Job Market Paper

Ralston, J. ; Aimone, J. ; Rentschler, L.; North, C. (2019) Bias, Trust, and Trustworthiness: An Experimental Study of Post Justice System Outcomes

The criminal justice system imposes long-term spillover costs for the convicted and acquitted in the form of reduced employment opportunities and high rates of recidivism, possibly a byproduct of poor employment opportunities. This paper examines discriminatory behavior of investors and employers when they are given the opportunity to condition on their trustee’s/worker’s criminal record. Similar to the real world, our experiment shows that employers and investors do exhibit discriminatory behavior toward those with criminal conviction and those with criminal acquittals. However, no basis exists for the statistical discrimination, since reciprocator behavior is found to not depend on criminal record, while true innocence or guilt is found to play a large role in a subject’s reciprocity. While access to true innocence and guiltiness would prove invaluable to investors and employers, this is unobtainable in the real world and equating convictions with true guiltiness is worrisome, given truly innocent subject’s willingness to plead guilty.

Under Review

1. Duffy, J. and Ralston, J. (2019) Innovate vs. Imitate: Theory and Evidence (Revise and Resubmit at the Journal of Economic Behavior and Organization)

We model and experimentally evaluate the trade-off between innovation and imitation commonly faced by firms and individuals. Innovation involves searching for a high payoff opportunity, but paying a cost in order to do so. Imitation involves avoiding that search cost and copying the most successful payoff opportunity uncovered thus far. We formulate a novel model of sequential innovation versus imitation decisions made by a group of n regret minimizing agents. We analyze the consequences of complete versus incomplete information about the distribution of payoffs from innovation on agents' decisions. We then study these predictions in a laboratory experiment where we find evidence in support of our theoretical predictions.

2. Ralston, J. ; Aimone, J. ; Rentschler, L.; North, C. (2019) Prosecutor Plea Bargaining and Incentive Structure: Evidence from an Experiment

Prosecutors in the United States are often incentivized (directly or indirectly) to maximize their conviction rate. Since prosecutors have broad discretion when deciding which cases to pursue these conviction rate centered incentives are likely to affect charges brought and plea-bargains offered. If convictions rates include plea bargains, prosecutors may offer attractive plea bargains in cases where the available evidence is unlikely to result in a guilty finding and inflate their conviction rate. We report the results of a controlled laboratory experiment, with subjects in the role of prosecutors. We vary whether subjects are incentivized to maximize their convictions rate, as well as whether conviction rates include guilty pleas. We find that incentivization of plea bargaining increases the plea-threat punishment differential, that prosecutors exhibit distinct types of bargaining behavior, and that there are gender differences in bargaining behavior.

3. Ralston, J. ; Aimone, J. ; Rentschler, L.; North, C. (2019) False confessions: An experimental laboratory study of the innocence problem

The innocence problem occurs when an innocent person is falsely accused or convicted a crime. This phenomenon is impossible to study with empirical data as “true” innocence and guilt are typically unobservable in empirical real-world data. In this study we replicate the criminal justice system in the laboratory with real salient crimes and subjects acting in the roles of defendants, prosecutors, and jurors in order to study the innocence problem. In a controlled environment, we identify individuals who are falsely or accurately accused of a crime and track their process through the plea-bargaining system. This allows us to explore the impact of being falsely accused of a crime on plea bargaining decisions. We find evidence for a substantial innocence problem, reflected by a high willingness of truly innocent defendants to accept plea bargains. However they do so at a lower rate than the truly guilty suggesting preferences for truth telling an irrelevant factor in most economic theory. We also find evidence plea decisions are influenced by individual preferences over uncertainty as predicted by economic theory. Overall, we find that loss aversion has a significant positive influence on plea decisions and that the reduced propensity of the truly innocent to accept plea bargains is driven by an interaction between their preferences to avoid lying and their risk, loss, and ambiguity preferences.

Working Papers

1. Aimone, J. ; Ralston, J. ; Rentschler, L.; North, C.(2019) Beyond a Perceived Reasonable Doubt

A trial by a jury of one’s peers is a common feature of many common law-based democracies. The United States instructs jurors to judge a defendant guilty only if the likelihood of guilt is “beyond a reasonable doubt”. The legal standard for “reasonable doubt” has no bright-line test, but scholars have modeled it as a probability of guilt or innocence. Empirical studies have found that survey respondents believe that the minimum threshold for “beyond a reasonable doubt” averages about a .10 to .15 probability of innocence.1-3 However, little is known about distributional differences of individuals’ perceptions of this threshold nor whether these distributions are related to juror demographic or selection characteristics such as race, gender, or voter status (the single federal requirement in the US to be placed on juror rolls). Here we show, using a laboratory experiment, that a juror’s self-identified voter status is significantly correlated with the juror’s reasonable doubt threshold, while there is no correlation between race or gender and reasonable doubt thresholds. Our results show that likely voters report a minimum of a .26 probability of innocence on average to be reasonable doubt, nearly 9 percentage points higher than the probability required to reach reasonable doubt by those that are not likely voters. Overall, our study’s results suggest that the reliance upon voter registration to select jurors may systematically bias juries toward increased rates of guilt due to higher required thresholds of doubt among the voting population.

