Showing papers in "Journal of Economic Behavior and Organization in 2006"
TL;DR: In this article, the authors compare two devices previously found to increase contributions to public goods in laboratory experiments: communication, and punishment (allowing subjects to engage in costly reductions of one another's earnings after learning of their contribution decisions).
Abstract: We compare two devices previously found to increase contributions to public goods in laboratory experiments: communication, and punishment (allowing subjects to engage in costly reductions of one another's earnings after learning of their contribution decisions). We find that communication increases contributions more than punishment, and, taking into account the cost of punishment, only communication significantly increases subjects' earnings and thus efficiency. We study three forms of communication to understand what elements of communication are essential to this result: exchanges of nume rical messages, exchanges of verbal messages through a computer chat room, and face-to-face communication. Compared with a baseline of no communication and no punishment, we find that chat room communication increases cooperation and efficiency nearly as much as face-to-face communication, even though the chat room environment does not communicate cues of facial expression, tone of voice, and body language. Verbal communication is so effective that adding a punishment option to it does not significantly change the level of contributions or earnings. In contrast, communication limited to sending numerical messages has no net effect on contributions or efficiency.
643 citations
TL;DR: In this article, the authors used an 11-year panel of U.S. manufacturing facilities to test whether certification with the ISO 9000 Quality Management Standard (QMS) generates a competitive advantage.
Abstract: Theory suggests that certification with a management standard may reduce information asymmetries in supply chains and thereby generate a competitive advantage for certified firms. This article uses an 11-year panel of U.S. manufacturing facilities to test whether certification with the ISO 9000 Quality Management Standard generates a competitive advantage. Results suggest that certified facilities grow faster after certification and that operational improvements do not account for this growth. Results also indicate that the growth effect is greater when buyers have greater difficulty acquiring information about suppliers.
485 citations
TL;DR: In this paper, a multivariate analysis has been done with data from the World Values Survey 1995-1997, covering more than 30 countries at the individual level, and the results suggest that religiosity raises tax morale.
Abstract: The intention of this paper is to analyze religiosity as a factor that potentially affects tax morale. For this purpose, a multivariate analysis has been done with data from the World Values Survey 1995–1997, covering more than 30 countries at the individual level. Several variables, such as church attendance, religious education, active membership in a church or a religious organization, perceived religiosity, religious guidance and trust in the church have been analyzed. The results suggest that religiosity raises tax morale.
400 citations
TL;DR: There exists no alternative to the core Darwinian principles of variation, selection and inheritance to explain the evolution of complex evolving population systems.
Abstract: Complex evolving systems, consisting of populations of varied and replicating entities are found in both nature and human society. There exists no alternative to the core Darwinian principles of variation, selection and inheritance to explain the evolution of such systems. Neither the actual existence of human intentionality nor the hypothetical possibility of Lamarckian acquired character inheritance offers a barrier to the use of Darwinian principles. On the contrary, Darwinism is always required to complete the explanation. However, while Darwinian principles are always necessary to explain complex evolving population systems they are never sufficient on their own.
337 citations
TL;DR: In this article, the authors simulate interbank lending with homogeneous banks and heterogeneous banks, and show that the interbank market can play an ambiguous role in stabilizing the system.
Abstract: We simulate interbank lending. Each bank faces fluctuations in liquid assets and stochastic investment opportunities that mature with delay, creating the risk of liquidity shortages. An interbank market lets participants pool this risk but also creates the potential for one bank’s crisis to propagate through the system. We study banking systems with homogeneous banks, as well as systems in which banks are heterogeneous. With homogeneous banks, an interbank market unambiguously stabilizes the system. With heterogeneity, knock-on effects become possible, but the stabilizing role of interbank lending remains so that the interbank market can play an ambiguous role.
286 citations
TL;DR: This article examined the influence of social distance and communication on other-regarding preferences (ORPs) in four countries and found strong evidence that personal but irrelevant communication significantly increases ORPs.
Abstract: This paper identifies when other-regarding preferences (ORPs) such as trust, reciprocity and altruism will likely arise. We experimentally examine the influence of social distance and communication on ORPs in four countries. We demonstrate that country of origin significantly influences ORPs, but also find mixed support for the relationship between ORPs and social distance; increasing social distance has the expected negative effect in the individually oriented U.S., but its effects internationally are different. This interaction is explained by an individual's cultural orientation. Finally, we show strong evidence that personal but irrelevant communication significantly increases ORPs.
268 citations
TL;DR: This paper provided an overview of the effects of communication on experimental studies of behavior and outcomes in common-pool resource (CPR) dilemmas, and confirmed the critical importance of communication and endogenous rule formation.
Abstract: This article provides an overview of the effects of communication on experimental studies of behavior and outcomes in common-pool resource (CPR) dilemmas. Aggregate outcomes in CPR dilemmas without communication approximate predictions of non-cooperative game theory, but allowing cheap talk results in higher outcomes. When exogenous rules are monitored at realistic levels, subjects cheat even though following the rule would generate optimal outcomes. If given the opportunity, experimental subjects will devise their own rule systems and impose sanctions on each other. These findings complement field research on more complex resources and communities by confirming the critical importance of communication and endogenous rule formation.
261 citations
TL;DR: In this paper, the authors examine experimentally how a person's generosity depends on the degree of anonymity between giver and recipient, as well as on the parties' sexes and find that less is given when the giver is paid on stage rather than in private; men receive less than women; fewer men than women give non-zero amounts.
Abstract: We examine experimentally how a person's generosity depends on the degree of anonymity between giver and recipient, as well as on the parties’ sexes. Less is given when the giver is paid on stage rather than in private; men receive less than women; fewer men than women give non-zero amounts. The results suggest that it may be problematic to organize experimental data in terms of social distance.
251 citations
TL;DR: In this paper, the authors proposed that people derive utility not only from goods or their attributes as in standard models, but also from their self-image as influenced by their own perception of their preferences, and that most respondents considered their own concern for status when purchasing a car to be minor in comparison with the status concerns of others.
Abstract: This paper proposes that people derive utility not only from goods or their attributes as in standard models, but also from their self-image as influenced by their own perception of their preferences. In a representative survey, most respondents considered their own concern for status when purchasing a car to be minor in comparison with the status concerns of others. Similarly, most individuals considered themselves to be more environmentally concerned than other people. These results are consistent with an extension of the conventional theory where an individual's self-image is added as an argument in the utility function.
233 citations
TL;DR: This paper examined the influence of time pressure and time-dependent incentive schemes on the quality of decision-making in an experimental beauty-contest game and found that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure.
Abstract: Many decisions in economics and finance have to be made under severe time pressure. Furthermore, payoffs frequently depend on the speed of decision-making, as, for instance, when buying and selling stocks. In this paper, we examine the influence of time pressure and time-dependent incentive schemes on the quality of decision-making in an experimental beauty-contest game. We find that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure. Interestingly, time-dependent payoffs under high time pressure lead to significantly quicker decision-making without reducing the quality of decisions.
223 citations
TL;DR: In this paper, the authors used Hungarian survey data to study the impact of religion and economic transition on happiness and found that religious involvement contributes positively to individuals' self-reported well-being.
Abstract: Economic transition lowered happiness on average, but did not affect everyone equally. This paper uses Hungarian survey data to study the impact of religion and economic transition on happiness. Religious involvement contributes positively to individuals’ self-reported well-being. Controlling for personal characteristics of the respondents, money is a less important source of happiness for the religious. The impact of economic transition varies greatly across different groups. The main winners from increasing economic freedom were the entrepreneurs. The religious were little affected by the changes. This implies that greater ideological freedom, measured by a greater social role of churches, may not influence happiness per se.
TL;DR: This article study the effect of manipulators on an experimental market and find that manipulators are unable to distort price accuracy, and subjects without manipulation incentives compensate for the bias in offers from manipulators by setting a different threshold at which they are willing to accept trades.
