Papers and articles

Industry Papers 
Optimizing Audience Buying on Facebook and Instagram. Blogpost see link; Full paper see link
Measuring for Success: Facebook on Facebook and Instagram. Blogpost see link; Full paper see link

Industry Articles

Academic Papers
  • Recommender system
Qi Zhao, Yi Zhang, Daniel Friedman and Fangfang Tan (2015), E-commerce Recommendation with Personalized PromotionRecSys '15 Proceedings of the 9th ACM Conference on Recommender Systems219-226. Link
Most existing e-commerce recommender systems aim to recommend the right products to a consumer, assuming the properties of each product are fixed. However, some properties, including price discount, can be personalized to respond to each consumer's preference. This paper studies how to automatically set the price discount when recommending a product, in light of the fact that the price will often alter a consumer's purchase decision. The key to optimizing the discount is to predict consumer's willingness-to-pay (WTP), namely, the highest price a consumer is willing to pay for a product. Purchase data used by traditional e-commerce recommender systems provide points below or above the decision boundary. In this paper we collected training data to better predict the decision boundary. We implement a new e-commerce mechanism adapted from laboratory lottery and auction experiments that elicit a rational customer's exact WTP for a small subset of products, and use a machine learning algorithm to predict the customer's WTP for other products. The mechanism is implemented on our own e-commerce website that leverages Amazon's data and subjects recruited via Mechanical Turk. The experimental results suggest that this approach can help predict WTP, and boost consumer satisfaction as well as seller profit.

  • Group versus individual decision making

Qiang Fu, Changxia Ke and Fangfang Tan (2015), ''Success breeds success'' or ''Pride goes before a fall''? Individuals and teams in best-of-three contests, Games and Economic Behavior, 94, 57-79Link
Abstract: We study the impact of progress feedback on players' performance in multi-contest team tournaments, in which team members' efforts are not directly substitutable. In particular, we employ a real-effort laboratory experiment to understand, in a best-of-three tournament, how players' strategic mindsets change when they compete on a team compared to when they compete individually. Our data corroborate the theoretical predictions for teams: Neither a lead nor a lag in the first component contest affects a team's performance in the subsequent contests. In individual tournaments, however, contrary to the theoretical prediction, we observe that leaders perform worse - but laggards perform better—after learning the outcome of the first contest. Our findings offer the first empirical evidence from a controlled laboratory of the impact of progress feedback between team and individual tournaments, and contribute new insights on team incentives.

Wieland Mueller and Fangfang Tan (2013), Who Acts More Like a Game Theorist? Group and Individual Play in a Sequential Market Game and the Effect of the Time HorizonGames and Economic Behavior, 82, 658-674Link
Abstract: Previous experimental results on one-shot sequential two-player games show that group decisions are closer to the subgame-perfect Nash equilbirum than individual decisions. We extend the analysis of inter-group versus inter-individual decision making to a Stackelberg market game, by running both one-shot and repeated markets. Whereas in the one-shot markets we find no significant differences in the behavior of groups and individuals, we find that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. To a large extent, this result is independent of the method of eliciting choices (sequential or strategy method) and the method used to account for observed first- and second-mover behavior. We provide evidence on followers' response functions and electronic chats to offer an explanation for the differential effect that the time horizon of interaction has on the extent of individual and group players' (non)conformity with subgame perfectness.

  • Experimental taxation

Fangfang Tan and Andrew Yim (2014), Can Strategic Uncertainty Help Deter Tax Evasion? – An Experiment on Auditing RulesJournal of Economic Psychology, 40, 161-174. Link  See what media says...
Abstract:  This paper adds to the economic-psychological research on tax compliance by experimentally testing a simple auditing rule that induces strategic uncertainty among taxpayers. Under this rule, termed the bounded rule, taxpayers are informed of the maximum number of audits by a tax authority, so that the audit probability depends on the joint decisions among the taxpayers. We compare the bounded rule to the widely studied flat-rate rule, where taxpayers are informed that they will be audited with a constant probability. The experimental evidence shows that, as theoretically predicted, the bounded rule induces the same level of compliance as the flat-rate rule when strategic uncertainty is low, and a higher level of compliance when strategic uncertainty is high. The bounded rule also suppresses the "bomb crater" effect often observed in prior studies. The results suggest that strategic uncertainty due to interactions among taxpayers could be an effective device to deter tax evasion.

