Performance Pay and the Erosion of Worker Cooperation: Field experimental evidence

We report the results of a field experiment with bicycle messengers in Switzerland and the United States. Messenger work is individualized enough that firms can choose to condition pay on it, but significant externalities in messenger behavior nonetheless give their on-the-job interactions the character of a social dilemma. Firms therefore suffer efficiency losses when messengers fail to cooperate. Second-mover behavior in our sequential Prisoner’s Dilemma allows us to characterize the cooperativeness of our participants. We find that messengers, like our student controls, have heterogeneous social preferences, but are much more cooperative than students. Among messengers, we find that employees at firms that pay for performance are significantly less cooperative than those who are paid hourly or are members of cooperatives. To examine whether the difference is the result of treatment or selection we exploit the fact that firm type is location-specific in Switzerland and that entering messengers must work in performance pay firms in the U.S. We find that the erosion of cooperation under performance pay is predominantly due to treatment, and that the treatment effect is relatively rapid, more akin to the differential cueing of a behavioral norm than the gradual acquisition of a new preference.field experiment, social preference, altruism, conditional cooperation, egoism, social dilemma

Cognitive Skills Explain Economic Preferences, Strategic Behavior, and Job Attachment

Economic analysis has said little about how an individual’s cognitive skills (CS's) are related to the individual’s preferences in different choice domains, such as risk-taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,000 trainee truckers we report three findings. First, we show a strong and significant relationship between an individual’s cognitive skills and preferences, and between the preferences in different choice domains. The latter relationship may be counterintuitive: a patient individual, more inclined to save, is also more willing to take calculated risks. A second finding is that measures of cognitive skill predict social awareness and choices in a sequential Prisoner's Dilemma game. Subjects with higher CS's more accurately forecast others' behavior, and differentiate their behavior depending on the first mover’s choice, returning higher amount for a higher transfer, and lower for a lower one. After controlling for investment motives, subjects with higher CS’s also cooperate more as first movers. A third finding concerns on-the-job choices. Our subjects incur a significant financial debt for their training that is forgiven only after twelve months of service. Yet over half leave within the first year, and cognitive skills are also strong predictors of who exits too early, stronger than any other social, economic and personality measure in our data. These results suggest that cognitive skills affect the economic lives of individuals, by systematically changing preferences and choices in a way that favors the economic success of individuals with higher cognitive skills.field experiment, risk aversion, ambiguity aversion, loss aversion, time preference, Prisoners Dilemma, social dilemma, IQ, MPQ, numeracy, U.S. trucking industry, for-hire carriage, truckload (TL), driver turnover, employment duration, survival model

Overconfidence is a Social Signaling Bias

Evidence from psychology and economics indicates that many individuals overestimate their ability, both absolutely and relatively. We test three different theories about observed relative overconfidence. The first theory notes that simple statistical comparisons (for example, whether the fraction of individuals rating own skill above the median value is larger than half) are compatible (Benoît and Dubra, 2007) with a Bayesian model of updating from a common prior and truthful statements. We show that such model imposes testable restrictions on relative ability judgments, and we test the restrictions. Data on 1,016 individuals' relative ability judgments about two cognitive tests rejects the Bayesian model. The second theory suggests that self-image concerns asymmetrically affect the choice to get new information about oneâs abilities, and this asymmetry produces overconfidence (Kőszegi, 2006; Weinberg, 2006). We test an important specific prediction of these models: individuals with a higher belief will be less likely to search for further information about their skill, because this information might make this belief worse. Our data also reject this prediction. The third theory is that overconfidence is induced by the desire to send positive signals to others about oneâs own skill; this suggests either a bias in judgment, strategic lying, or both. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with this third theory. Our results together suggest that overconfidence in statements is most likely to be induced by social concerns than by either of the other two factors.IQ, field experiment, social signaling, self-image, Bayesian updating, overconfidence, numeracy, personality, MPQ

Which Measures of Time Preference Best Predict Outcomes? Evidence from a Large-Scale Field Experiment

Economists and psychologists have devised numerous instruments to measure time preferences and have generated a rich literature examining the extent to which time preferences predict important outcomes; however, we still do not know which measures work best. With the help of a large sample of non-student participants (truck driver trainees) and administrative data on outcomes, we gather four different time preference measures and test the extent to which they predict both on their own and when they are all forced to compete head-to-head. Our results suggest that the now familiar (β, δ) formulation of present bias and exponential discounting predicts best, especially when both parameters are used.time preference, impatience, discounting, present bias, field experiment, trucker

Self Selection Does Not Increase Other-Regarding Preferences among Adult Laboratory Subjects, but Student Subjects May Be More Self-Regarding than Adults

