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Endogenous Institutions: a network experiment in Nepal
Last registered on March 02, 2021

Pre-Trial

Trial Information
General Information
Title
Endogenous Institutions: a network experiment in Nepal
RCT ID
AEARCTR-0007274
Initial registration date
March 01, 2021
Last updated
March 02, 2021 6:42 AM EST
Location(s)
Region
Primary Investigator
Affiliation
Paris School of Economics
Other Primary Investigator(s)
PI Affiliation
Paris School of Economics
Additional Trial Information
Status
Completed
Start date
2018-09-05
End date
2018-11-15
Secondary IDs
Abstract
In developing countries where formal institutions are often weak, peer monitoring represents a natural mechanism for the enforcement of agreements. This paper studies the demand for monitoring and its effectiveness in sustaining cooperation across social groups.
Mapping the social networks of 19 Nepali villages, we conduct an experiment to explore the role of the endogenous choice of monitors on cooperation. The paper shows that closely knit groups are 40% points less likely to choose a central monitor, while sparse groups tend to prefer a monitor who is highly central in the network. The democratic selection of monitoring improves cooperation by up to 22% compared to an exogenous assignment, but only in sparse groups. Further, we observe that in sparse groups the positive effect of endogenous monitoring can spill-over to games played under exogenous assignment.
External Link(s)
Registration Citation
Citation
Iacobelli, Giulio and JUNI SINGH. 2021. " Endogenous Institutions: a network experiment in Nepal." AEA RCT Registry. March 02. https://doi.org/10.1257/rct.7274-1.0.
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2018-09-12
Intervention End Date
2018-11-15
Primary Outcomes
Primary Outcomes (end points)
Cooperation behavior, Election of the monitor
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Individuals in groups of three play in two different group composition: closely knit and socially sparse. This novel feature of the design allows us to have individual fixed effects and get rid of the endogenity problem in networks. Individuals are then given a choice to elect a monitor. They choose between no monitor, a high central monitor and low central monitor where centrality can be thought of as level of influence. Players play a contribution game where contribution to the public pot increases in value by 50% and is then equally distributed. The monitor does not materially punish but only observes the contributions of each player, which would otherwise be private information. Women play two treatments in each group: a monitor chosen by the group and an externally assigned monitor.
Experimental Design Details
We have three different treatment components in our experiment. First, group composition. Groups can be composed either by close friends or by people socially distant in the network. Second, the centrality of monitors. In our experiment, we offer three monitoring options: high central monitors, low central monitors and no monitors. Third, the process whereby monitoring institutions are assigned: either democratically elected by the group or exogenously imposed. After assigning the role of high central and low central monitors, which remain fixed throughout the experiment, we divide the rest of the individuals into groups of three with varying group composition, either dense or sparse. Individuals play in groups of three in both dense and sparse treatment in a randomized order. By always reshuffling groups in such a way that every individual plays exactly in two different groups, we can extract individual fixed effects. This part of the design is of paramount importance because of the intrinsically endogenous nature of networks: the network position of player i is endogenous to her observable characteristics which are in turn affecting her contribution. This design allows a neat disentanglement of the endogenous position in the network from the contribution, through the extraction of fixed effects at the individual level.

At the start of each session, group players are gathered in a room where they can see each other, but no communication is allowed. Each member of the group receives 10 tokens of a different color, where the value of 1 token is marked at Rs 10. Each session is divided into two stages. In the first stage, each player privately casts a vote on her preferred monitoring option. Players are given the option to choose between a high central monitor (H), a low central monitor (L) or no monitor at all (NM). Note that this monitor is a fourth individual that remains the same for all groups within a village. The cost of choosing the monitor is 20 . This cost makes always choosing a monitor a non-dominated strategy. The cost is paid by participants who vote to have a monitor (either high central or low central), irrespective of the voting outcome of the group. The monitor is elected by a majority rule and the result of the vote is not immediately revealed. The group is then randomly assigned to either the endogenous treatment or the exogenous one. The randomization is implemented by picking one out of two balls: if a green ball is drawn, the endogenous treatment is played first and the exogenous follows. If the ball drawn is pink then exogenous is played first followed by endogenous. The result of the voting is only revealed just before playing the endogenous treatment. In the exogenous treatment, the group is randomly assigned either to a high central, low central or to no monitor treatment.

In the second stage of the experiment, the group plays a public good game where each player decides how many tokens out of the 10 are to be contributed to the public pot. They are informed that the money in the public pot would be increased by 50% and then divided equally among them. Once the contributions are made, the monitor -- either elected or assigned -- is called into the room to see how much each player contributed to the public pot. The monitor can distinguish the contributions belonging to each player by the different colors of the tokens they were endowed with. Moreover, the monitor does not have the power to impose fines and simply observes how much each player contributed. We exploit only the informational channel whereby the players' reputation can be affected (e.g. gossips, reporting, etc.), following the assumption that it would drive much of real-life interaction in the village. We study how the fear of being reported on by the monitor outside the lab drives the behavior of people and how it consequently affects the demand for third-party monitoring. To sum up, the contribution game is played twice in the same group without receiving any feedback, once with the monitor option chosen by the group (endogenous) and once randomly assigned monitoring option (exogenous).
Randomization Method
Randomization done by balls of different colors
Randomization Unit
Group composition: Level of individual
Endogenous/ Exogenous Institution: Level of groups formed in the experiment
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
19 villages
Sample size: planned number of observations
800 individuals
Sample size (or number of clusters) by treatment arms
800 individuals. Every one plays the different components of the experiment as it is a lab in the field experiment.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
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, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS