When is cutting corners acceptable?

Last registered on June 23, 2023

Pre-Trial

Trial Information

General Information

Title
When is cutting corners acceptable?
RCT ID
AEARCTR-0011610
Initial registration date
June 21, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
June 23, 2023, 5:50 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
WZB & DIW Berlin

Other Primary Investigator(s)

PI Affiliation
Linnaeus University
PI Affiliation
University of Hamburg

Additional Trial Information

Status
In development
Start date
2023-06-20
End date
2023-07-31
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
In this experiment, we examine the conditions under which individuals consider the exploitation of loopholes acceptable. The experiment involves two types of participants: workers and spectators. Workers are matched into groups of four and are supposed to pay a tax designed to equalize their incomes. However, they have the option to work on a calculation task to reduce their tax rate at the expense of other participants. The calculation task contains a loophole, which allows workers to strongly lower their tax rate. Spectators judge whether exploiting the loophole is appropriate or not. They can decide whether to close the loophole in future sessions or whether to sanction workers who exploited the loophole. In separate treatments, we vary whether pre-tax incomes reflect earned merits, how difficult it is to detect the loophole, and the efficiency costs of redistribution.
External Link(s)

Registration Citation

Citation
König, Tobias, Lydia Mechtenberg and Renke Schmacker. 2023. "When is cutting corners acceptable?." AEA RCT Registry. June 23. https://doi.org/10.1257/rct.11610-1.0
Experimental Details

Interventions

Intervention(s)
5 treatments: Baseline, Effort, Non-clever, Inefficiency, Ex-post
Intervention Start Date
2023-06-20
Intervention End Date
2023-07-31

Primary Outcomes

Primary Outcomes (end points)
Share of spectators that close the loophole: Spectators are matched with a group of workers from a future session and can decide whether the loophole should be closed for these subjects.

Appropriateness of using the loophole: Spectators’ first-order and second-order beliefs of the appropriateness of exploiting the loophole.

Share of spectators that sanction loophole exploiters: Spectators are matched with a group of workers from a previous session and can decide whether loophole exploiters should be sanctioned.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Appropriateness of tax adjustment: Spectators’ first-order and second-order beliefs of the appropriateness of participating in the fraction task in general.

Appropriateness of ex-post sanctioning: Spectators’ first-order and second-order beliefs of the appropriateness of sanctioning a loophole exploiter ex-post.

As manipulation checks, we estimate treatment effects on factors related to the treatments. These include participant perceptions regarding the deservedness of gross incomes in the experiment, whether they successfully detected the loophole and their estimations of how many others they believe did, their views on whether individuals who exploit the loophole are clever, and their opinions on whether the tax revenues are being wasted.

We will investigate mechanisms explaining the decision to close or sanction the loophole using the factors above, as well as the belief of how many subjects exploit the loophole and by how much.

Exploratively, we will investigate whether behavior in the experiment is correlated with political views and voting behavior in previous presidential elections. We will also investigate the relationship with their beliefs regarding the appropriateness of loopholes, preferences for redistribution, and perceptions of the efficiency of public spending.

Exploratively, we will also investigate the behavior of the workers. Here, we focus on their choice to use the loophole and on whether they consider using the loophole appropriate.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Spectator-worker design with randomized interventions
Experimental Design Details
Participants are matched into groups of four (two green workers and two orange workers). Green workers receive a higher gross income than orange workers. Green workers are supposed to pay a tax of 60% and orange workers of 20%, such that post-tax incomes are equal. However, green workers can work on a calculation task to adjust their tax rate. For each correct calculation, they reduce their tax rate by 3 percentage points. There is a loophole in the calculation task, which allows workers to decrease their tax rate strongly without making any calculations.

Spectators are shown the instructions of the workers and they can try out the task as well. Afterward, they are asked whether they would like to close the loophole in a future session. In the ex-post treatment, they are asked instead whether they would like to sanction workers who exploited the loophole. Moreover, they are asked how appropriate they consider the exploitation of the loophole.

Worker sessions for the ex-post decision are conducted prior to the spectator experiments, while worker sessions for the ex-ante decision take place after the experiment. The choices made by randomly selected spectators are then implemented in these worker sessions.
In a post-experimental questionnaire, we elicit the motives for spectator decisions, general political attitudes, and background characteristics.

For the experimental interventions, we test the following hypotheses (relative to the baseline treatment):
H1: The Effort treatment increases (a) the appropriateness of the loophole and (b) individuals are less likely to close the loophole.
H2: In the Non-clever treatment, individuals are more likely to close the loophole. Regarding the appropriateness of exploiting the loopholes, there may be mixed effects since the treatment may also shift the perception of whether the loophole is intended or not.
H3: The Inefficiency treatment increases (a) the appropriateness of the loophole and (b) individuals are less likely to close the loophole.
H4: In the ex-post treatment, we expect the share of people wanting to sanction loophole exploiters to be lower than the share of people wanting to close the loophole.

We will estimate heterogeneous treatment effects by political affiliation, voting behavior in previous presidential elections, income, education, gender, and age.

We are interested in heterogeneous treatment effects by political affiliation, however, Prolific has a substantially higher share of Democratic participants. Therefore, we will use quotas to target the vote share of Donald Trump in the presidential election 2020.

We will do robustness checks by excluding participants who answered the comprehension questions incorrectly on the first try.
Randomization Method
Computerized randomization using Qualtrics. We use the option “evenly present elements.”
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
Target sample: 3.400 (3000 spectators, 400 workers)

We target 3.400 subjects conditional on the ability to fill our quotas (see experimental design).
Sample size: planned number of observations
Target sample: 3400 (3000 spectators, 400 workers)
Sample size (or number of clusters) by treatment arms
We target 600 spectators and 80 workers per treatment.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Assuming a baseline share to close the loophole of 0.53, the MDE with N=600 is 0.112 at power=0.8 and alpha=0.05. If we end up with N=500, the MDE is 0.123. Assuming a baseline appropriateness rating of -0.12 (sd 0.65), the MDE is 0.150 at power=0.8 and alpha=0.05. If we end up with N=500, the MDE is 0.164.
IRB

Institutional Review Boards (IRBs)

IRB Name
UNIL Commission d'éthique de la recherche (CER-HEC)
IRB Approval Date
2022-07-08
IRB Approval Number
CUCO

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials