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

Earnings distribution, corporate governance and CEO pay

We investigate the relationship between earnings differentials and the pay of CEOs of 190 British companies between 1970 and 1990. We find that (i) changes in the differential between the 90th and 50th weekly earnings percentiles for non-manual adult male workers [90:50] explain changes in the level of real CEO salary and bonus in our sample of companies; (ii) changes in this differential also account for changes in the elasticity of CEO pay to firm size; (iii) a broader measure of earnings inequality does far worse than 90:50 at explaining changes in both the level and the firm size elasticity of CEO pay; (iv) fitting the model on data for 1970-1983 and predicting pay levels for the period starting with the widespread adoption of executive share option schemes in 1984, we find a structural break in the relationship between lower management pay differentials and the pay of the CEO. We conclude first that top executive pay prior to 1984 was a stable function of both firm size and earnings differentials lower on the administrative ladder, consistent with a hypothesis advanced by Herbert Simon in 1957; and second that the use of share options from 1984 onward represents not simply a change in the mode of top executive compensation, but a de -linking of the pay of top executives and that of their subordinates

Marine bivalve geochemistry and shell ultrastructure from modern low pH environments

Abstract. Bivalve shells can provide excellent archives of past environmental change but have not been used to interpret ocean acidification events. We investigated carbon, oxygen and trace element records from different shell layers in the mussels Mytilus galloprovincialis (from the Mediterranean) and M. edulis (from the Wadden Sea) combined with detailed investigations of the shell ultrastructure. Mussels from the harbour of Ischia (Mediterranean, Italy) were transplanted and grown in water with mean pHT 7.3 and mean pHT 8.1 near CO2 vents on the east coast of the island of Ischia. The shells of transplanted mussels were compared with M. edulis collected at pH ~8.2 from Sylt (German Wadden Sea). Most prominently, the shells recorded the shock of transplantation, both in their shell ultrastructure, textural and geochemical record. Shell calcite, precipitated subsequently under acidified seawater responded to the pH gradient by an in part disturbed ultrastructure. Geochemical data from all test sites show a strong metabolic effect that exceeds the influence of the low-pH environment. These field experiments showed that care is needed when interpreting potential ocean acidification signals because various parameters affect shell chemistry and ultrastructure. Besides metabolic processes, seawater pH, factors such as salinity, water temperature, food availability and population density all affect the biogenic carbonate shell archive.</jats:p

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

Encryption schemes secure against chosen-ciphertext selective opening attacks

Imagine many small devices send data to a single receiver, encrypted using the receiver's public key. Assume an adversary that has the power to adaptively corrupt a subset of these devices. Given the information obtained from these corruptions, do the ciphertexts from uncorrupted devices remain secure? Recent results suggest that conventional security notions for encryption schemes (like IND-CCA security) do not suffice in this setting. To fill this gap, the notion of security against selective-opening attacks (SOA security) has been introduced. It has been shown that lossy encryption implies SOA security against a passive, i.e., only eavesdropping and corrupting, adversary (SO-CPA). However, the known results on SOA security against an active adversary (SO-CCA) are rather limited. Namely, while there exist feasibility results, the (time and space) complexity of currently known SO-C

Cardiovascular risks of combined oral contraceptive use

Because of an increased risk of cardiovascular disease, the use of combined oral contraceptives (OCs) should be considered carefully in women who smoke and in those with hypertension or hyperlipidemia. (Strength of Recommendation: B, based on systematic reviews of case-control and cohort studies.) Combined OC use in patients with hypertension may increase the risk of peripheral arterial disease

Sustainable institutionalized punishment requires elimination of second-order free-riders

Although empirical and theoretical studies affirm that punishment can elevate collaborative efforts, its emergence and stability remain elusive. By peer-punishment the sanctioning is something an individual elects to do depending on the strategies in its neighborhood. The consequences of unsustainable efforts are therefore local. By pool-punishment, on the other hand, where resources for sanctioning are committed in advance and at large, the notion of sustainability has greater significance. In a population with free-riders, punishers must be strong in numbers to keep the "punishment pool" from emptying. Failure to do so renders the concept of institutionalized sanctioning futile. We show that pool-punishment in structured populations is sustainable, but only if second-order free-riders are sanctioned as well, and to a such degree that they cannot prevail. A discontinuous phase transition leads to an outbreak of sustainability when punishers subvert second-order free-riders in the competition against defectors.Comment: 7 two-column pages, 3 figures; accepted for publication in Scientific Report