Unequal outside options in the lost wallet game

Experimental evidence suggests the size of the foregone outside option of the first mover does not affect the behavior of the second mover in the lost wallet game. In this paper we experimentally compare the behavior of subjects when they face an outside option with unequal payoffs, i.e., the first mover gets 10 and the second mover gets 0, and when they face an outside option with equal payoffs, i.e., both get 5. Consistent with the most of the literature we do not find a significant difference in behavior of second movers.Experimental economics, fairness, inequality, lost wallet game, outside option

Dissertation abstract: Experiments on fairness and reputation

The three dissertation essays investigate different aspects of reputation in games where fairness is an important consideration. The first essay studies the effects of reputation on indirect reciprocity in different dictator games. The first experiment places dictators in two environments where they can either give money to the paired player or take money away from them: in one treatment the paired player is a stranger and in the other treatment the dictator has information on the paired player’s reputation. Contrary to anecdotal evidence, the statistical tests show that the dictators’ behavior towards a stranger is not statistically significantly different from their behavior towards an individual with an established reputation. The findings arise because a high proportion of dictators acted purely in their own self interest in both treatments. The data also provides evidence that dictators are more generous when they know that their choices (but not their identities) will be revealed in the future. In the second experiment the dictators’ choices were restricted to only generous actions. In such environment the dictators sent more money on average to recipients with a reputation for being generous than to recipients without a reputation. The second essay explores the ways in which information about others’ actions affects one’s own behavior in a dictator game. The experimental design discriminates behaviorally between three possible effects of recipient’s within-game reputation on the dictator’s decision: reputation causing indirect reciprocity, social influence, and identification. The separation of motives helps to identify the mechanisms of social transmission of impulses towards selfish or generous behavior. The data analysis reveals that the reputation effects have a stronger impact on dictators’ actions than social influence and identification. In the third essay 1 we examine the reputation effects in a labor market setting by analyzing the influence of negative technological shocks on long run relationships between firms and workers. The positive correlation between wage and effort in static conditions has been demonstrated in many experimental studies and has been one of the prominent explanations for the existence of wage rigidity. We subject these findings to further tests in a non-stationary environment that better corresponds to outside-the-lab market conditions. We observe the positive correlation of wages and effort but do not find support for downward wage rigidity in our data. Once the shocks occur, firms lower the wages and relationships often break down. The workers who accept a lower wage respond with exerting a lower effort. Copyright Economic Science Association 2007Experiments, Fairness, Reputation, Dictator game,