We use a sequential prisoner's dilemma game to measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: 100 college students, 94 non-student adults from the community surrounding the college and 1,069 adult trainee truckers in a residential training program. Both of the first two groups were recruited according to procedures commonly used in experimental economics (i.e., via e-mail and bulletin-board advertisements) and therefore subjects self-selected into the experiment. Because the structure of their training program reduced the opportunity cost of participating dramatically, 91% of the solicited trainees participated in the third group, so there was little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection into this type of experiment is unlikely to bias inferences with respect to non-student adult subjects. We also test (and reject) the more specific hypothesis that approval-seeking subjects are the ones most likely to select into experiments. At the same time, we find a large difference between the self-selected students and the self-selected adults from the surrounding community: the students appear considerably less pro-social. Regression results controlling for demographic factors confirm these basic findings.methodology, selection bias, laboratory experiment, field experiment, other-regarding behavior, social preferences, truckload, trucker

Fairness and Freight-Handlers: Local Labor-Market Conditions and Wage-Fairness Perceptions in a Trucking Firm

This paper draws on evidence from an internal attitude survey in the freight-handling terminals of a unionized trucking firm to investigate the effect of local labor market conditions on employee wage-fairness perceptions. The key element of our research design is that local managers have no discretion to vary wage rates in response to local labor market conditions; local economic shocks thus generate exogenous variation in the attractiveness of the wage paid by the firm relative to employees’ options in the outside labor market. We find robust associations between two indicators of local conditions – the rate of unemployment and the wages of similar workers in the outside market – and the wage-fairness perceptions of employees in the firm, which we argue reflects a causal relationship. As an extension, we relate the changes in local conditions and fairness perceptions to changes in employee performance, as measured by the rate of disciplinary dismissals. We find suggestive evidence that increased local unemployment leads to improved employee performance, and, conditional on a particular assumption about the mechanism through which local conditions affect performance, that increases in wage-fairness perceptions lead employees to supply more effort

Cognitive Skills Explain Economic Preferences, Strategic Behavior, and Job Attachment Among Truckers

Economic analysis has said little about how an individual’s cognitive skills (CS's) are related to the individual’s preferences in different choice domains, such as risk-taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,000 trainee truckers we report three findings. First, we show a strong and significant relationship between an individual’s cognitive skills and preferences, and between the preferences in different choice domains. The latter relationship may be counterintuitive: a patient individual, more inclined to save, is also more willing to take calculated risks. A second finding is that measures of cognitive skill predict social awareness and choices in a sequential Prisoner's Dilemma game. Subjects with higher CS's more accurately forecast others' behavior, and differentiate their behavior depending on the first mover’s choice, returning higher amount for a higher transfer, and lower for a lower one. After controlling for investment motives, subjects with higher CS’s also cooperate more as first movers. A third finding concerns on-the-job choices. Our subjects incur a significant financial debt for their training that is forgiven only after twelve months of service. Yet over half leave within the first year, and cognitive skills are also strong predictors of who exits too early, stronger than any other social, economic and personality measure in our data. These results suggest that cognitive skills affect the economic lives of individuals, by systematically changing preferences and choices in a way that favors the economic success of individuals with higher cognitive skills

Adding Behavioral Economics Field Experiments to the Industry Studies Toolkit: Predicting Truck Driver Job Exits in a High Turnover Setting

The Truckers and Turnover Project is an intensive case study of a single firm and its employees which matches proprietary personnel and operational data to new information collected by the researchers to create a two-year panel study of a large subset of new hires. The project’s most distinctive innovation is the data collection process, which combines traditional survey instruments with behavioral economics experiments used to measure individual participant characteristics. The survey data include information on demographics, risk and loss aversion, time preference, planning, non-verbal IQ, and the MPQ personality profile. The data collected by behavioral economics experiments include risk and loss aversion, time preferences (discount rates), backward induction ability, patience, and the preference for cooperation in a social dilemma setting. Subjects are being followed over two years of their work lives. Among the major design goals are to discover the extent to which the survey and experimental measures are correlated, and whether and how much predictive power, with respect to key on-the-job outcome variables, is added by the behavioral measures. The panel study of new hires is being carried out against the backdrop of a second research component, the development of a more conventional in-depth statistical case study of the cooperating firm and its employees. This is a high-turnover service industry setting, and the focus is on the use of survival analysis to model the flow of new employees into and out of employment, and on the correct estimation of the tenure-productivity curve for new hires, accounting for the selection effects of the high turnover

Combined stable isotope and gut contents analysis of food webs in plant-dominated, shallow lakes

1. To determine feeding links between primary producers, invertebrates and fish, stable isotope analyses and gut content analyses of fish were conducted on the components of four shallow, eutrophic to hypertrophic, plant-dominated lakes. 2. Although separation of basal resources was possible, the diets of both fish and invertebrates were broad, comprising food from different compartments (planktonic, epiphytic/benthic), as well as from different trophic levels. 3. Mixing models were used to determine the extent to which periphyton production supported higher trophic levels. Only one species of invertebrate relied upon periphyton production exclusively. 4. Fish density affected the diets of invertebrates. The response was different for planktonic and epiphytic/benthic invertebrates. The proportion of periphyton production in the diets of zooplankton appeared to increase with fish density, whilst it decreased for other invertebrates. 5. As all zooplankton samples were collected in the open water at dusk, these results are further evidence for the diurnal horizontal migration of zooplankton. Although not conclusive, they are consistent with a behavioural response by invertebrates and zooplankton in the presence of fish