What Makes Pyramid Schemes Work?
Last registered on June 13, 2018

Pre-Trial

Trial Information
General Information
Title
What Makes Pyramid Schemes Work?
RCT ID
AEARCTR-0003057
Initial registration date
June 08, 2018
Last updated
June 13, 2018 7:20 PM EDT
Location(s)
Primary Investigator
Affiliation
University of Cologne
Other Primary Investigator(s)
PI Affiliation
University of Queensland
PI Affiliation
University of Queensland
Additional Trial Information
Status
Completed
Start date
2018-06-08
End date
2018-06-09
Secondary IDs
Abstract
Via an online experiment, we investigate whether and why people invest in pyramid schemes. We focus on cognitive biases that could explain entry decisions.
External Link(s)
Registration Citation
Citation
Dogan, Gonul, Kenan Kalayci and Priscilla Man. 2018. "What Makes Pyramid Schemes Work?." AEA RCT Registry. June 13. https://www.socialscienceregistry.org/trials/3057/history/30704
Experimental Details
Interventions
Intervention(s)
Our study consists of three treatments. In baseline treatment, we will determine the rate of investment to a pyramid scheme. Two further treatments will test whether the investment decisions are due to the complexity of the decision-making.
Intervention Start Date
2018-06-08
Intervention End Date
2018-06-09
Primary Outcomes
Primary Outcomes (end points)
Investment rate, a binary variable.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Investment rate controlling for k-level reasoning, risk measure, and trust measure.
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Subjects are endowed with $4 and have to decide whether to invest or keep their endowment. 200 participants will make this decision. Subjects' decisions are implemented in a randomly drawn network, and the payoffs realise.
Experimental Design Details
Subjects are endowed with $4 and have to decide whether to invest or keep their endowment. 200 participants will make this decision. Afterwards, a tree will be randomly drawn to determine the participant's position in the tree. At the top of the tree, there are two persons, and each person is matched with two further people (followers). If a person decides to invest, and is part of an active branch of the tree, her earnings would be 2 times the number of first degree followers, 1 time the number of second degree followers, 0.5 times the number of third degree followers and so on. Participants get detailed instructions about this earnings structure and have to answer comprehension questions that give example trees.
Randomization Method
Mturk randomization device.
Randomization Unit
Individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
600
Sample size: planned number of observations
600
Sample size (or number of clusters) by treatment arms
200
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
If 50 percent invest in baseline, and 40 percent in treatment 1, then at alpha=0.05, power is 0.97. The effect size is 0.193. With 80 percent power at 5 percent alpha, with 400 subjects, the detectable effect is 0.14. This would translate into a reduction from 50 percent to 42.86 percent investors.
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers