How private is private information?:The ability to spot deception in an economic game

We provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer's valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers' prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people's ability to spot deception

Friendships and Favouritism on the Schoolground - A Framed Field Experiment

We present experimental evidence on favouritism practices. Children compete in teams in a tournament. After the first round of a real effort task, children indicate which group member they would prefer to do the task in the second round, for the benefit of the team. Friends are much more likely to be chosen than others after controlling for performance. We also find that children who are favoured by their friend subsequently increase performance. Consequently, favouritism does not hurt efficiency. These results show the importance of observing performance ex post in order to properly evaluate the efficiency implications of favouritism

Discretionary Bonuses as a Feedback Mechanism

This paper studies the use of discretionary rewards in a finitely repeated principal-agent relationship with moral hazard. We show that the principal, when she obtains a private subjective signal about the agent’s performance, may pay discretionary bonuses to provide credible feedback to the agent. Conistent with the often observed compression of ratings, we show that in equilibrium the principal communicates the agent’s interim performance imperfectly, i.e. she does not fully di?erentiate good and bad performance. Furthermore, we show that small rewards can have a large impact on the agent’s effort provided that the principal’s stake in the project is small. Our analysis further reveals that, also in accordance with the empirical findings, the principal may ex ante prefer to choose a ’smoky’, rather than a fully transparent performance monitoring system, thereby acquiring an implicit commitment device to reward the agent through discretionary bonuses.discretionary rewards, feedback, self confidence, subjective performance, moral hazard, monitoring system

A Public Dilemma: Cooperation with Large Stakes and a Large Audience

We analyze a large-stakes prisoner's dilemma game played on a TV show. Players cooperate 40% of the time, demonstrating that social preferences are important; however, cooperation is significantly below the 50% threshold that is required for inequity aversion to sustain cooperation. Women cooperate significantly more than men, while players who have "earned" more of the stake cooperate less. A player's promise to cooperate is also a good predictor of his decision. Surprisingly, a player's probability of cooperation is unrelated to the opponent's characteristics or promise. We argue that inequity aversion alone cannot adequately explain these results; reputational concerns in a public setting might be more important.

Is dishonesty persistent?

First published online: 18 September 2019We study if (dis)honest behavior is persistent. We investigate this by exposing participants to different incentives to lie over time. Some participants are first exposed to high incentives and then to lower incentives for others the reverse. If (dis)honest behavior is persistent, the propensity to lie depends on past incentives. We find no evidence of persistence in honest or dishonest behavior. Exposing participants first to high incentives does not result in a lasting positive effect on dishonesty after the incentives are lowered away. Similarly, after correcting for a time trend, subjects still respond strongly to high incentives after facing low incentives.Research Priority Area Behavioral Economics (UvA

Bad News: An Experimental Study on the Informational Effects of Rewards

Both psychologists and economists have argued that rewards often have hidden costs. One possible reason is that the principal may have incentives to offer higher rewards when she knows the task to be dificult. Our experiment tests if high rewards embody such bad news and if this is perceived by their recipients. Our design allows us to decompose the overall effect of rewards on effort into a direct incentive and an informational effect. The results show that most participants correctly interpret high rewards as bad news. In accordance with theory, the negative informational effect co-exists with the direct positive effect.reward, bonus, informational content, motivation, crowdingout, laboratory experiment

Beauty and the Sources of Discrimination

We analyze discrimination against less attractive people on a TV game show with high stakes. The game has a rich structure that allows us to disentangle the relationship between attractiveness and the determinants of a player’s earnings. Unattractive players perform no worse than attractive ones, and are equally cooperative in the prisoner’s dilemma stage of the game. Nevertheless, they are substantially more likely to be eliminated by their peers, even though this is costly. We investigate third party perceptions of discrimination by asking subjects to predict elimination decisions. Subjects implicitly assign a role for attractiveness but underestimate its magnitude

Is Beauty only Skin-deep? Disentangling the Beauty Premium on a Game Show

This paper analyzes behavior on a TV game show where players’ monetary payoffs depend upon an array of factors, including ability in answering questions, perceived cooperativeness and the willingness of other players to choose them. We find a substantial beauty premium and are able to disentangle contributing factors. Attractive players perform no differently than less attractive ones, on every dimension. They also exhibit and engender the same degree of cooperativeness. Nevertheless, attractive players are substantially less likely to be eliminated by their peers. Our results suggest a consumption value basis for the beauty premium

Fight or Flight:Endogenous Timing in Conflicts

We study a dynamic game in which players compete for a prize. In a waiting game with two-sided private information about strength levels, players choose between fighting, fleeing, or waiting. Players earn a “deterrence value” on top of the prize if their opponent escapes without a battle. We show that this value is a key determinant of the type of equilibrium. For intermediate values, sorting takes place with weaker and more loss averse players fleeing before others fight. Time then helps to reduce battles. In an experiment, we find support for the key theoretical predictions, and document suboptimal predatory fighting