Samahita, M. (2019). Pay-what-you-want in competition. Forthcoming in The B.E. Journal of Theoretical Economics.
This paper presents an analysis of Pay-What-You-Want (PWYW) in competition which explains its entry and limited spread in the market. Sellers choose their pricing schemes sequentially while consumers share their surplus. The profitability and popularity of PWYW depend not only on consumers’ preferences, but also on market structure, product characteristics and sellers’ strategies. While there is no PWYW equilibrium, given a sufficiently high level of surplus-sharing and product differentiation, PWYW is chosen by later entrants to avoid Bertrand competition. The equilibrium results and their market characteristics are consistent with empirical examples of PWYW.
Holm, H. J. and Samahita, M. (2018). Curating social image: experimental evidence on the value of actions and selfies. Journal of Economic Behavior & Organization, 148:83-104.
We manipulate the information subjects can share on the web concerning socially sensitive actions (public good contribution) and visibility (selfie) to determine the effect on social image, as captured by the price subjects demand for publication. Our novel design incorporates aspects of social media interaction including limited anonymity and the possibility to manipulate published information in retrospect, which involves a controled decision-making process. The overall conclusion from the experiment is that theory about social reputation can predict subjects’ social-signaling behavior. People take costly decisions to curate their social image online. We also report results of a more exploratory nature and find that taking a selfie has a strong negative impact on cooperation among frequent selfie takers, but not on other subjects.
Media: press release, radio segment
Samahita, M. (2017). Venting and gossiping in conflicts: verbal expression in ultimatum games. Journal of Behavioral and Experimental Economics, 67:111-121.
Conflicts often lead to expression of emotion to unrelated parties. We study non-instrumental verbal expression in binary ultimatum games, where receivers can comment either privately or to a third-party audience prior to accepting or rejecting the offer. The potential for gossip is sufficient to induce image concerns in senders, resulting in fairer offers in the audience treatment. Consequently, despite insignificant effect on receivers’ behaviour, the possibility of verbal expression to an audience is found to increase co-operation and hence welfare. There is demand for verbal expression even when it is unobserved or not triggered by negative stimulus.
Kahsay, G. A. and Samahita, M. (2015). Pay-what-you-want pricing schemes: a self-image perspective. Journal of Behavioral and Experimental Finance, 7:17-28.
Pay-What-You-Want (PWYW) pricing schemes are becoming increasingly popular. We develop a model incorporating self-image into the buyer’s utility function and introduce heterogeneity in consumption utility and image-sensitivity, generating different purchase decisions and optimal prices across individuals. When a good’s fixed price is lower than a threshold fair value, PWYW can lead to a lower utility. This may result in a lower purchase rate and higher average price, accounting for previously unexplained field experimental evidence. An increase in the threshold value decreases the buyer’s utility and may further lower the purchase rate, resulting in a further increase in purchase price.
Samahita, M. (2013). Effect of effort on self-image: monotonically increasing self-image functions. Economics Bulletin, 33(1):152-157.
The model of moral motivation as developed by Brekke et al. (2003) is analysed with the new assumption that self-image is an increasing function of effort. While the effects of increased efficiency and new information on optimal effort levels are similar, different results are obtained when individuals are faced with volunteering opportunities with and without non-participation fees. Most significantly, participation is sustainable as a Nash equilibrium even when it is not considered morally ideal. All results adhere to previously established theories on responsibility and crowding-out.
Visibility, peer effects and monetary incentive in solar PV adoption in Sweden – evidence from a survey experiment (with L. Mundaca).
This study investigates subsidy effects and non-economic variables affecting the likelihood to adopt solar PV in a survey using a web panel of Swedish house owners. We find that subsidies and peer effects are important factors, while visibility is not significant. Contrary to indications in the literature, interaction effects are irrelevant. Peer effects mostly come from hearing, but if the source is known both seeing and hearing affect the likelihood to adopt. Our results underline the importance of economic policy certainty –notably subsidies– and peer effects in decision-making.
Wishful thinking about mood effects (with H. J. Holm)
There is increasing acceptance of the role played by mood in decision-making. However, the evidence of mood effect in the field, as proxied by external factors such as weather and weekday, is limited. Using two large datasets containing all car inspections in Sweden and England during 2016 and 2017, we study whether inspectors are more lenient on days when their mood is predicted to be good, and if car owners exploit this mood effect by submitting lower quality cars to be inspected on these days. Different sources of good mood are studied: Fridays, sunny days, and days following major sports results, with varying degrees of the car owner’s ability to plan for inspection, and hence the likelihood of selection bias. We find limited evidence to support the existence of mood effect in this domain, despite survey results showing belief to the contrary.
Commitment demand and self-control (with C. Ek).
People commonly use commitment device to resist an immediate temptation in the interest of long-term goals. However, when people are pessimistic about their willpower or overestimate the strength of the looming temptation, they will demand more commitment device than is optimal. Using a lab experiment, we study if people sub-optimally restrict their mental capacity for decision-making, thus resulting in welfare loss especially if the commitment device is costly.