Can Real-Effort Investments Inhibit the Convergence of Experimental Markets?

Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers’ relative effort affects the allocation of production costs, but a random productivity shock ensures that the allocation is not necessarily equitable. In another treatment, sellers’ effort increases the buyers’ valuation of a good. We find that effort investments have a short-lived impact on trading behavior when sellers’ effort benefits buyers, but no effect when effort determines cost allocation. Efficiency rates are high and do not differ across treatments.Property Rights; Real Effort; Posted Offer Markets; Random Shock; Surplus Creation

Normative Conflict & Feuds: The Limits of Self-Enforcement

A normative conflict arises when there exist multiple plausible norms of behavior. In such cases, norm enforcement can lead to a sequence of mutual retaliatory sanctions, which we refer to as a feud. We investigate the hypothesis that normative conflict enhances the likelihood of a feud in a public-good experiment. We find that punishment is much more likely to trigger counter-punishment and start a feud when there is a normative conflict, than in a setting in which no conflict exists. While the possibility of a feud sustains cooperation,the cost of feuding fully offsets the efficiency gains from increased cooperation.normative conflict; peer punishment; feuds; counter-punishment; social norms

Surveillance cues do not enhance altruistic behavior among anonymous strangers in the field

The degree of altruistic behavior among strangers is an evolutionary puzzle. A prominent explanation is the evolutionary legacy hypothesis according to which an evolved reciprocity-based psychology affects behavior even when reciprocity is impossible, i.e., altruistic behavior in such instances is maladaptive. Empirical support for this explanation comes from laboratory experiments showing that surveillance cues, e.g., photographs of watching eyes, increase altruistic behavior. A competing interpretation for this evidence, however, is that the cues signal the experimenter’s expectations and participants, aware of being monitored, intentionally behave more altruistically to boost their reputation. Here we report the first results from a field experiment on the topic in which participants are unaware they are being monitored and reciprocity is precluded. The experiment investigates the impact of surveillance cues on a textbook example of altruistic behavior—hand hygiene prior to treating a ‘patient’. We find no evidence surveillance cues affect hand hygiene, despite using different measures of hand-hygiene quality and cues that have been previously shown to be effective. We argue that surveillance cues may have an effect only when participants have reasons to believe they are actually monitored. Thus they cannot support claims altruistic behavior between strangers is maladaptive

Can real-effort investments inhibit the convergence of experimental markets?

Evidence shows that real-effort investments can affect bilateral bargaining outcomes. This paper investigates whether similar investments can inhibit equilibrium convergence of experimental markets. In one treatment, sellers' relative effort affects the allocation of production costs, but a random productivity shock ensures that the allocation is not necessarily equitable. In another treatment, sellers' effort increases the buyers' valuation of a good. We find that effort investments have a short-lived impact on trading behavior when sellers' effort benefits buyers, but no effect when effort determines cost allocation. Efficiency rates are high and do not differ across treatments.Property rights Real effort Posted-offer markets Random shock Surplus creation