Kwabena Donkor (Stanford University)

Kwabena grew up in Accra, Ghana, before migrating to the US. He received a BA/MA economics degree from Hunter College, a Ph.D. in Agriculture and Resource Economics from UC Berkeley, and was a postdoctoral fellow at SIEPR.  Kwabena’s work combines theory, data, and field experiments to analyze the economic value and impact of social-behavioral fundamentals such as norm conformity and identity within the marketplace. His work also analyzes how the design of policy levers such as defaults (preselected options) and menus affect consumer behavioral choices and firm profits.

Title: Identity and Economic Incentives

Abstract: This paper examines how beliefs and preferences drive identity-conforming consumption or investments. We propose a theory where identity distorts individuals’ beliefs about potential outcomes and imposes psychic costs on identity-incongruent consumption. We substantiate our theoretical foundation through two large-scale field experiments on soccer betting in Kenya and the UK, where participants had established affiliations with the teams involved versus situations where they assumed a neutral stance. The results indicate that soccer fans have overoptimistic beliefs about match outcomes that align with their identity, betting significantly more on those than on games with neutral outcomes. After accounting for individuals’ beliefs and risk preferences, our structural estimates reveal that participants undervalue gains from identity- incongruent assets by 11% to 27%. Moreover, our counterfactual simulations imply that identity-specific beliefs account for 25% to 50% of the investment differences between neutral observers and supporters, and the remainder is due to identity preferences.