Abstract: Prediction markets are increasingly being considered as methods for gathering, summarizing and aggregating diffuse information by governments and businesses alike. Critics worry that these markets are susceptible to price manipulation by agents who wish to distort decision making. We study the effect of manipulators on an experimental market. We find that manipulators are unable to distort price accuracy. Subjects without manipulation incentives compensate for the bias in offers from manipulators by setting a different threshold at which they are willing to accept trades.
TL;DR: In this paper, the authors use evolutionary game theory to model the relationship between racial identity formation and inter-racial disparities in economic and non-economic outcomes, and show that the formation of identity norms imposes both positive and negative externalities on each person's identity actions.
Abstract: This study uses evolutionary game theory to model the relationship between racial identity formation and inter-racial disparities in economic and non-economic outcomes. Starting with a fixed population of persons who are easily identified according to an exogenous criterion, for example, phenotype, we then allow individuals to pursue either a racialist or an individualist identity strategy in social interactions. The formation of identity norms imposes both positive and negative externalities on each person's identity actions. There are forces in the model that might push society toward racialism, individualism, or a mixed identity equilibrium, depending on matching assumptions, dynamic assumptions, parameter values, and initial conditions.
TL;DR: The authors showed that in some cases people do not have a pre-existing sense of whether an experience is good or bad, even when they have experienced a sample of it, and showed that the valuation of ordinary products and experiences can be manipulated by non-normative cues.
Abstract: This paper challenges the common assumption that economic agents know their tastes. After reviewing previous research showing that valuation of ordinary products and experiences can be manipulated by non-normative cues, we present three studies showing that in some cases people do not have a pre-existing sense of whether an experience is good or bad—even when they have experienced a sample of it.
TL;DR: The authors investigated the effect of poverty and good intentions on dictator game giving and found that 46% of the experimental subjects (dictators) gave the full amount of money in the poverty treatment, while in the medicine treatment this percentage increases to 72% such extremely generous behavior has seldom been observed in the previous literature on dictator games.
Abstract: This paper investigates the eect of poverty and good intentions on dictator game giving Previous experimental studies in which information was supplied to dictators about recipients have shown that dictator giving increases overall in this context We develop a new design of standard informed dictator games with three main variants: 1) three recipients are used instead of one; 2) dictators are informed that their recipients are poor; 3) dictators give donations in the form of medicines instead of money We have found that 46% of the experimental subjects (dictators) give the full amount of money (100% of the endowment) in the 'poverty' treatment, while in the 'medicines' treatment this percentage increases to 72% Such extremely generous behavior has seldom been observed in the previous literature on dictator games
TL;DR: In this article, the effect of mood on behavior in a gift exchange game was investigated and it was found that a bad mood implies more reciprocity while a good mood imply more generosity.
Abstract: We test the effect of mood on behavior in a gift-exchange game. To induce a ‘bad mood’, second movers watched a sad movie before playing the game; to induce a ‘good mood’, they watched a funny movie. Mood induction was effective: subjects who saw the funny movie reported a significantly better mood than those who saw the sad movie. These two moods lead to significant differences in behavior. We find that a bad mood implies more reciprocity while a good mood implies more generosity. Furthermore, first movers make more money when second movers are in a bad mood.
TL;DR: The authors conducted field experiments to test whether the in-group-out-group bias extends to the cooperative behavior of one of the most successful and best-known modern collective societies, the Israeli kibbutz.
Abstract: The in-group-out-group bias is among the most well documented and widely observed phenomenon in the social sciences. Despite its role in hiring decisions and job discrimination, negotiations, and conflict and competition between groups, economists have paid little attention to the in-group-out-group bias. We question the universality of the bias by conducting field experiments to test whether it extends to the cooperative behavior of one of the most successful and best-known modern collective societies, the Israeli kibbutz. The facts that kibbutz members have voluntarily chosen their lifestyle of cooperation and egalitarianism, the ease with which they could join the surrounding capitalist society and their disproportionate involvement in social and national causes suggest that if ever there was a society of individuals whose cooperativeness extends equally to members and non-members, the kibbutz is it. Nonetheless, our results indicate that kibbutz members display higher levels of cooperation when paired with anonymous kibbutz members than when paired with city residents. In fact, when paired with city residents, kibbutz members’ observed levels of cooperation are identical to those of the city residents. Moreover, we show that self-selection rather than kibbutz socialization largely accounts for the extent to which kibbutz members are cooperative.
