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We run a laboratory experiment where some participants are selected to make investment decisions on behalf of others. We test whether a democratic context influences the social preferences of decision makers in terms of efficiency, altruism and concern for inequality. We find that decision makers who are selected democratically are generally more efficiency-oriented, but also more altruistic, than leaders who are selected at random or by ability. Because wealth generation and distribution sometime conflict, efficiency is no higher with democratic leaders, although payoffs are more equal. We interpret our results in terms of a democratic norm that mitigates how elections may otherwise lead to an enhanced feeling of entitlement to one's role. We exclude a selection effect and discuss the drivers of our results in terms of belief in the legitimacy of the selection procedure and reduced social distance.

It has been argued that cognitively constrained consumers respond suboptimally to complex decision problems, and that firms can exploit these limitations by introducing spurious complexity into tariff structures, weakening price competition. We model a countervailing force. Restricting one's choices to the most easily comparable options is a psychologically well‐attested heuristic. Consumers who use this heuristic favour firms that follow common conventions about tariff structures. Because a 'common standard' promotes price competition, a firm's use of it signals that it offers value for money, validating the heuristic. This allows an equilibrium in which firms use common standards and set competitive prices.

AbstractDefaults may not directly get people to behave as intended, such as saving more, eating healthy food or donating to charity. Rather, defaults often only put people on the 'right' path, such as joining a savings plan, buying healthy food or pledging money to charity. This an issue because getting more people to take those first steps does not necessarily motivate them to go on with further steps. Indeed, the default does little to help them understand the benefit of doing so. This can greatly reduce the impact of the default. We test this idea in a charitable giving experiment where people first can promise to give to charity ('pledge') and then can go on to donate. We find that participants pledge more often when that is the default, but those who pledge in that case are less likely to take further steps to donate than those who pledge when pledging is against the default. We interpret this in terms of motivation and transaction costs. Some people pledge only to avoid the psychological costs of going against the default. Those people are closest to indifference between donating or not and are therefore less motivated to go on to donate. We also show that the intrinsic motivation of pledgers is lower when pledging is the default and that making pledges the default does not change attitudes to charities.