Economics Seminar（2014-03）

Topic: Status-Driven Social Comparisons Reduce Traffic Violations: Evidence from A Large-Scale Field Experiment

Speaker: Fangwen Lu

Affiliation: Renmin University

Time: Tuesday, 4 March. 14:00-15:30pm
Location: Room217, Guanghua Building 2

Abstract： We study the effects of improvements in market transparency on eBay on seller exit and
continuing sellers’ behavior. An improvement in market transparency by reducing strategic
bias in buyer ratings led to a significant increase in buyer valuation especially of sellers
rated poorly prior to the change, but not to an increase in seller exit. When sellers had
the choice between exiting—a reduction in adverse selection—and improved behavior—a
reduction in moral hazard—, they preferred the latter because of lower cost. Increasing
market transparency improves on market outcomes.We study the effects of improvements in market transparency on eBay on seller exit and
continuing sellers’ behavior. An improvement in market transparency by reducing strategic
bias in buyer ratings led to a significant increase in buyer valuation especially of sellers
rated poorly prior to the change, but not to an increase in seller exit. When sellers had
the choice between exiting—a reduction in adverse selection—and improved behavior—a
reduction in moral hazard—, they preferred the latter because of lower cost. Increasing
market transparency improves on market outcomes.We study the effects of improvements in market transparency on eBay on seller exit and
continuing sellers’ behavior. An improvement in market transparency by reducing strategic
bias in buyer ratings led to a significant increase in buyer valuation especially of sellers
rated poorly prior to the change, but not to an increase in seller exit. When sellers had
the choice between exiting—a reduction in adverse selection—and improved behavior—a
reduction in moral hazard—, they preferred the latter because of lower cost. Increasing
market transparency improves on market outcomes.
The increase in car ownership in emerging markets has been accompanied by a rapid increase in traffic accidents. We investigate the effects of social comparisons as a non-pecuniary incentive to reduce traffic violations in a field experiment conducted in China. We sent text messages to a random sample of 75,000 drivers who had at least one ticket in the first nine months of 2013, informing each of his or her own number of tickets, or the average number of tickets among drivers of the same car brand, or drivers of a high-, medium-, or low-status car. Compared to the control, information on drivers of a high-status car significantly reduces the number of tickets received by men, particularly men who drive a low-status car.

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