Fair Wages When Employers Face the Risk of Losing Money

We study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with potential employer losses. This result can be in line with social comparison theories that are based on relative payoff differences. Alternatively, this result is also in line with the hypothesis that the risk of losing money increases the credibility of the employer's trust signal and, thus, the employee's reciprocity.fair wage, efficiency wage, social comparison, loss aversion

Sharing Information

Customers write book reviews for Amazon.com and rate stores at BizRate.com. Car drivers call up radio stations to report traffic jams or radar traps. In many cases individuals share their information to the benefit of an unknown group of recipients, even though doing so is costly for the provider. In contrast to a standard public good, providers have no immediate benefit from information public goods. The paper reports the results of an experimental study on information sharing under two payoff conditions (opportunity announcement and hazard warning) and two information conditions (anonymous and identified provider). The experimental results show a substantial degree of information sharing. Information on extreme opportunities and extreme hazards is significantly more often provided than information on moderate prospects. Identification only plays a role in case of extreme opportunities and not in case of hazard warnings.Information public good; online recommendation; consumer rating; word-of-mouth communication; altruism; other-regarding behavior

Sudden Termination Auctions – An Experimental Study

The design of markets has become a major issue due to the capability of online operators to implement almost any set of market rules overnight. With this study we contribute to the literature of market design by presenting a theoretical and experimental analysis of sudden termination auctions. Our main focus is on the candle auction that has a positive termination probability at any time in the course of the auction. The second price candle auction which is technically demanding and rarely implemented offline proves to be a faster and equally efficient alternative to standard hard close auctions.auctions, termination rules, electronic markets

An Experimental Assessment of Confederate Reserve Price Bids in Online Auction

internet auctions, bid shilling, reserve price, internet fraud, market design

Online Auctions

The economic literature on online auctions is rapidly growing because of the enormous amount of freely available field data. Moreover, numerous innovations in auction-design features on platforms such as eBay have created excellent research opportunities. In this article, we survey the theoretical, empirical, and experimental research on bidder strategies (including the timing of bids and winner's-curse effects) and seller strategies (including reserve-price policies and the use of buy-now options) in online auctions, as well as some of the literature dealing with online-auction design (including stopping rules and multi-object pricing rules).

Overconfidence and Managers’ Responsibility Hoarding

Overconfidence is a well-established behavioral phenomenon that involves an overestimation of own capabilities. We introduce a model, in which managers and agents exert effort in a joint production, after the manager decides on the allocation of the tasks. A rational manager tends to delegate the critical task to the agent more often than given by the efficient task allocation. In contrast, an overconfident manager is more likely to hoard responsibility, i.e. to delegate the critical task less often than a rational manager. In fact, a manager with a sufficiently high ability and a moderate degree of overconfidence increases the total welfare by hoarding responsibility and exerting more effort than a rational manager. Finally, we derive the conditions under which responsibility hoarding can persist in an organization, showing that the bias survives as long as the overconfident manager can rationalize the observed output by underestimating the ability of the agent

Elicited bid functions in (a)symmetric first-price auctions

We report on a series of experiments that examine bidding behavior in first-price sealed bid auctions with symmetric and asymmetric bidders. To study the extent of strategic behavior, we use an experimental design that elicits bidders' complete bid functions in each round (auction) of the experiment. In the aggregate, behavior is consistent with the basic equilibrium predictions for risk neutral or homogenous risk averse bidders (extent of bid shading, average seller's revenues and deviations from equilibrium). However, when we look at the extent of best reply behavior and the shape of bid functions, we find that individual behavior is not in line with the received equilibrium models, although it exhibits strategic sophistication.Asymmetric first-price auctions, private independent values, elicited bid functions, constant relative risk aversion, empirical best replies, experimental methods

In Search of Workers' Real Effort Reciprocity - A Field and a Laboratory Experiment

updated version of paper no 5

The Desire to Influence Others

We introduce the give-or-destroy game that allows us to fully elicit an individual\u27s social preference schedule. We find that about one third of the population exhibits both pro-social and anti-social preferences that are independent of payoff comparisons with those who are affected. We call this type of preference a desire to influence others. The other two thirds of the population consist to almost equal parts of payoff maximizers and pro-socials. Furthermore, we find that full information and experimenter demand may increase the extent of pro-social preferences, but neither treatment affects the extent of anti-social preferences or the distribution of social types in the population