Showing papers in "Journal of Economic Behavior and Organization in 2000"
TL;DR: The authors found that economics students are significantly more corrupt than others, which is due to self-selection rather than indoctrination, and found that male students of economics are most corrupt, male non-economists the least.
Abstract: In this paper, we report on an experiment on corruption which investigates various determinants of corruptibility. We found that economics students are significantly more corrupt than others, which is due to self-selection rather than indoctrination. Moreover, our results vary with gender — male students of economics are most corrupt, male non-economists the least. Also, agents are no less corrupt if rewarded in addition to, and independently of a possible bribe. Our experiment isolates the influence of self-interest on cooperation from other influences such as risk attitude and expectations regarding the behavior of others.
373 citations
TL;DR: In this paper, a model of the determinants of coordination costs in a collaborative contractual alliance is developed, which is based on transaction cost and relational exchange theories to evaluate alliance performance by directly examining exchange costs.
Abstract: The paper draws on transaction cost and relational exchange theories to develop a model of the determinants of coordination costs in a collaborative contractual alliance. While some empirical research has examined certain dimensions of alliance performance, almost no studies have attempted to evaluate alliance performance by directly examining exchange costs. Data examining 393 original equipment manufacturer (OEM) supplier relationships that are governed by relational contracts found support for both the transaction cost and relational exchange perspectives. Asset specificity and environmental uncertainty directly increase coordination costs and, by altering the behavioral orientation of the alliance, relational norms lowered exchange costs.
336 citations
TL;DR: In this paper, the authors argue that the private-public ownership factor should be differentiated from other factors that also influence the effect of privatization on efficiency, and empirically confirm that the negative effect of these factors is transitional, being eventually offset by the positive effects of the change to private ownership.
Abstract: This paper argues that the private-public ownership factor should be differentiated from other factors that also influence the effect of privatization on efficiency. This is empirically confirmed in a longitudinal study of 24 Spanish firms, for which several political and organizational factors are found to influence the estimated effects of privatization on efficiency. The analysis of the timing of the effects reveals a strong significance for post-privatization years 5‐6 (negative), and 7‐8 (positive). This suggests that the negative effect of these factors is transitional, being eventually offset by the positive effects of the change to private ownership. ©2000 Elsevier Science B.V. All rights reserved. JEL classification: L33
333 citations
TL;DR: This article used an extensive form two person trust game to examine the hypothesis that human subjects have a preconscious friend-or-foe (FOF) mental mechanism for evaluating the intentions of another person.
Abstract: In a laboratory experiment, we use an extensive form two person trust game to examine the hypothesis that human subjects have a preconscious friend-or-foe (FOF) mental mechanism for evaluating the intentions of another person. Instructions are used to weakly prime the FOF state: instead of the term “counterpart” for referring to the person that an individual is matched with, we substitute the word “partner” in one treatment, “opponent” in the other. This treatment produces a significant difference in trust and trustworthiness behavior in repeat interactions over time with distinct pairs on each trial. Trustworthiness with “partner” is over twice that for “opponent”, and this reinforces trust, although both trust and trustworthiness erode over time.
298 citations
TL;DR: This article investigated whether the act of eliciting beliefs about the actions of others influences a subject's likelihood of playing an equilibrium in a social dilemma or public goods game, and found that participants in the elicitation treatment play the dominant strategy significantly more than subjects in a control treatment.
Abstract: Previous research has reported conflicting results on whether and the extent to which individuals play equilibria of experimental games. Two experiments reported in this paper ask whether the act of eliciting beliefs about the actions of others influences a subjects’ likelihood of playing an equilibrium in a social dilemma or public goods game. The first experiment compares two versions of a linear public goods game, one with and one without an elicitation of beliefs. Contributions in the two treatments were significantly different, with the actions of subjects in the elicitation treatment closer to the equilibrium prediction of full free riding. A second experiment investigates the same question using a prisoner’s dilemma game with similar results; subjects in the elicitation treatment play the dominant strategy significantly more than subjects in a control treatment.
285 citations
TL;DR: In this article, the authors examined labor market data from the 1990 US Census on nonprofit and for-profit employees and found a strong link between wage equity and sector of employment, supporting the view that wage equity is related to worker motivation.
Abstract: In this paper, I argue that because nonprofit organizations rely disproportionately on intrinsically motivated employees, they provide a particularly interesting context for examining the relationship between wage dispersion and employee motivation. If certain hypotheses put forth in the literature on psychology and employee motivation are correct, then wage dispersion should be less apparent in the nonprofit sector than in the for-profit sector. I examine labor market data from the 1990 US Census on nonprofit and for-profit employees and find a strong link between wage equity and sector of employment. This finding is supportive of the view that wage equity is related to worker motivation. Alternative explanations for the observed wage patterns are examined and rejected.
