Group Formation in a Public Good Experiment. On The Dynamics of Social Ties Structures

Economic behavior often takes place in groups of small numbers of people interacting with each other (like work teams, neighborhoods, social networks, etc.). Characteristic of such interaction is the development of (affective) interpersonal relationships, or social ties. According to sociologists, the embeddedness of economic behavior in networks of social ties has a profound impact on economic performance. Although, in economics, there is a growing awareness of the significance of social factors, the study of social dynamics is still in its infancy. In this paper we investigate experimentally the development of social ties structures, and thereby the formation of informal groups, through economic interaction in a public good environment. It turns out that complicated dynamics arise from individual differences in social value orientation and (affective) response patterns. Our findings point at the importance of leadership in controlling and channeling emotions and sentiments to build effective groups, like teams or communities. This leads to a different perspective on management than the one provided by standard agency theory.

Incentive Systems in a Real Effort Experiment

In the reported experiment different payment schemes are examined on their incentive effects. Payment based on individual, team an d relative performance are compared. Subjects conducted computerized tasks that required substantial effort. The results show that individual and team payment induced the same effort levels. In team production free-riding occurred, but it was compensated by many subjects providing more effort than in case of individual pay. Effort was higher, but more variable in tournaments, while in case of varying abilities workers with relatively low ability worked very hard and drove up effort of the others. Finally, attitudes towards work and other workers differed strongly between conditions.Payment schemes, experiment

Social Ties in a Public Good Experiment

The formation of social ties is examined in an experimental study of voluntary public good provision. The experimental design consists of three parts. In the first part the value orientation (attitude to a generalized other) is measured. In the second part couples play a multi-period public good game. In the third part the attitudes of subjects to their partners in the public good game is measured. The concept of social tie is operationalized as the difference between the measurements in the first and third parts. Evidence for the occurrence of social ties is found. These ties depend on the success of the interaction in the public good game.Public good, social ties, experiment

Input Versus Output Taxation in an Experimental International Economy

This paper is concerned with a policy oriented macroeconomic experiment involving an ‘international’ economy with a relatively small ‘home’ country and a large ‘foreign’ country. It compares the economic performance of two alternative tax systems as a means to finance unemployment benefits: a sales-tax-cum-labor-subsidy system versus a wage tax system. The two systems are applied to the home country, while the wage tax system always obtains in the foreign country. In stark contrast with expectations of experts the sales tax system clearly outperforms the wage tax system, using standard economic indicators. It is argued that producers' reluctance to incur costs up-front while being uncertain about product prices can explain this outcome. Several pieces of evidence are provided to support this claim. The results strongly suggest that behavioral aspects have to be taken into account also in applied macroeconomic models.laboratory experiment, wage tax, sales tax, macroeconomic policy, behavioral economics

Professionals and students in a lobbying experiment

This paper reports on a series of signaling game experiments in which an informed sender can send a costly message in order to persuade an uninformed responder. We compare the behavior of two subjects pools: 143 undergraduate students and 30 public affairs officials that are professionally familiar with strategic information transmission. The experiments comprised two parameter treatments: one with low costs for sending messages, and one with high costs. Our main conclusion is that there are neither significant nor systematic differences in the behavior of the two subject-pools.

Negative Reciprocity and the Interaction of Emotions and Fairness Norms

This experimental study investigates how behavior changes after punishment for an unkind action. It also studies how fairness perceptions affect the reaction to punishment and whether this effect is consistent across repeated play and role experiences. A repeated version of the power-to-take game is used. In this game, the proposer can make a claim on the resources of a responder. Then, the responder can destroy any part of her own resources. The focus is on how proposers adjust their behavior depending on their fairness perceptions, their experienced emotions, and their interaction with responders. We find that fairness plays an important role in the behavior of proposers. Specifically, deviations from a perceived fairness norm trigger feelings of shame and guilt, which induce proposers to lower their claims. However, we also find that the perceived fairness norm varies considerably between individuals. Therefore, it is not the case that proposers who considered they were acting fairly were particularly nice to responders. Our results also show that the different types of individuals predicted by models of social preferences, can be traced among the subjects that played the same role in both periods, but fail to describe the behavior of subjects who switched from one role to the other.

Social Ties and Coordination on Negative Reciprocity: The Role of Affect

This is an experimental study of a three-player power-to-take game where a proposer is matched with two responders. We compare a treatment in which subjects are anonymous to each other (strangers) with one in which responders know each other from outside the lab (friends). We focus on the responders’ decisions, beliefs, and emotions. We find that friends punish the proposer more than strangers, and that they are more likely to coordinate their punishment (without communication). Both punishment and coordination are explained by the responders’ emotional reactions. Furthermore, the responders’ expectations are better predictors of emotions and destruction than their fairness perceptions.