"Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm

This paper explores the rationality of status concerns amongst co-workers and the impact of such rational status concerns on a firm's profits. We find that it is individually rational for agents in a firm to develop and exhibit status concerns. Workers are, by their choices of status concerns, able to transfer surplus from the the rm to themselves. Further, relative concerns are shaped by the relative strengths and weaknesses of the workers in the firm. Finally, a firm's profit is reduced (relative to the benchmark moral-hazard model) by workers who exhibit such "endogenous" relative concerns.status, incentives, endogenous preferences, surplus transfer, profits

The relevance of irrelevant information in the dictator game

We examine the sensitivity of the dictator game to information provided to subjects. We investigate if individuals internalize completely irrelevant information about players when making allocation decisions. Subjects are provided with their score and the scores of recipients on a quiz prior to making decisions in multiple dictator games. Quiz scores have no bearing on the game or on players' endowments and hence represent extraneous information. We find that dictators reward good performance on the quiz. We find that information that is irrelevant for the game might nevertheless be relevant for choices. Our results highlight the extreme sensitivity of the dictator game to information and context.dictator game, experiment, irrelevant information, context

Firms, Markets, and the Work Ethic

In this paper, we develop a new theory of the firm where the market is primarily an incentive system whereas the firm is an intrinsic motivation device. The firm is more efficient than the market when asset specificity and subjective risk are sufficiently high because it provides balanced incentives, fosters intrinsic motivation, and economizes on risk. An efficient firm is unambiguously the more ethical institution in the sense that the component of production effort due to intrinsic motivation and the agent's rents in exchange for commitment are higher. The exception is when the market approximates the first best.authority, conscientiousness, incentives, markets, multi-tasking, ownership, theory of the firm, work ethic

The relevance of irrelevant information in the dictator game

We examine the sensitivity of the dictator game to information provided to subjects. We investigate if individuals internalize completely irrelevant information about players when making allocation decisions. Subjects are provided with their score and the scores of recipients on a quiz prior to making decisions in multiple dictator games. Quiz scores have no bearing on the game or on players' endowments and hence represent extraneous information. We find that dictators reward good performance on the quiz. We find that information that is irrelevant for the game might nevertheless be relevant for choices. Our results highlight the extreme sensitivity of the dictator game to information and context

The Firm as a Socialization Device

Why do firms exist? What is their function? What do managers do? What is the role, if any, of social motivation in the market? In this paper, we address these questions with a new theory of the firm, which unites some major themes in management, principal-agent theory, and economic sociology. We show that although the market is a superior incentive mechanism, the firm has a comparative advantage with respect to social motivation. We then show that the market is efficient in environments that favor the provision of incentives, such as when subjective risk is low and performance is easy to measure. The firm is efficient in other environments where incentives are costly and/or ineffective. We compare our model and results with the views of Durkheim (Durkheim, E. 1984. The Division of Labor in Society. Free Press, New York) and Granovetter (Granovetter, M. 1985. Economic action and social structure: The problem of embeddedness. Amer. J. Sociol. 91(3) 481-510).embeddedness, endogenous preferences, institutions, multitasking, norms, principal-agent theory, theory of the firm, trust

"Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm

This paper explores the rationality of status concerns amongst co-workers and the impact of such rational status concerns on a firm's profits. We find that it is individually rational for agents in a firm to develop and exhibit status concerns. Workers are, by their choices of status concerns, able to transfer surplus from the the rm to themselves. Further, relative concerns are shaped by the relative strengths and weaknesses of the workers in the firm. Finally, a firm's profit is reduced (relative to the benchmark moral-hazard model) by workers who exhibit such "endogenous" relative concerns

Broken Punishment Networks in Public Goods Games: Experimental Evidence

Abundant evidence suggests that high levels of contributions to public goods can be sustained through self-governed monitoring and sanctions. This experimental study investigates the effectiveness of decentralized sanctioning institutions where punishment opportunities are restricted to agents who are linked through alternative punishment networks. We find that the structure of the punishment network significantly impacts contributions to the public good, but not overall efficiencies. Contributions collapse over decision rounds in groups with limited punishment opportunities, even if the absolute punishment capacity corresponds to the complete punishment network where all agents are allowed to punish each other. However, after allowing for the costs of sanctions, efficiencies are similar across the different networks that allow for punishment and the no-punishment network.public goods experiment, punishment, cooperation, networks

Identity and group conflict

We experimentally investigate the effects of real and minimal identities on group conflict. In turn we provide a direct empirical test of the hypotheses coined by Amartya Sen that the salience of a real identity escalates conflict but that of a mere classification would not do so. In a baseline treatment, two groups – East Asians and Caucasians – engage in a group contest, but information on the racial composition of the groups is not revealed. In the minimal identity treatment each group is arbitrarily given a different color code, whereas in the real identity treatment the race information is revealed. Supporting Sen’s hypotheses, we find that compared to the baseline, free-riding declines and conflict effort increases in the real identity treatment but not in the minimal identity treatment. Moreover, this occurs due to an increase in efforts in the real identity treatment by females in both racial groups

Property Rights and Loss Aversion in Contests

We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three situations: in “gain” two players start with no prize and make sunk bids to win a prize; in “loss” both the players start with prizes and whoever loses the contest loses their prize; and in “mixed” only one player starts with a prize that stays with him if he wins, but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility and the standard loss aversion models predict no difference in bids across treatments. We introduce a loss aversion model in which the property rights are made salient, and as a result the reference point varies across treatments. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. There is no significant difference in bids in the loss (gain) treatment and bids by property rights holder (nonholder) in the mixed treatment. A model incorporating both loss aversion and social preferences explains this result. (JEL C91, C72, D23, D74).</p

Varying experimental instructions to improve comprehension: punishment in public goods games

We provide evidence that more explicit instructions can affect behaviour in a public goods game with punishment. Instructions that highlight the positive externality associated with public goods contributions and provide more examples improve subjects’ comprehension levels, as measured by shorter decision times in the experiment. They also lead to higher contribution levels in games with punishment opportunities, linked to better targeting of punishment