278 citations
TL;DR: The moonlighting game as mentioned in this paper allows players to take money from or pass money to another player, who can either return money or punish player A. Although contracts are not binding they increase trust, but do not find evidence that they also encourage reciprocity.
Abstract: We introduce the moonlighting game. Player A can take money from or pass money to player B, who can either return money or punish player A. Thus, our game allows to study both positively and negatively reciprocal behaviour. One-shot experiments were conducted with and without the possibility of making non-binding contracts beforehand. We find that retribution is much more compelling than reciprocity. Although contracts are not binding they increase trust, but we do not find evidence that they also encourage reciprocity.
272 citations
TL;DR: A "technology landscape" is introduced into an otherwise standard dynamic programming setting where the optimal strategy is to assign a reservation price to each possible technology, and it is found that early in the search for technological improvements, if the inital position is poor or average, it is optimal to search far away on the technology landscape; but as the firm succeeds in finding technological improvements it is ideal to confine search to a local region of the landscape.
Abstract: We address the question of how a firm’s current location in the space of technological possibilities constrain its search for technological improvements. We formalize a quantitative notion of distance between technologies — encompassing the distinction between evolutionary changes (small distance) versus revolutionary change (large distance) — and introduce a technology landscape into an otherwise standard dynamic programming setting where the optimal strategy is to assign a reservation price to each possible technology. Technological search is modeled as movement, constrained by the cost of search, on a technology landscape. Simulations are presented on a stylized technology landscape while analytic results are derived using landscapes that are similar to Markov random fields. We find that early in the search for technological improvements, if the initial position is poor or average, it is optimal to search far away on the technology landscape; but as the firm succeeds in finding technological improvements it is optimal to confine search to a local region of the landscape. © 2000 Elsevier Science B.V. All rights reserved.
261 citations
TL;DR: In this paper, the incompleteness of inter-firm contracts through the lens of recent developments in transaction cost economics is explored, and a non-truncated contract database representing all the relationships of Electricite de France (EDF) with its coal-carriers over the period 1977-1997 is built.
Abstract: This paper explores the incompleteness of inter-firm contracts through the lens of recent developments in transaction cost economics. We built a non-truncated contract database representing all the relationships of Electricite de France (EDF) with its coal-carriers over the period 1977–1997. We tested and corroborated most propositions derived from transaction cost theory relating contractual incompleteness to transaction characteristics, even when we considered the complete set of the theory’s propositions by endogeneizing the asset specificity at stake in transactions. To our knowledge, this kind of test has never been conducted before.
241 citations
TL;DR: In this article, the authors present a formal model in which individuals are assumed to have two distinct preference orderings: personal well-being functions are applied in contexts where the individual regards himself as a consumer, while subjective social welfare functions are used when the citizen role is perceived as most relevant.
Abstract: In addition to his role as a consumer pursuing his own interests, an individual may also regard himself as an ethical observer or citizen, judging matters from society’s point of view. However, an individual’s personal preferences do not necessarily coincide with his social preferences. This paper presents a formal model in which individuals are assumed to have two distinct preference orderings: Personal well-being functions are applied in contexts where the individual regards himself as a consumer, while subjective social welfare functions are used when the citizen role is perceived as most relevant. The paper discusses the implications for environmental valuation if some respondents take on a citizen role when reporting their willingness to pay.
240 citations
TL;DR: In this article, the authors argue that the diffuse residual claims of the franchise system reduce overall system quality, and that this problem is inherent in the nature of franchising and that quality is not contractible in this setting.
Abstract: The organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs. Why then does anyone not franchise? In this paper I argue that the diffuse residual claims of the franchise system reduce overall system quality, and that this problem is inherent in the nature of franchising. The theory is tested by examining evidence from both the restaurant and the hotel industries, including chains that franchise and ones that own all of their units. In both industries, quality is negatively related to the percent franchising in the chain, controlling for size, growth in units, monitoring costs, market segment, ownership structure, multi-chain operation, and price. The results suggest that the franchise contract increases free-riding and decreases quality in decentralized service chains, and that quality is not contractible in this setting.
TL;DR: The authors found that subjects respond with more generosity when wages are determined by a random process than when assigned by a third party, indicating that even a slight shift in perceived responsibility for the final payoffs can change behavior.