  • Punishment and social preferences

Erte Xiao and Fangfang Tan (2014), Justification and third-party punishmentJournal of Institutional and Theoretical Economics, 170(1), 168-188. Link
Abstract: Punishment can lose its legitimacy if the enforcer can profit from delivering punishment. We examine how justification can promote the legitimacy of punishment in a one-shot sender-receiver game where an independent third party can punish the sender upon seeing whether the sender lied. Most third parties who can profit from punishment punish the senders regardless of how the senders behave. However, when they have to provide explanations for their punishment decisions, majority third parties punish the sender if and only if the sender lies and senders are also more likely to perceive punishment as legitimate and behave honestly. 

Fangfang Tan and Erte Xiao (2012), Peer Punishment in a Social Dilemma Game with Third-Party Approval, Economics Letters, 117(3), 589-591Link
 In a prisoner’s dilemma experiment, compared with the case when the implicated parties are allowed to punish each other, both the cooperation rate and the earnings are lower when the enforcement of punishment requires approval from an independent third party.

Charles Noussair and Fangfang Tan (2011), Voting on Punishment Systems with a Heterogeneous Group, Journal of Public Economic Theory, 113(5), 661-693. Link 
Abstract: We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The punishment system can condition on type and contribution history. The results indicate that the most effective regime, in terms of contributions and earnings, is one that allows punishment of low contributors only, regardless of productivity. Nevertheless, only a minority of sessions converge to this system, indicating a tendency for the voting process to lead to suboptimal institutional choice.

Fangfang Tan (2008), Punishment in a Linear Public Good Game with Productivity Heterogeneity, De Economist, 2008, 156(3), 269-293. Link
Abstract: Although it is widely recognized that sanction increases cooperation in a public good game, comparatively little attention has been paid to a scenario in which agents have heterogeneous productivity (i.e. asymmetric impact on the group account). This paper examines the extent to which sanction works in this scenario by varying marginal per capita return (MPCR) among group members. Experimental results indicate that in the absence of sanctions, productivity heterogeneity hampers cooperation. Allowing punishment in these groups significantly enhances average contributions of group members, but does not increase welfare. In groups in which cooperation is highly successful, high-productivity agents actively punish low-productivity agents in initial periods. However, conditional on individual contributions, high-productivity agents receive more punishment, and behave more responsively by raising their contributions in the next period. The results mirror the reality in which elites in a society are under higher pressure, since their choices are likely to have a deeper impact on a society.

Working papers
Providing Global Public Goods: Electoral Delegation and Cooperation 
(with Martin Kocher and Jing Yu). Link
Abstract: This paper examines the effect of electoral delegation on providing global public goods when the elected delegate has the decision power on contributions at the subgroup level. People mostly vote for pro-social delegates who assign an equally high contribution for everyone in the subgroup, even though these delegates face the temptation to free ride on contributions of other subgroups and to exploit members in their own subgroup. Moreover, the delegation mechanism protects members of a subgroup from being exploited by other subgroups or by a selfish delegate. The results highlight the importance of the delegation mechanism in solving the conflict between equality and efficiency.

Third-Party Punishment: Retribution or Deterrence? (with Erte Xiao). Link
Abstract: We conduct an experiment to examine the role of retribution and deterrence in motivating third party punishment and, in particular, how the role of these two motives may differ according to whether the third party is a group or an individual. In the experiment, third parties are empowered with the right to uphold or negate punishments proposed by players in a PD game. We vary the timing with which third party punishment decisions are displayed across treatments: some are imposed ex- post (after players decisions) and thus can have a deterrence effect while others are threatened ex-ante (before players decisions) and thus can be only retributive. In all cases, third parties must specify punishment amounts when approving punishment proposals. We find the timing of punishment not to impact individual third party decisions. On the other hand, we find third party groups to be significantly more likely to approve punishment that includes a deterrent effect. We also find that, in general, third party punishment is weaker when it is levied by a group than by an individual.