TL;DR: In this article, the results of a repeated all-pay auction game are reported. But the results are confronted with two solution concepts of economic theory, the Nash-equilibrium and the symmetric Logit equilibrium.
Abstract: This paper reports the results of a repeated all-pay auction game. The auction form used is the simplest possible, complete information, perfect recall and common value. Our main findings are that in such an auction, over-bidding is quite drastic, and the seller’s revenue depends strongly on the number of bidders in early stages. However, after a few rounds of play, this dependence completely disappears and the seller’s revenue becomes independent of the number of participants. The results are confronted with two solution concepts of economic theory, the Nash-equilibrium and the symmetric Logit equilibrium. © 2005 Published by Elsevier B.V.
TL;DR: This article investigated the ability of cheap talk to mitigate positive hypothetical bias in a contingent-valuation phone survey administered to over 4000 households and found that a short, neutral cheap-talk script appears to exacerbate rather than mitigate the bias.
Abstract: Two recent studies have shown that “cheap talk” is an effective means of eliminating positive hypothetical bias in experimental and field-auction settings. We further investigate the ability of cheap talk to mitigate positive hypothetical bias in a contingent-valuation phone survey administered to over 4000 households. Positive hypothetical bias is detected in our data by contrasting revealed and stated preference information. However, a short, neutral cheap-talk script appears to exacerbate rather than mitigate the bias. Based on this and mixed evidence from earlier studies, we suggest caution in using cheap talk as an ex ante control for hypothetical bias.
TL;DR: This paper found that groups are more generous and equalitarian when women are in majority, but the most generous groups are those with two men and one woman in a group dictator game, and that the most equalitarian groups are the ones with two women and one man.
Abstract: How does gender composition influence team decisions? Our evidence from a group dictator game is: (i) groups are more generous and equalitarian when women are in majority, but (ii) the most generous groups are those with two men and one woman.
TL;DR: The new institutional economics (NIE) is diverse in terms of the theory of behaviour under uncertainty as mentioned in this paper, some views are close to neoclassical economics, but others are similar to those held by heterodox economists.
Abstract: The new institutional economics (NIE) is diverse in terms of the theory of behaviour under uncertainty. Some views are close to neoclassical economics, but others are similar to those held by heterodox economists. Distinctions between procedural and substantive uncertainty, weak and strong uncertainty and ambiguity and fundamental uncertainty help to identify different approaches to uncertainty in NIE. Regarding the influence of institutions on economics behaviour, not all NIE focuses on institutions as constraints and takes individuals as given. The dominant views of rationality in NIE are standard neoclassical maximization and bounded rationality, but alternative notions have also been defended.
TL;DR: The authors analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market and finds that outsourcing generally softens competition in the final product market.
Abstract: This paper analyzes a sequential game where firms decide about outsourcing the production of a non-specific input good to an imperfectly competitive input market. We apply the taxonomy of business strategies introduced by Fudenberg and Tirole (1984) to characterize the different equilibria and find that outsourcing generally softens competition in the final product market. If firms anticipate the impact of their outsourcing decisions on input prices, there may be equilibria where firms outsource so as to collude or to raise rivals’ costs. We illustrate our analysis using a linear Cournot model.
TL;DR: In this paper, the authors identify important interactions between banking, compliance and enforcement in emissions trading and show that noncompliance and emissions are significantly greater when banking is allowed, while price stability comes at a cost.
Abstract: In this laboratory experiment on emissions trading, subjects face exogenous, random emissions shocks after making production and emission control plans. In some sessions subjects can bank their unused permits for future use. After a reconciliation-trading period following the shock realization, subjects report their emissions to the regulatory authority and are placed in different inspection groups depending on their compliance history. We identify important interactions between banking, compliance and enforcement. Banking smoothes out the price variability arising from imperfect emissions control. Price stability comes at a cost, however, since noncompliance and emissions are significantly greater when banking is allowed.