Abstract: Previous indirect evidence suggests that impulses towards pro-social behavior are diminished when an external authority is responsible for an outcome. The responsibility-alleviation effect states that a shift of responsibility to an external authority dampens internal impulses toward honesty, loyalty, or generosity. In a gift-exchange experiment, we find that subjects respond with more generosity (higher effort) when wages are determined by a random process than when assigned by a third party, indicating that even a slight shift in perceived responsibility for the final payoffs can change behavior. Responsibility-alleviation can be a factor in economic environments featuring substantial personal interaction.
TL;DR: This article examined the effects of positive and negative framing on cooperation in voluntary public goods provision experiments in which subjects have different value orientations and found that negative framing has a most salient effect on the subjects who have individualistic value orientation, whereas positive framing has an insignificant effect on those who have cooperative value orientation.
Abstract: This paper examines the effects of positive and negative framing on cooperation in voluntary public goods provision experiments in which subjects have different value orientations. The major finding of this experiment is that while there is a significant difference between the two framing conditions in terms of overall contribution rates, there is no significant difference for some subjects. In particular, the data strongly suggest that the negative framing has a most salient effect on the subjects who have individualistic value orientation, whereas the negative framing has a rather insignificant effect on the subjects who have cooperative value orientation. This suggests that at least for some group, the behavioral asymmetry between the warm-glow of doing something good and cold-prickle of doing something bad may not be as significant as in the previous study of Andreoni (1995) .
TL;DR: In this article, a model of decentralized markets is studied, in which transactors follow simple adaptive rules, and transactions are coordinated by specialist trading firms that bear the costs of market disequilibrium.
Abstract: A model of decentralized markets is studied, in which transactors follow simple adaptive rules. Transactions are coordinated by specialist trading firms that bear the costs of market disequilibrium. Starting from an initially autarkic situation in which none of the institutions that support exchange exist, computer simulation shows that for a wide range of parameter values a fully developed market economy will emerge spontaneously. Moreover, in virtually every case where a market economy develops, one of the commodities traded will emerge as a universal medium of exchange, being traded by every firm and changing hands in every act of exchange.
TL;DR: The authors examined results from laboratory experiments in which five human subjects participated as sellers in a Cournot oligopoly environment and provided, at best, only partial support for the hypothesis that behavior of privately informed subjects will converge to the static Nash equilibrium when play is repeated.
Abstract: This research examines results from laboratory experiments in which five human subjects participate as sellers in a Cournot oligopoly environment. The central issue is whether repeated play among a group of privately informed subjects will lead to convergence to a unique, static, noncooperative Nash equilibrium. The experiments were designed so that the implications of different hypotheses about adaptation and convergence, such as the best response dynamic and fictitious play, could be distinguished. The results provide, at best, only partial support for the hypothesis that behavior of privately informed subjects will converge to the static Nash equilibrium when play is repeated. Total output averaged over time periods and across experiments is greater than, but still close to, predicted equilibrium total output. However, observed intertemporal variation in total output and heterogeneity in individual choices are inconsistent with convergence to the static Nash equilibrium.
TL;DR: In this article, a two-step risk perception process is proposed for individual information processing, where differences in the reliability between single types of suppliers are captured by subjective failure probabilities, and trust in an individual supplier is defined as the subjective probability that he is a reliable one.
Abstract: In a model of individual information processing a two step risk perception process is proposed. First, differences in the reliability between single types of suppliers are captured by subjective failure probabilities. Second, trust in an individual supplier is defined as the subjective probability that he is a reliable one. This contrasts the standard assumption of a single step risk perception process based on ‘objective’ probability information. The analysis shows that the typically observed consumer response to food scares, i.e. a sharp decline in demand, followed by a slow and often incomplete recovery, may thus be explained. Furthermore, implications concerning the information strategies of suppliers with respect to food safety are derived.
TL;DR: In this paper, the authors elicit experimental subjects' preferences for income redistribution using an incentive compatible elicitation mechanism, which is motivated by claims in some of the experimental economics literature that non-self-interested motives often underlie individual behavior.
Abstract: Under three different rules for allocation of initial income we elicit experimental subjects’ preferences for income redistribution using an incentive compatible elicitation mechanism. The three income allocation rules are designed to capture preferences for distributive justice among subjects. The concern is motivated by claims in some of the experimental economics literature that non-self-interested motives often underlie individual behavior. We cannot reject self-interest in favor of any redistribution motives based on our observations. Almost all individuals chose the income distribution which maximized their own income — high income individuals chose no redistribution and low income individuals chose perfect equality in income distribution.
