Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision

We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, monitoring and pay should be complements. In our experiment, between and within treatment variation is qualitatively in line with the normative predictions of the model under standard assumptions. Yet, we also find evidence for reciprocal behavior. Our data analysis shows, however, that it does not pay for the employer to solely rely on the reciprocity of employees

The resurrection of group selection as a theory of human cooperation

Two books edited by members of the MacArthur Norms and Preferences Network (an interdisciplinary group, mainly anthropologists and economists) are reviewed here. These books in large part reflect a renewed interest in group selection that has occurred among these researchers: they promote the theory that human cooperative behavior evolved via selective processes which favored biological and/or cultural group-level adaptations as opposed to individual-level adaptations. In support of this theory, an impressive collection of cross-cultural data are presented which suggest that participants in experimental economic games often do not behave as self-interested income maximizers; this lack of self-interest is regarded as evidence of group selection. In this review, problems with these data and with the theory are discussed. On the data side, it is argued that even if a behavior seems individually-maladaptive in a game context, there is no reason to believe that it would have been that way in ancestral contexts, since the environments of experimental games do not at all resemble those in which ancestral humans would have interacted cooperatively. And on the theory side, it is argued that it is premature to invoke group selection in order to explain human cooperation, because more parsimonious individual-level theories have not yet been exhausted. In summary, these books represent ambitious interdisciplinary contributions on an important topic, and they include unique and useful data; however, they do not make a convincing case that the evolution of human cooperation required group selection

Pay What You Want as a Marketing Strategy in Monopolistic and Competitive Markets

Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fair-minded and selfish customers, to fully penetrate a market without giving away the product for free, and to undercut competitors that use posted prices. We report on laboratory experiments that identify causal factors determining the willingness of buyers to pay voluntarily under PWYW. Furthermore, to see how competition affects the viability of PWYW, we implement markets in which a PWYW seller competes with a traditional seller. Finally, we endogenize the market structure and let sellers choose their pricing strategy. The experimental results show that outcome-based social preferences and strategic considerations to keep the seller in the market can explain why and how much buyers pay voluntarily to a PWYW seller. We find that PWYW can be viable in isolation, but it is less successful as a competitive strategy because it does not drive traditional posted-price sellers out of the market. Instead, the existence of a posted-price competitor reduces buyers’ payments and prevents the PWYW seller from fully penetrating the market. If given the choice, the majority of sellers opt for setting a posted price rather than a PWYW pricing. We discuss the implications of these results for the use of PWYW as a marketing strategy

(Dis)Advantages of Student Subjects: What is Your Research Question?

In this comment on Henrich et al. (2010) I argue that the right choice of subject pool is intimately linked to the research question. At least within economics, students are often the perfect subject pool for answering some fundamental research questions. Student subject pools can provide an invaluable benchmark for investigating generalizability across different social groups or cultures

Cooperation and Contagion in Web-Based, Networked Public Goods Experiments

A longstanding idea in the literature on human cooperation is that cooperation should be reinforced when conditional cooperators are more likely to interact. In the context of social networks, this idea implies that cooperation should fare better in highly clustered networks such as cliques than in networks with low clustering such as random networks. To test this hypothesis, we conducted a series of web-based experiments, in which 24 individuals played a local public goods game arranged on one of five network topologies that varied between disconnected cliques and a random regular graph. In contrast with previous theoretical work, we found that network topology had no significant effect on average contributions. This result implies either that individuals are not conditional cooperators, or else that cooperation does not benefit from positive reinforcement between connected neighbors. We then tested both of these possibilities in two subsequent series of experiments in which artificial seed players were introduced, making either full or zero contributions. First, we found that although players did generally behave like conditional cooperators, they were as likely to decrease their contributions in response to low contributing neighbors as they were to increase their contributions in response to high contributing neighbors. Second, we found that positive effects of cooperation were contagious only to direct neighbors in the network. In total we report on 113 human subjects experiments, highlighting the speed, flexibility, and cost-effectiveness of web-based experiments over those conducted in physical labs

Benevolent characteristics promote cooperative behaviour among humans

Cooperation is fundamental to the evolution of human society. We regularly observe cooperative behaviour in everyday life and in controlled experiments with anonymous people, even though standard economic models predict that they should deviate from the collective interest and act so as to maximise their own individual payoff. However, there is typically heterogeneity across subjects: some may cooperate, while others may not. Since individual factors promoting cooperation could be used by institutions to indirectly prime cooperation, this heterogeneity raises the important question of who these cooperators are. We have conducted a series of experiments to study whether benevolence, defined as a unilateral act of paying a cost to increase the welfare of someone else beyond one's own, is related to cooperation in a subsequent one-shot anonymous Prisoner's dilemma. Contrary to the predictions of the widely used inequity aversion models, we find that benevolence does exist and a large majority of people behave this way. We also find benevolence to be correlated with cooperative behaviour. Finally, we show a causal link between benevolence and cooperation: priming people to think positively about benevolent behaviour makes them significantly more cooperative than priming them to think malevolently. Thus benevolent people exist and cooperate more

Social Preferences and the Efficiency of Bilateral Exchange

Under what conditions do social preferences, such as altruism or a concern for fair outcomes, generate efficient trade? I analyze theoretically a simple bilateral exchange game: Each player sequentially takes an action that reduces his own material payoff but increases the other player’s. Each player’s preferences may depend on both his/her own material payoff and the other player’s. I identify necessary conditions and sufficient conditions on the players’ preferences for the outcome of their interaction to be Pareto efficient. The results have implications for interpreting the rotten kid theorem, gift exchange in the laboratory, and gift exchange in the field

Evolutionary Roots of Property Rights; The Natural and Cultural Nature of Human Cooperation

Debates about the role of natural and cultural selection in the development of prosocial, antisocial and socially neutral mechanisms and behavior raise questions that touch property rights, cooperation, and conflict. For example, some researchers suggest that cooperation and prosociality evolved by natural selection (Hamilton 1964, Trivers 1971, Axelrod and Hamilton 1981, De Waal 2013, 2014), while others claim that natural selection is insufficient for the evolution of cooperation, which required in addition cultural selection (Sterelny 2013, Bowles and Gintis 2003, Seabright 2013, Norenzayan 2013). Some scholars focus on the complexity and hierarchical nature of the evolution of cooperation as involving different tools associated with lower and the higher levels of competition (Nowak 2006, Okasha 2006); others suggest that humans genetically inherited heuristics that favor prosocial behavior such as generosity, forgiveness or altruistic punishment (Ridley 1996, Bowles and Gintis 2004, Rolls 2005). We argue these mechanisms are not genetically inherited; rather, they are features inherited through cultural selection. To support this view we invoke inclusive fitness theory, which states that individuals tend to maximize their inclusive fitness, rather than maximizing group fitness. We further reject the older notion of natural group selection - as well as more recent versions (West, Mouden, Gardner 2011) – which hold that natural selection favors cooperators within a group (Wynne-Edwards 1962). For Wynne-Edwards, group selection leads to group adaptations; the survival of individuals therefore depends on the survival of the group and a sharing of resources. Individuals who do not cooperate, who are selfish, face extinction due to rapid and over-exploitation of resources