Of Mice and Markets
Some goods, such as widgets, are freely bought and sold in markets without protest, whereas others, such as indulgences, are not. Some mice that have been bred for use in laboratory experiments turn out to be surplus to requirements and are subsequently sacrificed. Falk and Szech (p. 707) studied the effect that marketplace negotiation has had on experimental subjects' willingness to pay for the upkeep of these surplus mice. Individuals were willing to pay much more to save the mice, but market-like exchanges lowered these prices.
The possibility that market interaction may erode moral values is a long-standing, but controversial, hypothesis in the social sciences, ethics, and philosophy. To date, empirical evidence on decay of moral values through market interaction has been scarce. We present controlled experimental evidence on how market interaction changes how human subjects value harm and damage done to third parties. In the experiment, subjects decide between either saving the life of a mouse or receiving money. We compare individual decisions to those made in a bilateral and a multilateral market. In both markets, the willingness to kill the mouse is substantially higher than in individual decisions. Furthermore, in the multilateral market, prices for life deteriorate tremendously. In contrast, for morally neutral consumption choices, differences between institutions are small.
Nora Szech engages in market and institution design, theoretically and empirically, in order to render institutions sustainable. She combines traditional and behavioral insights in order to understand how agents behave. In many markets, e.g. in health markets, patients do not necessarily understand quality, they may follow heuristics instead. In other markets, participants may prefer to ignore consequences of their activities in order to keep a positive self-image.
When designing competition, specific contexts may require specific designs. For example, if a competition is very asymmetric (think about college admissions, promotions, but also lobbying), how could we design such contests in order to fight potential discouragement of contestants from weaker groups -- and keeping everybody still motivated? And how can we design markets such that our moral values remain respected?
Nora holds the Chair of Political Economy at the Karlsruhe Institute of Technology (KIT) since 2013. In 2010, she obtained her Ph.D. at the Bonn Graduate School of Economics under the supervision of Benny Moldovanu. Her thesis was awarded the best of 2010 at the University of Bonn. From 2010 to 2012, she was a postdoc (Akademische Rätin auf Zeit) at the chair of Benny Moldovanu in Bonn. In 2011, she was awarded the Reinhard Selten prize. From 2012 to 2013, she was tenured Professor for Industrial Economics at the University of Bamberg. In addition to the KIT, Nora is affiliated with the Berlin Social Science Center and with CESifo.