An Economic Analysis of Business Drinking: Evidence from a Lab-in-the-field Experiment

40 Pages Posted: 27 Nov 2019

See all articles by Jianxin Wang

Jianxin Wang

Central South University; George Mason University, Department of Economics, Students; George Mason University - Interdisciplinary Center for Economic Science (ICES)

Daniel Houser

George Mason University - Department of Economics; Interdisciplinary Center for Economic Science; George Mason University - Mercatus Center

Date Written: November 18, 2019

Abstract

Alcohol consumption is an important component of business negotiations across many cultures, yet this behavior remains unmodeled and its potential implications untested. This paper is a step towards filling that gap. We develop a theory that combines guilt-aversion with a canonical alcohol myopia framework. Our GAAM (guilt aversion and alcohol myopia) model predicts that intoxication increases promise-making but has no effect on promise-breaking. We test these predictions using a prisoner’s dilemma game with pre-play communication in a lab-in-the-field experiment. Among males, we find behavior consistent with predictions: intoxication promotes promise-making behavior but does not impact the rate at which promises are trusted or broken. Consequently, intoxication increases communication efficiency. We do not observe intoxication to impact female promise-making, trusting, or promise-breaking behaviors. This is consistent with previous empirical findings that females are substantially less sensitive than males to alcohol-induced myopia.

Keywords: Business drinking; Communication; Guilt aversion; Alcohol myopia; Gender difference

Suggested Citation

Wang, Jianxin and Houser, Daniel, An Economic Analysis of Business Drinking: Evidence from a Lab-in-the-field Experiment (November 18, 2019). GMU Working Paper in Economics Forthcoming, Available at SSRN: https://ssrn.com/abstract=3489451 or http://dx.doi.org/10.2139/ssrn.3489451

Jianxin Wang (Contact Author)

Central South University ( email )

Changsha, Hunan 410083
China

George Mason University, Department of Economics, Students ( email )

Fairfax, VA
United States

George Mason University - Interdisciplinary Center for Economic Science (ICES) ( email )

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Arlington, VA 22201
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Daniel Houser

George Mason University - Department of Economics ( email )

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Interdisciplinary Center for Economic Science ( email )

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HOME PAGE: http://mason.gmu.edu/~dhouser/

George Mason University - Mercatus Center ( email )

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