Experimental Design
Indian participants (primarily from Uttar Pradesh) and Pakistani participants will be recruited from large Internet panels. Participants will be asked to privately make a series of binary choices. In particular, they will be asked to choose stocks from given pairs, potentially earning a substantial bonus on the order of a day’s wage. Specifically, if the stock they choose from a randomly selected pair performs better than the alternative stock during a given month after the survey (e.g., September 2023), then they will earn a prespecified bonus. Otherwise, they will earn nothing. The size of the bonus will be randomly varied across participants. In addition, participants will be asked to state their opinions on a variety of social and economic issues.
Pairs of stock will be of three types: (i) Neutral stocks: pairs where both stocks are of firms based in the USA. (ii) National stocks, same country: pairs where both stocks are of firms based in one of the two surveyed countries, either India or Pakistan, and where company names clearly indicate that they are based in that specific country. Thus, nationality is made more salient, and in addition participants from the relevant companies’ country are likely to be perceived as having more stock-related knowledge. (iii) National stocks, different countries: pairs where one stock is of a firm based in India, and the other stock is of a firm based in Pakistan. This will allow testing for home (ingroup) bias in stock picking, and examine how this bias interacts with ingroup conformity, outgroup differentiation and learning.
Policy choices will concern domestic financial and economic issues, in line with the study being about economic behavior. They will involve issues that are relatively less central in public discussion, and where participants are likely to be uncertain about the intrinsic values of the decisions (to allow social learning), and are unlikely to have strong preexisting familiarity with relevant group norms.
To allow social learning, choice items will ideally involve some uncertainty about their intrinsic value. Items will be selected based on preliminary surveys in both countries, and to the extent possible will be chosen to reduce preexisting cross-country differences in dispositions, and beliefs about group norms.
Other questions on social and economic matters will be selected from Wave 6 of the WVS, which was fielded in both India and Pakistan (Wave 7 was not fielded in India). Items will be chosen to reduce preexisting cross-country differences in opinions and norms. However, unlike the above policy choices, these questions will involve major, and possibly deeply-held, views and opinions. The perceptions of social norms in these matters will not be tightly controlled by the experimenter, and may not be significantly affected by the social information we provide. For example, one question asks about agreement with the statement “If a woman earns more money than her husband, it's almost certain to cause problems”. Many participants plausibly have preexisting views about this question, as well as about the prevailing views in society, and may not be much affected by the social information provided within the survey. Furthermore, there is likely to be less uncertainly about the intrinsic value of different responses. For example, one question asks: “To what degree are you worried about not being able to give your children a good education?” Here, people may have a clear answer regardless of what other people think. Nonetheless, we include the WVS questions as we believe it is of interest to study whether any of our three channels of social influence can be detected even when it comes to such issues.
Survey participants will be randomly assigned to receive or not receive social information. Those who receive social information will be matched with a random sample of each nationality group participating in the preliminary surveys (either our own survey or the WVS, as appropriate). Before making each choice, they will be informed of the descriptive norms prevailing in the samples of nationality groups assigned to them. The information about norms will include a description of the distribution of choices in the sample of each social group (e.g., a% of Group A chose option x, and (1-a)% of Group A chose option y; b% of Group B chose option x, and (1-b)% of Group B chose option y), alongside a graphic illustration of the distribution. Since the samples are independently drawn for each participant, this will generate variation in the patterns of choices they observe by their ingroup and by their outgroup. Qualitatively, there should be four main social-information conditions (in addition to the no-social-information condition), where participants will discover that a majority or minority of their in-group, and a majority or minority of their out-group chose a particular option, leading to a 2 (in-group majority, in-group minority) X 2 (out-group majority, out-group minority) + 1 (no social information) design.
To create the distribution of choices for the different social-information conditions, while avoiding deception, each survey participant in the social-information conditions will be matched with an odd-sized small sample from each nationality group participating in the relevant preliminary survey already conducted (either by us or as part of the WVS). The choice items presented to survey participants will be those for which the distributions of choices in the preliminary surveys are closest to uniform. Due to this procedure, we may not have enough identifying variation for some choice items. In particular, strong home bias in the choices across national stocks from different countries (Indian vs. Pakistani stock, type iii), will mean that we will not have much variation in observed choices within each nationality.
Comparing the choices of survey participants who observe different combinations of in-group and out-group norms (or receive no social information), and who have different levels of social identification, will allow us to disentangle the three main channels of social influence. In particular, under uncertainty about the options’ intrinsic values, social learning implies a positive effect of both observed ingroup and outgroup behavior. Furthermore, in the absence of social identity effects or differential group expertise and intrinsic preferences, this effect should be similar in size for both groups. In the presence of social identity effects, conformity implies positive effects of observed ingroup behavior, while differentiation implies negative effects of observed outgroup behavior. Importantly, whereas social learning does not hinge on social identification, conformity and differentiation do. Hence, for strong social identifiers, we expect the last two effects to be more prominent.
The inclusion of choices involving national stocks from different countries (type iii) will allow us to explore home bias in financial decisions and its interaction with the above three channels of social influence. The inclusion of choices involving national stocks from the same country (type ii) neutralizes the home bias channel, and allows us to explore the existence of potential saliency effects, leading to a general increase in ingroup following behavior (compared to type i choices) against learning effects due to perceived expertise, whereby participants follow Indians in the choice between Indian stocks, and follow Pakistanis in Pakistani stocks, regardless of their own national affiliation.
This discussion shows how the experimental design allows us to separate different theoretical channels. We will analyze the results using a regression framework where we examine how individual choices are affected by the observed descriptive norms of the ingroup and the outgroup, that is, the proportion in each group making a particular choice. Crucially, we will separate the effects by the extent of group identification, measured by our survey items.
After choices are made, one of the stock pairs will be randomly selected for each participant. If the price of the chosen stock in that pair increases more or falls less than the price of the other stock during a given month after the survey (e.g., September 2023), then the participant will receive a bonus payment, whose size will be randomly varied between participants. The different sizes of bonuses will allow us to explore whether the importance of conformity and differentiation is mitigated in higher-stakes decisions.
Each participant will also be asked to complete a brief survey, which will include questions about their reasoning during the experiment, subjective and objective measures of financial sophistication, psychological questionnaires on identity, demographics, and feedback to the researchers. We are interested in also exploring differences in in-group conformity, out-group differentiation and social learning by the size of the stakes, attitudes, frequency of watching cricket, and demographics.