The Psychology of Externalities

Last registered on September 28, 2026
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Pre-Trial

Trial Information

General Information

Title
The Psychology of Externalities
RCT ID
AEARCTR-0019571
Initial registration date
September 22, 2026

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
September 28, 2026, 8:54 AM EDT

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

Locations

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Primary Investigator

Name
Krishna Srinivasan
Affiliation
University of Vienna
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Other Primary Investigator(s)

PI Name
Christopher Roth
PI Affiliation
LMU Munich
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PI Name
Charlie Rafkin
PI Affiliation
University of British Columbia
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PI Name
Max Müller
PI Affiliation
University of Bonn
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Additional Trial Information

Status
In development
Start date
2026-09-23
End date
2027-09-23
Keywords
Behavior, Welfare
Additional Keywords
Social norms; punishment; externalities
JEL code(s)
D62, H23, D91, C91
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
When actions generate externalities, market prices alone fail to reflect their full social costs or benefits, leading to inefficient outcomes. The classical remedy is a Pigouvian tax, which restores the first-best on its own. Yet such price instruments rarely operate alone: informal social norms governed by punishment are also widespread and discipline the same behaviors. If a tax suffices in theory, why do people punish those engaging in externality-inducing actions? We answer this question using an incentivized experiment uncovering the psychology of punishment. Our experiment tests whether individuals’ willingness to punish others engaging in externality-inducing actions depends on two theoretically important inputs: the extent to which externalities are internalized by policy and the expected behavioral response to punishment.
External Link(s)

Registration Citation

Citation
Müller, Max et al. 2026. "The Psychology of Externalities." AEA RCT Registry. September 28. https://doi.org/10.1257/rct.19571-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
See the Experimental Design section.
Intervention Start Date
2026-09-23
Intervention End Date
2027-09-23

Primary Outcomes

Primary Outcomes (end points)
Punishment: An indicator variable equal to 1 if a spectator chooses to decrease the matched participant’s bonus by $5 in a given scenario, and 0 if they leave it unchanged or increase it.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Willingness-to-pay to punish: The maximum amount that a spectator is willing to give up from their own bonus to decrease the matched participant’s bonus. This outcome is coded as zero for spectators who choose to leave the matched participant’s bonus unchanged or increase it. We describe several additional and exploratory measures in the Experimental Design section.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We study how people view the role of social norms alongside taxes and fines in addressing externalities. We test the hypothesis that people use social punishment to correct externalities left uninternalized by policy. Under this rationale, willingness to punish should depend on both the external costs left unpriced by the policy and the expected behavioral response to punishment.
Experimental Design Details
Not available
Randomization Method
Software-based randomization in Qualtrics.
Randomization Unit
Individual spectator. Each spectator is assigned to one of the six treatments, with one of the two sub-treatments, which is held fixed across their five scenarios. For each spectator, five actions are randomly selected from a broader set and presented in random order.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
1
Sample size: planned number of observations
Main experiment: 3,000 spectators, each making five decisions, resulting in 15,000 observations. Companion survey: Implementing one randomly selected decision for one in twenty spectators requires 150 matched participants for 3,000 spectators. More than 150 matched participants may need to be recruited to obtain enough participants whose reported actions and stated responses fit the relevant scenarios and treatments.
Sample size (or number of clusters) by treatment arms
The 3000 spectators are randomly assigned to one of six treatments, leading to 500 spectators per treatment.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
For each primary pairwise comparison, we have 500 spectators per treatment (e.g., No Response x Full Internalization), each making five decisions, yielding 2,500 punishment decisions per treatment. Using a two-sided two-sample t-test with a significance level of 0.05, 80% power, a baseline punishment share of 0.5, and a standard deviation of 0.5, the minimum detectable effect is approximately 4.0 percentage points, treating decisions as independent for this calculation.
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Ethical Review Board of the Faculty of Management, Economics and Social Sciences, University of Cologne.
IRB Approval Date
2026-08-26
IRB Approval Number
260051CR
IRB Name
Behavioural Research Ethics Board, Office of Research Ethics, The University of British Columbia
IRB Approval Date
2026-09-11
IRB Approval Number
H26-02871
Analysis Plan