Enforcing cooperation in public goods games: Is one punisher enough?

We experimentally investigate a finitely repeated public goods game setting where, in each round, access to sanctioning power is exclusively awarded to one single player per group. We show that our central ‘Top Contributors as Punishers’ institution – a mechanism by which a player needs to be the highest contributor in her group in order to earn the right to sanction others – is extremely effective in raising cooperation and welfare due to turnover in the top contributor role and to top contributors’ willingness to substantially sanction others. Our findings yield implications for the design of mechanisms intended to foster cooperation in social dilemma environments.     

An Ex-Post View of Inequality of Opportunity in France and its Regions

This paper proposes an ex-post measure of inequality of opportunity in France and its regions by assessing the inequality between individuals exerting the same effort. To this end, we define a fair income that fulfils ex-post equality of opportunity requirements. Unfairness is measured by an unfair Gini based on the distance between the actual income and the fair income. Our findings reveal that the measures of ex-post inequality of opportunity largely vary across regions, and that this is due to differences in reward schemes and in the impact of the non responsibility factors of income. We find that most regions have actual incomes closer to fair incomes than to average income, excepted Ile de France where the actual income looks poorly related to effort variables. Finally, we find that income inequality and inequality of opportunity are positively correlated among regions.     

Rejecter-proposer legislative bargaining with heterogeneous time and risk preferences

This article considers a legislative bargaining model in which the rejecter in the previous round becomes the proposer in the current round. We allow the time and risk preferences to differ across players and the voting quota to be a supermajority or submajority. We show that there exists a stationary subgame perfect equilibrium and that each player’s equilibrium payoff conditional on being a proposer is unique, and we explicitly derive the equilibria and equilibrium payoff. We compare a proposer’s equilibrium payoff when the time interval between two consecutive rounds tends to zero with respect to the protocols of the selection of proposers and the voting quota: we show that a proposer’s equilibrium payoff can be greater in this article’s rejecter-proposer model than in the Baron–Ferejohn random-proposer model; even though the voting quota increases, a proposer’s equilibrium payoff can increase.     

Reference dependent prices in bargaining: An experimental examination of precise first offers

Evidence from psychology and marketing suggests that those who make a “precise” first offer in bargaining get a better deal than those who make a “round” first offer. We report on a series of experiments designed to test for and improve our understanding of the “precise first offer” (PFO) effect in bargaining and whether it likely reflects rational optimizing or equilibrium behavior. Our experiment varies whether decisions are incentivized and whether the PFO effect can emerge as an equilibrium of a cheap-talk signaling game. We find evidence of a PFO effect when subjects read a vignette and make unincentivized individual decisions. When monetary incentives are added to the vignette, we still find the PFO effect, but it is not robust. In a bilateral bargaining situation with a cheap-talk equilibrium, we can not find the PFO effect, which is inconsistent with the equilibrium predictions. Moreover, the PFO effect reemerges in a setting in which initial offers are generated by a random device and thus provides a strong refutation of the signaling model. Our evidence suggests that optimizing and equilibrium accounts of the PFO effect are inadequate. Understanding initial offers as reference points, which subtly change perceptions about the kinds of acceptable counteroffers, provides a plausible account of a new finding on which prior explanations are silent: precise offers induce more precise counteroffers.     

Status and distrust: The relevance of inequality and betrayal aversion

Trust involves a willingness to accept vulnerability, comprised of the risk of being worse off than by not trusting, the risk of being worse off than the trusted party (disadvantageous inequality), and the risk of being betrayed by the trusted party. We examine how people’s status, focusing on sex, race, age and religion, affects their willingness to accept these three risks. We experimentally measure people’s willingness to accept risk in a decision problem, a risky dictator game, and a trust game, and compare responses across games. Groups typically considered having lower status in the US – women, minorities, young adults and non-Protestants – are averse to disadvantageous inequality while higher status groups – men, Caucasians, middle-aged people and Protestants – dislike being betrayed.     

Is there no “I” in “Team”? Interindividual-intergroup discontinuity effect in a Cournot competition experiment

Even though firms consist of teams of individuals, industrial organization experiments are typically conducted under the unitary player assumption with individuals representing firms. Against this practice, there is evidence that individuals’ decisions differ from those made by teams, and also from individuals’ decisions which affect both oneself and others. This study examines the empirical scope of the unitary player assumption (alternatively the “interindividual-intergroup discontinuity effect”) in the context of a Cournot competition experiment. In the first, standard, experiment (216 participants), we find no evidence for the discontinuity effect. Output choices of both individuals and teams are around the Cournot outcome. In a second experiment (198 participants), we use a recommendation to shift participants’ initial disposition towards the (off-equilibrium) collusive output. This triggers the discontinuity effect; individuals choose lower outputs and collude more than teams. This effect is persistent in the second half of the experiment, and is not caused by team-member discussion or by seating team members together. We discuss the interpretations and implications of our results.     

