Business drinking: Evidence from a lab-in-the-field experiment

Abstract

Alcohol consumption is an important component of business negotiations across many cultures, yet this behavior remains unmodeled and its potential explanations untested. Here, we develop a theory that combines guilt-aversion with the canonical alcohol myopia framework. Our GAAM (guilt aversion and alcohol myopia) model predicts that intoxication increases promise-making, and will not decrease rate of 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 but does not impact the rate at which promises are broken. Importantly, this implies intoxication increases the efficiency of communication. We do not observe intoxication to impact female promise-making or promise-breaking behaviors. This is consistent with previous empirical findings that females can display less sensitivity than males to alcohol-induced myopia. Our results provide an explanation for the widespread phenomenon of business drinking.