Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device

When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is not third-party enforceable. But can implicit agreements – or relational contracts – also motivate high worker performance when the labor market is tight? We examine this question by implementing an experimental market in which there is an excess demand for labor and the performance of workers is not third-party enforceable. We show that relational contracts emerge in which firms reward performing workers with wages that exceed the going market rate. This motivates workers to provide high effort, even though they could shirk and switch firms. Our results thus suggest that unemployment is not a necessary device to motivate workers. We also discuss how market conditions affect relational contracting by comparing identical labor markets with excess supply and excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor compared to a market characterized by unemployment. Surprisingly though, this does not compromise market performance.relational contracts, involuntary unemployment

Misperceiving Economic Success: Experimental Evidence on Meritocratic Beliefs and Inequality Acceptance

Most people tend to equate success with merit, a tendency that is particularly pronounced among conservatives. However, in practice it is exceedingly difficult to discern the relative impact of luck and effort to economic success. Based on a large-scale online study that samples the general US population, we investigate whether individuals misperceive the importance of luck for success, and how this mediates their meritocratic beliefs and acceptance of inequality. We randomly assign participants in pairs to compete in an easy or hard work assignment. The tasks are structured such that working on the easy work assignment almost certainly results in better performance and economic success. We show that economically successful participants overweight the role of effort in their success, perceiving high income as more deserved than unsuccessful participants. Subsequently, they demand less redistributive taxation, and they also show little interest in receiving information about the true determinants of their success. These general findings hold true regardless of political orientation. Successful liberals are as meritocratic as conservatives are, sharing the same beliefs in deservingness and preferences for low redistributive taxes

Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device

When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is no third-party enforceable. But can implicit agreements - or relational contracts - also motivate high worker performance when the labor market is tight? We examine this question by implementing an experimental market in which there is an excess demand for labor and the performance of workers is not third-party enforceable. We show that relational contracts emerge in which firms reward performing workers with wages that exceed the going market rate. This motivates workers to provide high effort, even though they could shirk and switch firms. Our results thus suggest that unemployment is not a necessary device to motivate workers. We also discuss how market conditions affect relational contracting by comparing identical labor markets with excess supply and excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor compared to a market characterized by unemployment. Surprisingly though, this does not compromise market performance.relational contracts, involuntary unemployment

On the psychological foundations of ambiguity and compound risk aversion

Ambiguous prospects are ubiquitous in social and economic life, but the psychological foundations of behavior under ambiguity are still not well understood. One of the most robust empirical regularities is the strong correlation between attitudes towards ambiguity and compound risk which suggests that compound risk aversion may provide a psychological foundation for ambiguity aversion. However, compound risk aversion and ambiguity aversion may also be independent psychological phenomena, but what would then explain their strong correlation? We tackle these questions by training a treatment group’s ability to reduce compound to simple risks, and analyzing how this affects their compound risk and ambiguity attitudes in comparison to a control group who is taught something unrelated to reducing compound risk. We find that aversion to compound risk disappears almost entirely in the treatment group, while the aversion towards both artificial and natural sources of ambiguity remain high and are basically unaffected by the teaching of how to reduce compound lotteries. Moreover, similar to previous studies, we observe a strong correlation between compound risk aversion and ambiguity aversion, but this correlation only exists in the control group while in the treatment group it is rather low and insignificant. These findings suggest that ambiguity attitudes are not a psychological relative, and derived from, attitudes towards compound risk, i.e., compound risk aversion and ambiguity aversion do not share the same psychological foundations. While compound risk aversion is primarily driven by a form of bounded rationality – the inability to reduce compound lotteries – ambiguity aversion is unrelated to this inability, suggesting that ambiguity aversion may be a genuine preference in its own right

Touch-screen-guided task reveals a prosocial choice tendency by chimpanzees (Pan troglodytes)