2. Ralston, J. (2019) Cognitive Load, Preferences, and Performance

Recent studies have found deleterious effects of increased cognitive load on outcomes such as backward induction, performance, and strategic sophistication. I corroborate these effects and show evidence that cognitive load is also responsible for changes in subjective valuations, suggesting that changes in cognitive load changes preference orderings.

Works in Progress

1. Ralston, J. ; Wong, S, ; Aimone, J. ; Rentschler, L.; North, C. (2019) Type I and Type II Error: An Experimental Analysis of Individual Tolerances to Error Types

Differential tolerance of type I and type II errors could presumably lead to differences in cost benefit analyses. Such differences could explain divides in economic and social policy positions between individuals and differences arising in the structure of institutions over time. For instance, the United States criminal justice system is based upon a presumption of innocence until proven guilty suggesting early policies were aimed at preventing false convictions of truly innocent people. However, more recent systems handling immigration, customs, and airline travel often have security procedures in place presuming malevolence until travelers pass screenings, suggesting policies have recently been adopted to prevent falsely clearing truly guilty people. In this study we provide a novel experimental procedure for eliciting individual participants’ tolerance of type I and type II error. In our results we pay particular attention to differences in type I/II error tolerances that arise along gender, political, and religious lines.

2. Ralston, J. ; Aimone, J. ; Ball, S. ; Smith, A. (2019) Cognitive Bandwith, Poverty, and Habit formation

We propose to study the effects of cognitive constraints and poverty on habit formation in a behavioral experiment. Laboratory experiments are ideal for such a study as they allow us to control and exogenously manipulate cognitive load which is infeasible out of the laboratory. Habit formation has important implications for the economics of poverty, macroeconomics, and behavioral economics. Participants engage in a modified life-cycle task, well studied in the experimental macroeconomics literature, while also performing a secondary task which vies for the attention of the participant. Our design allows us to identify deviations from the optimal strategy and to measure the planning horizon of individual subjects. This is important for understanding habit formation because the model implies that increased myopia is correlated with habit reliance and deviations from optimal choices. In our first set of treatments, cognitive load will be exogenously manipulated using a standard task that requires participants to memorize short or long digit sequences during the experiment (Deck & Jahedi, 2015; Allred, Duffy, & Smith, 2016, Ralston, 2019). This allows us to explore which habitual choices are the result of rational economic decision making and which are a consequence of heuristic decision making. In our second set of treatments, we will vary the total lifetime income the partipants receive while holding the other parameters of the first set of treatments constant. This allows us to mimic economic conditions that are more prevalent in poorer sectors of society (Hardy & Ziliak, 2012), conditions where more cognitive bandwidth would be most beneficial. Overall, our design allows for clean testing of our hypotheses that cognitive load increases rate of habit formation and length of reliance, decreases total welfare, and increases myopia. We expect decreased income stream levels will serve to exacerbate each of these effects.

3. Short, A. ; Ralston, J. ; Aimone, J. ; Rentschler, L. ; North, C. (2019) Dynamics of Public Goods Contributions Under Probabilistic Punishment:

We use a set of experimental voluntary contribution mechanism (VCM) games in the style of Masclet et al. 2003 to study the effect of costly probabilistic punishment on contribution amounts. We study how punishment and contributions amounts evolve over finitely repeated games and how these patterns vary depending on how likely it is for punishment to be effective. We use a Fischbacher et al. 2001 typing procedure to examine correlations between contribution type (e.g. altruist, conditional cooperator, etc.) and retaliatory punishment behavior. Our study sheds light on how costly probabilistic punishment shapes cooperation in a group setting.

4. Short, A. ; Ralston, J. ; Aimone, J. ; Rentschler, L. ; North, C. (2019) Plotting Prevenge: Punishment Strategies in a Public Goods Environment

We use a set of experimental voluntary contribution mechanism (VCM) games to study the effect of costly probabilistic punishment on contribution amounts. Our primary treatment variables allow us to vary probabilities of punishment, information regarding the contributions of group members, and the occurrence of type I errors being made. Our methods and rich data set allow for a detailed typing procedure using punishment participant punishment strategies, which can evolve according to different informational treatments and punishment conditions. We also use a Fischbacher et al. 2001 typing procedure to examine correlations between contribution type (e.g. altruist, conditional cooperator, etc.) and punishment type.

5. Ralston, J. (2016) Debt Aversion and the Impact of Natural Borrowing Constraints: Evidence from an Experiment

Consumption theory states that if total lifecycle income remains constant, consumption will be flat regardless of whether the income profile is upward or downward sloping. However, in experimental literature deviations from optimal consumption are larger in lifecycles with upward sloping income profiles than downward. This has come to be referred to as ``debt aversion''. Through use of increasing and decreasing income profiles with the same expected total income and same expected total life time utility in a treatment, consumption behavior under borrowing and saving regimes are able to be compared directly. In the experiment, we allow for lengthening of the lifecycle and adding of borrowing constraints. It is found that there are modest reductions in deviations from optimal behavior when in the presence of a borrowing constraint, and that its effects are largest in the longer of the two lifecycle types. This indicates that loss aversion and risk aversion are alleviated by borrowing constraints.