Competition as a Coordination Device. Experimental Evidence from a Minimum Effort Coordination Game

The problem of coordination failure, particularly in 'team production' situations, is central to a large number of mircroeconomic as well as macroeconomic models. As this type of inefficient coordination poses a severe economic problem, there is a need for institutions that foster efficient coordination of individual economic plans. In this paper, we introduce such a rather classical economic institution: competition. In a series of laboratory experiments, we reveal that the true reason for coordination failure is strategic uncertainty, which can be reduced almost completely by introducing a appropriately designed mechanism of (inter-group) competition.coordination failure, team production, competition

The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment

We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects' income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple at taxes are particularly prone to being misperceived because their simplicity reduces the tax salience.field experiment, real effort experiment, tax perception, tax salience, tax experience, behavioral economics

Unilateral Emissions Abatement: An Experiment

According to the model of HOEL (1991), a unilateral emissions abatement of a global pollutant leads to lower aggregated emissions in a game with a simultaneous decision protocol. Our experiment tests the Hoel model and examines the question of whether a leader can induce additional abatement of followers in a game with a mixed sequential-simultaneous decision protocol. Using an environment with a unique interior equilibrium, our experiments confirm the stylized outcomes of previous public good experiments. Changes in abatement and profits for the simultaneous decision protocol are in line with the theoretical predictions of the Hoel model albeit not significantly in every case. In the treatments with a mixed sequential-simultaneous decision protocol, during the first periods an abatement near social optimum is mostly chosen by the leader. However, in most cases the leader failed to induce cooperation, i.e. there are few followers who react cooperatively to the leader’s signal. High efforts by the leader and the cooperative followers are exploited by the majority of defective followers.

Reformstau in Deutschland? - Deutschland mangelt es an grundlegenden Reformen!

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Wege zur Reformfähigkeit

Reformblockaden werden derzeit in Deutschland in vielen Bereichen diagnostiziert. Wie können diese Blockaden überwunden werden? Können andere Länder als Vorbild dienen? Wie muss sich der politische Prozess wandeln, um mehr Reformkompetenz zu ermöglichen? --

Selfish in the End?:An Investigation of Consistency and Stability of individual Behavior

This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfishapproach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behaviorthat delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games.individual preferences; consistency; stability; experimental economics

The Dynamics of Individual Preferences in Repeated Public Good Experiments

We investigate the stability of individual behavior in a repeated public good experiment over time by reinviting subjects back to the lab up to four times in one week intervals. We exclude effects due to learning about others\u27 behavior and reputation building by employing a non-learning and non-reputation environment: subjects are neither told nor paid their earnings until the very end of their participation and thus deprived of any feedback information and strategic possibilities to signal their intentions. This experimental design thus leaves unstable preferences as the most likely source for unstable behavior. We observe that, in the first wave of the experiment, subjects contribute to the public good in accordance to other-regarding preferences, but become more selfish in the latter waves of the experiment and consequently contributions to the public good decrease over time. The decline is mainly caused by initially conditional cooperators who turn into free riders over the course of the experiment

The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment

We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects\u27 income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple flat taxes are particularly prone to being misperceived because their simplicity reduces the tax salience