Group Identity and Discrimination in Small Markets: Asymmetry of In-Group Favors

We experimentally study the inuence of induced group identity on the determination of prices and beliefs in a small market game. We create group identity through a focal point coordination game. Subjects play a three-person bargaining game where one seller can sell an indivisible good to one of two competing buyers under four different treatments varying the buyer-seller constellation. We find evidence of in group favoritism on the buyer side. However we do not detect a lower ask prices for in-group sellers for in-group buyers, indicating that in-group favoritism is in favor of the more powerful market participant.Group identity, Experiments, Markets, Bargaining

Ambiguity aversion as a reason to choose tournaments

We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. When output distributions are uncertain, models of ambiguity aversion suggest that tournaments may become more attractive than independent wage contracts, in contrast to the case where output distributions are known. We do so by presenting agents with a choice between tournaments and independent contracts, which are designed in a way that under uncertainty about output distribution (that is, under ambiguity), ambiguity averse agents should typically prefer tournaments, while ambiguity neutral agents prefer independent contracts, independent of their degree of risk aversion. This is the case, because the tournament removes all ambiguity about the equilibrium wages. We compare the share of participants who choose the tournament under ambiguity with the share of participants choosing the tournament in a control treatment, where output distributions are know. As the theory predicts, we find indeed that under ambiguity the share of agents who choose the tournaments is higher than in the case of known output distributions.Ambiguity aversion, tournaments, Ellsberg urn, contract design

Reputation and Influence in Charitable Giving: An Experiment

Abstract Previous experimental and observational work suggests that people act more generously when they are observed and observe others in social settings. But the explanation for this is unclear. An individual may want to send a signal of her generosity in order to improve her own reputation. Alternately (or additionally) she may value the public good or charity itself and, believing that contribution levels are strategic complements, give more in order to influence others to give more. We perform the first series of laboratory experiments that can separately estimate the impact of these two social effects, and test whether realized influence is consistent with the desire to influence, and whether either of these are consistent with anticipated influence. We find that �leaders� are influential only when their identities are revealed along with their donations, and female leaders are more influential then males. Identified leader�s predictions suggest that are aware of their influence. They respond to this by giving more than either the control group or the unidentified leaders. We find mixed evidence for �reputation-seeking.�

Costs of Control in Groups

This paper explores the role of social groups in explaining the reaction to control.We propose a simple model with a principal using control devices and a controlledagent, which incorporates the existence of social groups. Testing experimentally theconjectures derived from the model and related literature, we find that agents in socialgroups (i) perform more than other (no-group) agents; (ii) expect less control thanno-group agents; (iii) decrease their performance substantially when actual controlexceeds their expectation, while no-group agents do not react; (iv) do not reciprocatewhen facing less control than expected, while no-group agents do.

On Social Identity, Subjective Expectations, and the Costs of Control

Controlling employees can have severe consequences in situations that are not fully contractible. However, the perception of control may be contingent on the nature of the relationship between principal and agent. We, therefore, propose a principal-agent model of control that takes into account social identity (in the sense of Akerlof and Kranton, 2000, 2005). From the model and previous literature, we conclude that a shared social identity between the principal and agent has both a cognitive, that is, belief-related, and a behavioral, that is, performance-related, dimension. We test these theoretical conjectures in a labor market experiment with perfect monitoring. Our ndings confirm that social identity has important implications for the agent's decision-making. First, agents who are socially close to the principal (in-group) perform, on average, more on behalf of the principal than socially distant (no-group) agents. Second, social identity shapes the agent's subjective expectations of the acceptable level of control. In-group agents expect to experience less control than no-group agents. Third, an agent's reaction to the monitoring level she eventually faces also depends on social identity. If the experienced level of control is lower than the expected control level, that is, the agent faces a positive sensation, the increase in performance is less pronounced for in-group agents than for no-group agents. In the case of a negative sensation, however, in-group agents react stronger than no-group agents. Put differently, being socially distant from the principal amplies the performance-enhancing effect of a positive control surprise and mitigates the detrimental performance effect of a negative surprise.Control, Identity, Employee motivation, Principal-agent theory, Lab experiment

Inequality and Mobility of Household Incomes in Europe. Evidence from the ECHP

In this paper I want to shed light on two aspects of income mobility: relative total income mobility using the estimator by Fields and Ok [1999] and equalization of long-run incomes measured by the index of Fields [2004]. The cross country comparison shows a negative relationship between total relative mobility and long-run income equalization, this results is contrary to the intuition given by Shorrocks [1978a] who stated, that higher relative mobility will cause higher equalization of incomes when the accounting period is extended.Income distribution, Economic mobility, Inequality

Lying, spying, sabotaging : procedures and consequences

Do individuals prefer to compete fairly, or unfairly with an opponent? We study individuals who can choose how to compete for one ex-post nonzero payoff. They can either nudge themselves into a fair set of rules where they have the same information and actions as their opponent, or into unfair rules where they spy, sabotage or fabricate their opponent's action. In an experiment, we observe significant altruism under rules which allow for fabrication and sabotage, but not under rules which allow for spying. We provide direct evidence that this altruism emanates from an ethical concern purely about the rules of the game. How individuals deal with this concern - whether they nudge themselves into fabrication-free, spying-free, or sabotage-free rules, or whether they assume the power to fabricate or sabotage to compensate their opponent by giving all payoff away - varies along with individuals' attitudes towards power

Reputation and Influence in Charitable Giving: An Experiment

Previous experimental and observational work suggests that people act more generously when they are observed and observe others in social settings. But the explanation for this is unclear. An individual may want to send a signal of her generosity in order to improve her own reputation. Alternately (or additionally) she may value the public good or charity itself and, believing that contribution levels are strategic complements, give more in order to influence others to give more. We perform the first series of laboratory experiments that can separately estimate the impact of these two social effects, and test whether realized influence is consistent with the desire to influence, and whether either of these are consistent with anticipated influence. We find that 'leaders' are influential only when their identities are revealed along with their donations, and female leaders are more influential then males. Identified leader's predictions suggest that are aware of their influence. They respond to this by giving more than either the control group or the unidentified leaders. We find mixed evidence for 'reputation-seeking.

Lying, spying, sabotaging : procedures and consequences

Do individuals prefer to compete fairly, or unfairly with an opponent? We study individuals who can choose how to compete for one ex-post nonzero payoff. They can either nudge themselves into a fair set of rules where they have the same information and actions as their opponent, or into unfair rules where they spy, sabotage or fabricate their opponent's action. In an experiment, we observe significant altruism under rules which allow for fabrication and sabotage, but not under rules which allow for spying. We provide direct evidence that this altruism emanates from an ethical concern purely over the distribution of decision rights. How individuals deal with this concern - whether they nudge themselves into fabrication-free, spying-free, or sabotage-free rules, or whether they assume the power to fabricate or sabotage to compensate their opponent by giving all payoff away - varies along with individuals' attitudes towards power

A first test of focusing theory

Focusing theory hypothesizes a bias toward concentration according to which consumers prefer goods with one outstanding feature over those with several smaller sized upsides. In contrast to models of present-biased behavior, focusing theory prescribes also future-biased behavior if an option’s future reward is particularly outstanding. Our laboratory experiment yields substantial support for the bias toward concentration and finds both present-biased and future-biased choices as predicted by focusing theory