Essays in Behavioral and Experimental Economics

This dissertation consists of three self-contained articles. In the first chapter ``Lying Aversion and Vague Communication: An Experimental Study \u27\u27 (joint with Guangying Chen), we study the behavioral aspects of sophisticated agents in potentially vague communication through an online experiment. An agent may benefit from misleading the audience\u27s belief about the state of the world. While a more blatantly misleading message may be more effective than a vague message, they may affect one\u27s internal cost of dishonesty and social identity of honesty differently. We explore the extent to which these two types of lying costs affect people\u27s sophisticated use of vague messages in communication and vice versa in a simple experimental setting. To this end, we introduce a novel experiment design that isolates the internal cost of lying and the social identity cost of appearing dishonest. Our result shows that subjects employ more vague messages in treatments in which the social identity concern is relevant. In treatments in which the social identity concern is irrelevant, on the other hand, we find subjects exploit vagueness so as to be consistent with the truth, yet at the same time leveraging the imprecision to their own benefit in a more undisguised manner. The result opens a new set of questions on the motivations behind the preferences for truth-telling. In the second chapter ``Habits as adaptations: An experimental study\u27\u27 (joint with Ludmila Matyskov\\u27{a}, Brian Rogers, and Jakub Steiner), we experimentally study the degree of sophistication in habit formation and cue selection. When observable cues correlate with optimal choices, habit-driven behavior can alleviate cognition costs. We compare lab treatments that differ in the information provided to subjects, holding fixed the serial correlation of optimal actions. We find that a particular cue – own past action – affects behavior only in treatments in which this habit is useful. The result suggests that caution is warranted when modeling habits via a fixed non-separable utility. Despite this sophistication, lab behavior also reveals myopia in information acquisition. The last chapter ``Reporting Incentives and the Structure of a Community\u27\u27 examines how the network structure of a community affects a witness and her reporting incentive through a model of favor exchange over a social network. I argue that individuals of a given moral disposition may act differently depending on the pattern of connections in a community. A key factor that affects the reporting decision of a witness to a crime in this model is the `impact\u27 of the offender on the witness\u27s neighbors, where the impact is defined as the difference between the average contribution of neighbors to the witness\u27s network and the contribution of the offender to the network. The result identifies what kind of society is more susceptible to hidden crime. It gives a warning especially for a closed community through the potential harm of overly intertwined mutual neighbors. It suggests that we can mitigate the harm by adding channels to expand one’s social network