Humans help others even without direct benefit for themselves. However, the nature of altruistic (i.e., only the other benefits) and prosocial (i.e., self and other both benefit) behaviors in our closest living relative, the chimpanzee, remains controversial. To address this further, we developed a touch-screen-guided task that allowed us to increase the number of trials for a thorough test of chimpanzees' prosocial and altruistic tendencies. Mother-offspring dyads were tested in the same compartment; one was the actor while the other was the recipient. In Experiment 1, the actor chose among three options: prosocial, selfish (only the actor benefited) and altruistic. To better understand the nature of the chimpanzees' choices and to improve experimental control, we conducted two additional experiments. Experiment 2 consisted of two-option choices interspersed with three-option choices, and in Experiment 3 the two-option choice were blocked across all trials. The results of Experiment 1 clearly showed that chimpanzees acted prosocially in the touch-screen-guided task, choosing the prosocial option on an average of 79% of choices. Five out of the six chimpanzees showed the preference to act prosocially against chance level. The preference for the prosocial option persisted when conditions were changed in Experiments 2 and 3. When only selfish and altruistic options were available in Experiments 2 and 3, chimpanzees preferred the selfish option. These results suggest that (1) most individuals understood the nature of the task and modified their behavior according to the available options, (2) five out of the six chimpanzees chose to act prosocially when they had the option to, and (3) offspring counterbalanced between altruistic and selfish, when given those two options perhaps to avoid suffering repercussions from the mother.Ministry of Education, Science, Sports and Culture, Japan [24000001]; Japan Society for the Promotion of Science (JSPS); [16H06283]; [22700270

Social preferences in childhood and adolescence. A large-scale experiment to estimate primary and secondary motivations

We elicit social preferences of 883 children and teenagers, aged eight to 17 years, in an experiment. Using an econometric mixture model we estimate a subject\u2019s primary and secondary social preference motivations. The secondary motivation indicates the motivation that becomes relevant when the primary motivation implies indifference between various choices. For girls, particularly older ones, maximin-preferences are the most frequent primary motivation, while for boys efficiency concerns are most relevant. Examining secondary motivations reveals that girls are mostly social-welfare-oriented, with strong equity concerns. Boys are also oriented towards social welfare, but are more concerned with efficiency than with equity

Doppler radar observation, CG lightning activity and aerial survey of a multiple downburst in southern Germany on 23 March 2001

Two downburst events from one thunderstorm are investigated, which occurred on 23 March 2001, in Germany's climatologic annual minimum of downburst activity. Observations by two Doppler radars are combined with hail reports, ground lightning detection and an aerial survey conducted after the event. The downburst-producing storm had formed at a synoptic convergence line within the warm sector of a cyclone. It had a remarkably high propagation speed of up to 31 m s−1 corresponding to the midtropospheric flow. Thus, by superposition with the storm motion, even two weak downbursts were sufficient to cause the observed damage of F1 and F2 intensity, respectively. While in its late stages, the storm was dynamically characterized by lower- and midtropospheric divergence; at about the time of the first downburst, a mesocyclonic vortex signature was verified. Aside from midtropospheric dry air entrainment, a thermodynamic explanation for the triggering of the two downbursts by melting of small hail according to recent findings by Atlas et al. [Atlas, D., Ulbrich, C.W., Williams, C.R., 2004. Physical origin of a wet microburst: observations and theory. J. Atmos. Sci. 61, 1186–1196] appears probable. Despite the lack of warnings to the public, the storm's potential for hail and strong straight-line winds was detected by the German weather service radar software CONRAD more than a half hour before the downbursts occurred

Lock-in detection for pulsed electrically detected magnetic resonance

We show that in pulsed electrically detected magnetic resonance (pEDMR) signal modulation in combination with a lock-in detection scheme can reduce the low-frequency noise level by one order of magnitude and in addition removes the microwave-induced non-resonant background. This is exemplarily demonstrated for spin-echo measurements in phosphorus-doped Silicon. The modulation of the signal is achieved by cycling the phase of the projection pulse used in pEDMR for the read-out of the spin state.Comment: 4 pages, 2 figure

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