Personal Autonomy in Trust-Based Interactions. An Experimental Analysis

The paper experimentally investigates the interactions between restrictions to personal autonomy and reciprocity in a Principal-Agent relationship. Previous experimental contributions have shown that actions aimed at restricting decisional autonomy are likely to reduce reciprocity in trust- based relationships. Results in our experiment, which is a modified version of the Investment Game, differ from previous findings and conform more to standard economic predictions. Principals in our interaction do not support the self-determination of agents. On the other side, agents do not show any positive reciprocity when allowed to freely determine their behavior in the game. (This is an updated version of the CEEL Working Paper 2-05)Principal-Agent relationship, Trust, Reciprocity, Self-Determination, Incentives

Trust and Detection: An Experimental Investigation of Motivational Crowding Out

Several contributions, either in economics and Social Psychology literature, have evidenced the negative impact of controlling practices on intrinsic motivation. The aim of the present paper is to experimentally test some implications of a controlling strategy in a simple game, called Big Brother, where an Agent and a Principal face some decisional tasks involving trust and trustworthiness. The game has been based on the well-known Investment Game introduced by Berg et al.. What has been registered in the data is that those who have to decide whether to introduce or not the monitoring strategy, the Principals, do not consider the possibility of reciprocity in the behavior of those who are monitored, the Agents. On the other side the Agents do not reciprocate positively to the decision of non-monitoring their activity. Even more surprisingly Agents who are detected in their intentions tend to "overshoot" in the effort exerted following the introduction of the costly monitoring strategy made by their Principal.

Conformism and Social Connections: An Empirical Analysis of Self-Commitment to Food Purchase

Recent years registered a renewed interest in social interactions. However, due to some well-known identification problems, empirical estimation of peer effects remains quite problematic. To overcome problems of this kind, a database providing detailed information on the sequential structure of choices is analyzed. Observations refer to the deposit of money in a personal account devoted to the purchase of food at campus refectories. A clear tendency to conform to directly observed deposits is registered in the data. Furthermore, higher conformism is observed among mutually acquainted individuals.Social interactions; Identification; Conformism; Social Proximity; Food Purchase

Is It Just Legitimacy of Endowments? An Experimental Analysis of Unilateral Giving

Deviations from standard game theoretical predictions have been repeatedly observed in basic Dictator Games. Different interpretations have been provided to these deviations. On the one hand, empirical (among others, Forsythe et al., 1994) and theoretical works (among others, Bolton and Ockenfels, 2000; Fehr and Schmidt, 1999) have adopted the explanation based on other-regarding concerns. On the other hand, potential weaknesses in standard design of the game have been stressed. Evidence collected shows that when controlling for reputation considerations (Hoffman et al., 1996) and for legitimacy of assets (Cherry et al., 2002) behavior observed in the experiments is very close to that predicted by standard game theory. Results from our experiment suggest that the relevance of these two factors in explaining observed behavior may be overestimated by previous contributions. Relevant deviations from selfish equilibrium are registered in a condition of full-anonymity when assets to be shared are earned by the dictators and, simultaneously, recipients are allowed to work without being rewarded for their effort.

Hidden Costs of Control: Three Repetitions and an Extension

We report three repetitions of Falk and Kosfeld's (2006) low and medium control treatments with 364 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. Our results largely conflict with those of the original study. We mainly observe hidden costs of control of low magnitude that lead to low-trust principal-agent relationships. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld's (2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid according to a flat participation fee. We observe that hidden costs outweigh benefits of control which shows that control aversion is more prevalent under hypothetical than under real incentives. Still, in the low control treatment, we observe much weaker negative responses to control in our extension than in the original study. This observation, the fact that the original study uses real incentives, and preliminary findings on the relationship between demographics and the degree of control aversion lead us to conclude that Falk and Kosfeld's (2006) experimental regularities originate from the characteristics of their subjects.Control, Demographics, Experimental Economics, Incentives, Intrinsic Motivation

Does procedural fairness crowd out other-regarding concerns? A bidding experiment

Bidding rules that guarantee procedural fairness may induce more equilibrium bidding and moderate other-regarding concerns. In our experiment, we assume commonly known true values and only two bidders to implement a best-case scenario for other-regarding concerns. The two-by-two factorial design varies ownership of the single indivisible commodity (an outside seller versus collective ownership) and the price rule (first versus second price). Our results indicate more equilibrium behavior under the procedurally fair price rule, what, however, does not completely crowd out equality and efficiency seekinAuctions, Fair Division Games, Procedural fairness

Skills, Division of Labor and Performance in Collective Inventions. Evidence from the Open Source Software

This paper investigates the role of skills and the division of labor among participants in collective inventions. Our analysis draws on a large sample of projects registered at Sourceforge.net, the world’s largest incubator of open source software activity. We explore the hypothesis that the level of skills of participants and their skill variety are important for project performance. Skill heterogeneity across participants is in line with two fundamental organizational features of the open source development model: team work and modular design. We also test the hypothesis whether the level of modularization of project activities is an important predictor of performance. The results provide support to the hypothesis that the skill level is important for the survival of open source projects. Moreover, we found that skill heterogeneity is positive for innovation. Finally, design modularity is positively associated with the performance of the project.Software, Technological innovation, Human capital, Modularity

Would You Mind if I Get More? An Experimental Study of the Envy Game

Envy is often the cause of mutually harmful outcomes. We experimentally study the impact of envy in a bargaining setting in which there is no conflict in material interests: a proposer, holding the role of residual claimant, chooses the size of the pie to be shared with a responder, whose share is exogenously fixed. Responders can accept or reject the proposal, with game types differing in the consequences of rejection: all four combinations of (not) self-harming and (not) other-harming are considered. We find that envy leads responders to reject high proposer claims, especially when rejection harms the proposer. Notwithstanding, maximal claims by proposers are predominant for all game types. This generates conflict and results in a considerable loss of efficiency.Social Preferences, Conflict, Experimental Economic,, Bargaining

The Financial Markets and Wealth Effects on Consumption: an Experimental Analysis

The paper investigates the effects exerted by the ownership of quoted equities on intertemporal wealth allocation. To this end, it reports an experiment conducted with human subjects. The fact that an increasing share of household balances is allocated to equities raises numerous questions on the nature and magnitude of so-called ‘wealth effects’. The traditional theories are based on the assumption of perfect rational agents and do not consider wealth effects in detail. The empirical literature on the topic is heterogeneous and does not give a uniform description of such effects. The decision to work with experimental tools was prompted by the idea that this approach would shed light on the behaviour of subjects asked to decide on simulated consumption/saving decisions. The neutral position taken up with respect to the traditional theory when designing the experiment enabled us to compare the outcomes of the laboratory experiment against the theoretical findings of Hall's (1978) model, which describes a Random Walk in consumption. This analysis yielded a much more complex picture than would have been obtained in the perfect rationality framework which supports the traditional theories of life cycle-permanent income. In trying to understand and give a theoretical framework to the behaviour observed in the laboratory, we consider models taken from both the economic and the psychological literature. The analysis furnishes interesting insights, which are described and considered as future directions for research