TL;DR: In this article, the authors examine factors explaining subcontracting decisions in the construction industry and use panel data to evaluate the influence of all relevant variables, and design and use a new index of the closeness to small numbers situations to estimate the extent of holdup problems.
Abstract: This paper examines factors explaining subcontracting decisions in the construction industry. Rather than the more common cross-sectional analyses, we use panel data to evaluate the influence of all relevant variables. We design and use a new index of the closeness to small numbers situations to estimate the extent of hold-up problems. Results show that as specificity grows, firms tend to subcontract less. The opposite happens when output heterogeneity and the use of intangible assets and capabilities increase. Neither temporary shortage of capacity nor geographical dispersion of activities seem to affect the extent of subcontracting. Finally, proxies for uncertainty do not show any clear effect.
TL;DR: Bester and Guth as mentioned in this paper showed that the result on evolutionary stability of preference and payoff functions applies under more general preference functions than Bester's and Guth's results on payoff functions.
Abstract: This note demonstrates that a result on evolutionary stability, presented by Bester and Guth [Bester, H., Guth, W., 1998. Journal of Economic Behavior and Organization 34, 193–209], applies under more general preference and payoff functions.
TL;DR: The authors reviewed a number of different hypotheses clustering around work incentives, the financing of firms, and collective choice, identifying the strengths and weaknesses of each approach, filling in theoretical gaps where necessary, and conclude with some suggestions for empirical research.
Abstract: A fundamental question for economics is why large firms in market economies usually assign control rights to capital suppliers rather than labor suppliers. A diverse collection of answers can be found in the literature. But unfortunately little theoretical consensus has emerged, and few attempts have been made to resolve this issue through systematic empirical investigation. This paper reviews a number of different hypotheses clustering around work incentives, the financing of firms, and collective choice. We identify the strengths and weaknesses of each approach, filling in theoretical gaps where necessary, and conclude with some suggestions for empirical research.
TL;DR: In this paper, the authors extend the theoretical Quantal Response Equilibrium model to allow for heterogeneity, and find that the data fit the heterogeneous version of the theory significantly better.
Abstract: The Logit version of Quantal Response Equilibrium predicts that equilibrium behavior in games will vary systematically with payoff magnitudes, if all other factors are held constant (including the Nash equilibria of the game). We explore this in the context of a set of asymmetric 2x2 games with unique totally mixed strategy equilibria. The data provide little support for the payoff magnitude predictions of the Logit Equilibrium model. We extend the theoretical Quantal Response Equilibrium model to allow for heterogeneity, and find that the data fit the heterogeneous version of the theory significantly better.
TL;DR: The authors examined gender as a possible explanation of hypothetical bias, which occurs in valuation studies using real world public goods and found that gender differences exist in hypothetical valuation exercises, but not in real valuation exercises.
Abstract: Recent work on public goods contributions has examined the relationship between gender and free-riding behavior in studies using laboratory public goods. This research furthers this line of inquiry by examining gender as a possible explanation of hypothetical bias, which occurs in valuation studies using real world public goods. Results show that gender differences exist in hypothetical valuation exercises, but not in real valuation exercises. Further, the results show that hypothetical bias is almost three times larger for males than for females, an important result for researchers investigating the source of, and solutions for, hypothetical bias.
TL;DR: The authors extended prior research by incorporating agency theory and implicit contracts theory into models based on the behavioral theory of the firm and test their hypotheses in a large sample of US manufacturing firms in two different economic environments.
Abstract: Research into accounting risk-return relations largely relied on reference-based models of managerial choice This focus ignores other explanations that may contribute to our understanding Our study extends prior research by incorporating agency theory and implicit contracts theory into models based on the behavioral theory of the firm We test our hypotheses in a large sample of US manufacturing firms in two different economic environments Our results show some support for each theory, suggesting that multiple frameworks may better explain risk-return relations Further, differences in results between the two economic environments imply that macroeconomic conditions may be important
TL;DR: In this article, the iterative elimination of strongly dominated strategies (IESDS) and mixed-equilibrium solution concepts are studied in an iterated two-person investment game with discrete strategy spaces, non-recoverable investments, and either equal or unequal investment capital.
Abstract: The iterative elimination of strongly dominated strategies (IESDS) and mixed-equilibrium solution concepts are studied in an iterated two-person investment game with discrete strategy spaces, non-recoverable investments, and either equal or unequal investment capital. In this game, the player investing the largest amount wins the competition and receives a fixed reward; ties are counted as losses. Both cases of symmetric and asymmetric dyads are studied theoretically and experimentally. Results from two experiments provide support for the mixed-strategy equilibrium solution on the aggregate but not the individual level, and evidence for a hierarchy of bounded IESDS.
