1,720,969 research outputs found
Relationship‐specific investment and multiple interested parties
Full text linkThis paper proposes a solution to the hold-up problem for situations where a seller interacts with several parties who have a common interest in inducing the seller to make a quality-enhancing investment. Since parties can observe purchase decisions, they are able to add a clause to the contract specifying that an extra payment should be made to the seller, conditional on verifiable previous purchases. Since previous purchases depend on observable but not verifiable quality, this ‘conditional multilateral contract’ provides correct incentives to restore efficiency, and is feasible in the context of both, complete and incomplete information
The Effect of Random Shocks on Reciprocal Behavior in Dynamic Principal-Agent Settings
Full text linkPrevious work has shown that unobservable random shocks on output have a detrimental effect on efficiency in short-term (‘static’) employment relationships. Given the prevalence of long-term (‘dynamic’) relationships in firms, we investigate whether the impact of shocks is similarly pronounced in gift-exchange relationships where the same principal-agent pair interacts repeatedly. In dynamic relationships, shocks have a significantly less pronounced negative effect on efficiency than in static relationships. In an attempt to identify the drivers for our results we find that the combination of a repeated-game effect (current misbehavior can be punished in future periods) and a noise-canceling effect (part of the noise cancels out in the long run) is required to avoid the detrimental effects of unobservable random shocks on efficiency
Correction to: The effect of random shocks on reciprocal behavior in dynamic principal-agent settings (Experimental Economics, (2023), 26, 2, (468-488), 10.1007/s10683-022-09771-w)
No full textShifting the Blame to a Powerless Intermediary
No full textWe extend the results of Bartling and Fischbacher (Rev. Econ. Stud. 79(1):67–87, 2012) by showing that, by delegating to an intermediary, a dictator facing an allocation decision can effectively shift blame onto the delegee even when doing so necessarily eliminates the possibility of a fair outcome. Dictators choosing selfishly via an intermediary are punished less and earn greater profits than those who do so directly. Despite being powerless to influence the fairness of the outcome, an intermediary given the choice between two unfair outcomes is punished more than when the dictator chooses one directly. This is not the case when the intermediary merely can initiate the random selection of one of the outcomes. Our findings reinforce and clarify the usefulness of agency as a tool to evade perceived culpability
Distributional Preferences and Ego Depletion
No full textBy means of a laboratory experiment with 508 participants, we study the impact of ego depletion on revealed distributional preferences. Subjects are exposed to a social preference identification procedure in two consecutive weeks. In the treatment intervention they accomplish an ego depletion task before being exposed to the procedure in one of the two weeks, while in the control intervention they accomplish a control task. Half of the subjects are exposed to the intervention in week one and the other half in week two. Our design allows us to cleanly identify three separate effects on social preferences: i) the effect of exposing subjects to the social preference identification procedure a second time; ii) the effect of the intervention per se; and iii) the effect of ego depletion in particular. We find that only the intervention per se has an effect on social preferences for some types while the ego depletion task does not have a significant effect compared to the control task and preferences display a considerable degree of stability over time
Is Reciprocity Really Outcome-Based? A Second Look at Gift Exchange with Random Shocks
Full text linkBy means of a laboratory experiment, Rubin and Sheremeta (Manag Sci 62(4):985–999, 2016), study a bonus-version of the gift-exchange game, including two treatment variations. First they vary whether the effort provided by the agent directly translates into output for the principal, or whether it is distorted by a shock. Second, for the condition with a shock they vary whether the shock is observed by the principal, or not. The authors’ main findings are that (1) the introduction of an unobservable shock significantly reduces welfare; and (2) informing the principal about the size of the shock does not restore gift-exchange. In a replication study we largely reproduce finding (1), but we fail to confirm finding (2). Our data suggests that small behavioral differences in the initial rounds lead to a hysteresis effect that is responsible for the differences in results across studies
Respecting entitlements in legislative bargaining: A matter of preference or necessity?
Full text linkWe investigate whether fairness concerns overrule strategic behaviour in legislative bargaining with entitlements. In a lab experiment, we vary bargaining power by using either majority rule or dictator rule to implement a division. We apply coarse measures in order to assess whether entitlements are respected. Our results show that with experience over one third of proposers make “extreme” offers, assigning at most 10% of the surplus to partners whose consent is not needed under the respective rule. Having observed extreme outcomes in the past increases the likelihood of own extreme proposals. Overall, we find significant limitations in the acknowledgment for others' entitlements, in particular for groups in which individual contributions differ.Version of recor
Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence
Full text linkWe investigate how heterogeneity in contestants’ investment costs affects competition expenditures in a dynamic elimination contest with different seeding variants of contestants. Theory predicts that expenditures in dynamic contests are lower when competitors are heterogeneous than when they are homogeneous. Cost heterogeneity influences expenditures directly – by inducing weak and strong competitors to reduce their expenditures – and indirectly – through their influence on continuation values. We present evidence from lab experiments that is qualitatively in line with the theoretical prediction for contestants with low investment costs: they incorporate the heterogeneity and the differences in continuation values when competing in stage one and they decrease their expenditures when competing against a weak agent in stage two. For high-cost contestants, the theoretical predictions are not confirmed: expenditures in heterogeneous interactions are not lower and sometimes even higher. As a consequence, we find that total expenditures in heterogeneous dynamic contests are not necessarily lower than in homogeneous one
Do Competitive Bonuses Ruin Cooperation in Heterogeneous Teams?
Full text linkA debate among practicing managers is whether to use cooperative or competitive incentives for team production. While competitive incentives may drive individual effort higher, they may also lead to less help and more sabotage, with unclear consequences overall, especially when team members' abilities differ. Using a lab experiment, we examine how increasing competitive incentives affects performance as team composition changes. We find that competitive incentives generally under-perform noncompetitive incentives and a larger bonus does not generate enough effort to compensate for a loss in help. Our results help understand better how to balance out individual versus team rewards and how firms could structure teams when employees have heterogeneous abilities
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