concerns like these were important in the debates before the introductions of congestion charges in both London and Stockholm and influenced the final policy design choices. This study introduces a sequential experimental game to study reactions to congestion pricing in the commercial sector. In the game, merchants first make location choices. Consumers, who drive to do their shopping, subsequently choose where to shop. Initial responses to the introduction of congestion pricing and equilibrium selection adjustments over time are observed. These observations are compared to responses and adjustments in a condition where congestion pricing is reduced from an initially high level. Payoffs are non-linear and non-transparent, making it less than obvious that the efficient equilibrium will be selected, and introducing possibilities that participants need to discover their preferences and anchor on past experiences. We find that initial responses reflect standard inverse price-demand relations, and that adjustments over time rely on signaling by consumers leading to the efficient equilibrium. There is also evidence that priming from initial experiences influence play somewhat. We confirm that commercial activities relocate following the introduction of congestion pricing and that the adjustment process is costly to merchants.

Not much is known about the heterogeneity of risk attitudes among poor households in rich countries. This paper provides estimates from a unique data set collected among the urban poor in Atlanta, Georgia. The data set includes lab-in-the-field experiments on the relationship between risk attitudes and several household characteristics. Apart from looking at income, wealth, and education, we are particularly interested in household composition as it captures the number and kind of people who are dependant on the income of the household head. Heads of households who are less risk averse may be willing to take on the extra risk from smaller resource margins resulting from additional dependants, implying a negative relationship between household size and risk aversion. However, if the size of the household is a result of exogenous forces some heads of households may become more risk averse with more dependants. Household size can also reflect a risk management choice that involves adding non-dependant members who can provide resources and risk sharing. However, this possibility is limited to homes that are not already too crowded. We find that household size correlates positively with the risk aversion of the head, but with a large proportion of children the correlation is strongly dampened. However, this negative effect of children is conditional on the home not already being crowded. These heterogeneous findings have implications for the design of new insurance, savings, and credit programs where risk attitudes are important to the decisions to adopt.

A frequent finding in the empirical literature on cost-benefit analysis of traffic safety measures is that valuations of public goods are lower than valuations of private goods, contrary to theory predictions. This study elicits the willingness to pay for publicly and privately provided safety improvement benefiting cyclists and pedestrians, a relatively neglected group in this literature. Our results suggest that there is no significant difference between valuations of a private good and three versions of a public good as long as the good itself is the same, in our case a mobile phone app. The public good versions differ in attributes such as mandatory or voluntary use and private or public provision institutions. This finding is consistent with the simultaneous presence of both financial altruism and safety altruism, or neither. Public institutions are preferred to private ones in the provision of the public goods, and voluntary participation is preferred to mandated regulation. We also find evidence that attitudes that favor using taxes to fund traffic safety projects, and public responsibility for traffic safety are associated with a higher willingness to pay.

We provide evidence that choices over small stakes bets are consistent with assumptions of some payoff calibration paradoxes. We then exploit the existence of detailed information on individual wealth of our experimental subjects in Denmark, and directly estimate risk attitudes and the degree of asset integration. We discover that behavior is consistent with partial, rather than full, asset integration. The implied risk attitudes from estimating these specifications indicate risk premia and certainty equivalents that are a priori plausible. This theory and evidence suggest one constructive solution to payoff calibration paradoxes.

Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive implications for the relationship between atemporal risk aversion and the intertemporal elasticity of substitution. If the intertemporal utility function is additively separable, then the latter two concepts are the inverse of each other. We review a theoretical specification with a long lineage in the literature on multi-attribute utility and use this theoretical structure to guide the design of a series of experiments that allow us to identify and estimate intertemporal correlation aversion. Our results show that subjects are correlation averse over lotteries with intertemporal income profiles.

Measures of risk attitudes derived from experiments are often questioned because they are based on small stakes bets and do not account for the extent to which the decision-maker integrates the prizes of the experimental tasks with personal wealth. We exploit the existence of detailed information on individual wealth of experimental subjects in Denmark, and directly estimate risk attitudes and the degree of asset integration consistent with observed behavior. The behavior of the adult Danes in our experiment is consistent with partial asset integration: they behave as if some fraction of personal wealth is combined with experimental prizes in a utility function, and that this combination entails less than perfect substitution. Our subjects do not perfectly asset integrate. The implied risk attitudes from estimating these specifications imply risk premia and certainty equivalents that are a priori plausible under expected utility theory or rank dependent utility models. These are reassuring and constructive solutions to payoff calibration paradoxes. In addition, the rigorous, structural modeling of partial asset integration points to a rich array of neglected questions in risk management and policy evaluation in important field settings.

This paper reviews the preconditions for successful applications of Experimental Economics methods to research on transportation problems, as new transportation and research technologies emerge. We argue that the application of properly designed incentives, the hallmark of Experimental Economics, provides a high degree of experimental control, leading to internal validity and incentive compatibility. Both of these are essential for ensuring that findings generalize to contexts outside the immediate application. New technologies, such as virtual reality simulators, can generate external validity for the experiments by providing realistic contexts. GPS and other tracking technologies, as well as smart phones, smart cards and connected vehicle technologies can allow detailed observations on actions and real-time interactions with drivers in field experiments. Proper application of these new technologies in research requires an understanding of how to maintain a high level of internal validity and incentive compatibility as external validity is increased. In this review of past applications of Experimental Economics to transportation we focus on their success in achieving external and internal validity.