TL;DR: In this article, the authors study the dynamics of a work group whose members value not only compensation, but also having a high status relative to their peers, and they show that status competition based on merit can push group members to work hard.
Abstract: We study the dynamics of a work group whose members value not only compensation, but also having a high status relative to their peers. Compensation takes the form of a fixed salary plus a bonus based on group performance. Status is determined both by contributing to group output and by non-productive, social activities which we call “politics”. Group members allocate their time between working and non-productive status enhancement, trying to maximize the combined utility from compensation and status rank. We show that status competition based on merit can push group members to work hard. However, if status can also be achieved through political maneuvering, it can lead to lower overall performance. Moreover, group performance may fluctuate and be unstable over time if the results of effort are noisy or if shared ranks are not allowed in the group. These results help to clarify the question of whether status competition enhances group performance by pushing group members to work harder, or retards it by causing unproductive behavior. They also suggest ways through which a firm can influence the effects of status competition on overall performance.
TL;DR: In this article, the authors consider the selection properties of a competitive bribery model in the presence of two types of asymmetry: unevenness between the competitors and unfairness in the contest rules, and they show that it is socially optimal to run an unfair contest in order to redress the allocation inefficiency introduced when contestants are asymmetric.
Abstract: We consider the selection properties of a competitive bribery model in the presence of two types of asymmetry: unevenness between the competitors and unfairness in the contest rules. Only under very special conditions does the benchmark model yield allocation efficiency; in other cases, the effect on allocation efficiency of making the contest more unfair is ambiguous and parameter specific. We present conditions under which each result obtains. Our results indicate that it is socially optimal to run an unfair contest in order to redress the allocation inefficiency introduced when contestants are asymmetric. We show, however, that a selfish, income-maximizing bribee will discriminate in the opposite direction to that which society would prefer.
TL;DR: In this article, the authors adopt an aspiration-based model of firm behaviour, linking it to the economy with the requirement that in the long-run, the profit aspiration must be at least as great as normal-profits.
Abstract: An economy consists of many markets, each of which is a duopoly. Firms must earn normal-profits in the long-run if they have to survive. Normal-profits are interpreted as the long-run limit of average profits in the whole economy. We adopt an aspiration based model of firm behaviour, linking it to the economy with the requirement that in the long-run, the profit aspiration must be at least as great as normal-profits. We assume that the joint-profits can be maximized with symmetric payoffs, and with very few other assumptions are able to show that the (almost) global attractor is the cooperative outcome.
TL;DR: In this paper, the authors developed a model to assess distributive rules observed in field data on 48 Mexican farmer-managed irrigation systems, and estimated a model of rule choice: inequality and the age of the water users' association strongly increase the likelihood that a system chooses proportional water allocation.
Abstract: I develop a model to assess distributive rules observed in field data on 48 Mexican farmer-managed irrigation systems. Households decide whether to contribute maintenance effort, the aggregate amount of which affects the level of output. Distributive rules with congruence between the sharing of collective costs and benefits elicit the highest level of effort; empirically, however, incongruent rules dominate the surveyed systems. I argue that transaction costs offset some efficiency benefits of congruent rules. I estimate a model of rule choice: inequality and the age of the water users’ association strongly increase the likelihood that a system chooses proportional water allocation.
TL;DR: In this article, the authors studied children's behavior in a prisoner's dilemma game and found that the proportion of cooperative individual increases significantly immediately after a short moral lecture, whereas a moral lecture 12 months before has no significant effect on children's behaviour.
Abstract: This paper studies children’s behavior in a prisoner’s dilemma game. I attempted to teach children cooperation by means of a short moral lecture. Over the period of 12 months, I experimented with 196 children between the ages of six and eleven. The experimental findings are as follows. (1) In support of the developmental psychology theories, the proportions of cooperation are indeed higher for older children. (2) There is a positive short-run teaching effect: the proportion of cooperative individual increases significantly immediately after the lecture. However, a moral lecture 12 months before has no significant effect on children’s behavior.
TL;DR: In a convincing analysis of the conditions and strength of altruism, Bester and Guth [Journal of Economic Behavior & Organization, Vol. 34, 1998, 193-209] unfortunately restrict the interpretation of their results.
Abstract: In a convincing analysis of the conditions and strength of altruism, Bester and Guth [Journal of Economic Behavior & Organization, Vol. 34, 1998, 193-209] unfortunately restrict the interpretation of their results. Their paper provides us with an analysis of the conditions and strength of malevolence (or envy) as well.