Experimental Design Details
The IDM treatment consists of repeated individual decision-making, using multiple price lists. Participants in the three treatments (SINGLE, MULTI and FULL) will participate in markets with different conditions. All markets consist of 10 participants, 5 per market side (buyers/sellers). In SINGLE, 5 units of an experimental good can be traded, and each participant can trade one unit. In MULTI and FULL, 15 units can be traded in total. In MULTI, each participant can trade up to 3 units, in FULL, each participant can trade up to 15 units. Across all markets, there is a common supply/demand schedule, which means that costs/values for trading a unit only depend on the aggregate number of units traded previously. In all market treatments (SINGLE, MULTI, FULL), participants first participate in the elicitation of their valuation of charity donations, identically to participants in IDM. Afterwards, they participate in the markets; lastly, they face the identical individual elicitation as before the start of the market.
Across all treatments, the experiment will conclude with elicitations of: i) the median of the distribution of valuations of charity donations; ii) social norm elicitation about behavior in markets and in individual decision-making; iii) risk preferences.
In the experiment, the main hypotheses are concerned with establishing whether (i) market outcomes get closer to the (selfish) competitive equilibrium behavior and selfish traders as we move from SINGLE to MULTI to FULL, (ii) treatment differences are due to different degrees of erosion of moral costs vis-a-vis different degrees to which these markets allow for selection of immoral traders. We isolate norm erosion by comparing traded quantities to the competitive equilibrium benchmarks (without norm erosion, quantities should be close to the competitive equilibrium with moral costs; hence quantity increasing towards the selfish competitive equilibrium indicates moral cost erosion). On the other hand, we isolate market selection, (i) by exploring the degree to which the benchmark equilibrium with moral costs (iiia) (as well as the distance between the equilibrium in (iiia) and (iiib) ) differs across SINGLE, MULTI and FULL market setups; and (ii) by studying to what extent the traded units are concentrated in the hand of a relatively small number of traders.
We further study treatment differences in individual-level norm erosion. With the three market treatments, we disentangle several potential forces contributing to moral cost erosion. Between IDM and SINGLE, most forces studied in the literature as potential factors of norm erosion are present (e.g. Falk & Szech, 2013; Bartling, Weber & Yao, 2015). Noteworthy factors are: (i) shared responsibility (i.e. the fact that two traders jointly decide on a trade, sharing the responsibility and guilt for a trade and introducing payoff-concerns for the counter-party) and (ii) market framing. The remaining two treatments disentangle the reasons for norm erosion we are mostly interested in. SINGLE and MULTI are identical markets, where we only scale up the market size proportionally. Treatment differences in moral cost erosion will be due to the more precise social learning possible in this treatment. Lastly, MULTI and FULL allow for a replacement-logic type of reasoning, as each trader is potentially able to serve the entire market by her/himself. In both SINGLE and MULTI, each trader is pivotal in determining whether their units are going to be sold or not. In FULL, the removal of capacity constraints of traders allows for the replacement logic to be active. To study this force, we are interested in the identity and moral costs of the marginal traders: if subjects with high moral costs are most active at low surpluses in this treatment, this indicates that the replacement logic deteriorates moral costs.