TL;DR: In this article, the authors argue that large outside investors are able to reduce agency costs by monitoring and disciplining managers more effectively than a large number of small dispersed investors and argue that the latter have lower incentives in monitoring managers.
Abstract: In corporate governance literature, it is argued that large outside investors are able to reduce agency costs by monitoring and disciplining managers more effectively than a large number of small dispersed investors. This paper separates large investors into private foreign institutional investors and government-owned local financial institutions in the context of a developing economy, and arguing that the latter have lower incentives in monitoring managers. The empirical results show that increasing presence of foreign institutional investors has a positive effect on corporate performance in terms of profitability. Firms that depend on government financial institutions for external finance show decline in performance.
TL;DR: The authors conducted field experiments in two multi-ethnic republics of Russia and found that responders employ varied strategies in an ultimatum game, with an unusually high proportion of 50/50 splits.
Abstract: Field experiments conducted in two multi-ethnic republics of Russia show that responders employ varied strategies in an “ultimatum game”. While many responders choose strategies that are monotonically rational and characteristic of most ultimatum game results (rejecting low offers and accepting high ones), almost as many others display a tendency towards “hyper-fairness” (rejecting offers that are too low and too high). Proposers, in turn, seem to take this into account with an unusually high proportion of 50/50 splits. Drawing on data from the experiments and a related survey, this paper focuses on the variation in responders’ strategies, and the factors that account for the differences.
TL;DR: The authors investigated the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessment, iteration, and monetary incentives, and found that a large share of the overconfidence in interval estimation task is an artifact of the response format.
Abstract: We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.
TL;DR: In this paper, the authors examined the interactive effects of uncertainty and irreversibility on the likelihood of entry into new business by diversified firms and investigated both industry and firm-specific factors.
Abstract: Recent work in the real options approach to investment has argued that firms face significant opportunity costs when entry costs are largely irreversible, and these costs equal the value of an option to defer investment. This study seeks to examine empirically these claims by investigating the interactive effects of uncertainty and irreversibility on the likelihood of entry into new business by diversified firms. We investigate both industry and firm-specific factors influencing the degree of investment irreversibility. In general, we find support for the notion that real option value affects the likelihood of entry.
TL;DR: It is surmised that the exchange of e-mails between individuals in organizations reveals how people interact and therefore provides a map of the real network structure behind the formal chart.
Abstract: The formal chart of an organization is intended to prescribe how employees interact. However, ties between individuals arise for personal, political, and cultural reasons. The characterization of the structure of such informal networks behind the formal chart is a key element for successful management. We surmise that the exchange of e-mails between individuals in organizations reveals how people interact and therefore provides a map of the real network structure behind the formal chart. We propose a methodology that allows extraction of relevant information about the community structure of an organization from the network of e-mail interactions between its employees.
TL;DR: In this paper, Allaz and Vila show that oligopolists may also have a strategic motive to sell forward, and investigate how the trading institution and the number of firms affect competition.
Abstract: Hedging risks is an important rationale for forward trading. However, Allaz and Vila [Allaz, B., Vila, J.-L., 1993. Cournot competition, forwards markets and efficiency. Journal of Economic Theory 59, 1–16] show that oligopolists may also have a strategic motive to sell forward. Moreover, in their model forward markets increase competitiveness between firms, raising consumer surplus and efficiency. In this study, we examine this theoretical result in a controlled laboratory environment and investigate how the trading institution and the number of firms affect competition. Our findings support the main comparative-static predictions but also suggest that, when compared to the increase in competitive pressure due to entry, the competition-enhancing effect of a forward market is weaker than predicted.
TL;DR: In this article, the authors evaluate German bank influence in terms of three hypotheses: (1) do bank influenced firms enjoy lower finance costs? (No); (2) is bank influence a solution to control problems? (Yes); (3) Do bank-influenced firms have higher profitability?(No).
Abstract: Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where powerful universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses: (1) do bank influenced firms enjoy lower finance costs? (No); (2) is bank influence a solution to control problems? (Yes); (3) do bank influenced firms have higher profitability? (No).