THREE‐PLAYER TRUST GAME WITH INSIDER COMMUNICATION

We examine behavior in a three‐player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%. (JEL C72, C91, D72)     

Reward the lucky? An experimental investigation of the impact of agency and luck on bonuses

We examine the impact of agency and luck on bonuses in a two player, two stage controlled laboratory experiment. In the first stage, Player A makes an investment decision on behalf of Player B. In the second stage, Player B makes a dictator allocation for each possible outcome from the investment. We compare dictator giving (bonuses) across outcomes and with a control treatment in which the stage 1 outcomes are determined randomly. We do not find that luck is rewarded with higher bonuses. However, we do find a general tendency to respond to agency with reduced bonuses and, in particular, a significant tendency to reduce bonuses to agents who are unlucky. Additionally, we find that those who are more risk tolerant are less likely to give no bonus under agency but not in the control.     

Optimal Betting in Casino Blackjack

Abstract

In casino blackjack, the odds fluctuate from round to round as cards are dealt from a randomly shuffled pack. A player who ‘counts cards’ can estimate the odds on the next round and so can vary his bet size accordingly: better-than-average odds warrant a larger bet. The optimal relationship of bet to count is derived here under the criterion of maximum expected increase in capital per round subject to a specified risk of ruin. The optimisation analysis is complicated by the need to impose lower and possibly upper bounds on the bet size. A family of optimal betting schemes is found, depending on the risk selected and other parameters; among this family is the one found by Harris, Janecek and Yamashita using a different optimisation criterion. Representative computational results are displayed for a typical set of blackjack conditions. Some commentary is given on the choice of a bet scheme from the optimal family, depending on the player’s style and objectives. Remarks are also made about Kelly betting, in the context of risk.     

Incentivising trust

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut, and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness, Cobo-Reyes, and Jimenez (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.     

Labor’s inequality of bargaining power: Changes over time and implications for public policy

A major justification for enacting the Wagner Act and encouraging collective bargaining was that in the wage-determination process individual workers suffer from an inequality of bargaining power vis-á-vis employers. This critical review of this justification examines the analytical meaning of the concept of an inequality of bargaining power, the factors responsible for this inequality, the change that has taken place in labor’s disadvantage since the 1930s, and the implications for national labor policy. It is concluded that some employers continue to have significant market power over wages but that the extent and degree of labor’s disadvantage in bargaining has diminished substantially since World War II. The implication is that the Wagner Act’s protection of the right to organize remains in the social interest but that the bargaining power of labor unions should be further circumscribed to preserve a balance of power in wage determination. The author thanks Paul Swiercz for helpful comments.     

GENDER DIFFERENCES IN EXPERIMENTAL WAGE NEGOTIATIONS

We examine behavioral gender differences and gender pairing effects in a laboratory experiment with face‐to‐face alternating‐offers wage bargaining. Our results suggest that gender differences in bargaining behavior are role‐dependent. We find that women obtain worse bargaining outcomes than men when they take on the role of employees, but not when they act as employers. Differences in bargaining outcomes can be explained by the bargaining parties' initial offers and counteroffers. We do not find evidence for behavioral differences between men and women in the process of alternating offers after first offers and counteroffers are made.(JEL J16, C78, C91)     

Gender differences in social risk taking

Women in Western societies are typically more risk averse than men in individual risk taking decisions. In real life, however, risk taking decisions are usually made in a social context. So far, empirical evidence whether gender differences are also present in the social risk taking domain is missing. We use a controlled experiment to analyze gender differences in social risk taking. We find that inequality aversion is the main driver for risk aversion in social risk taking. Disaggregating the data for males and females shows that this effect is mainly driven by strong inequality aversion of women. Moreover, by running the experiment with non-standard subjects from an egalitarian small-scale society, our results suggest that gender differences in social risk taking are culture-specific.     

Two simplified proofs for Roberts’ theorem

Roberts (Aggregation and Revelation of Preferences. Papers presented at the 1st European Summer Workshop of the Econometric Society, pp. 321–349. North-Holland, 1979) showed that every social choice function that is ex-post implementable in private value settings must be weighted VCG, i.e. it maximizes the weighted social welfare. This paper provides two simplified proofs for this. The first proof uses the same underlying key-point, but significantly simplifies the technical construction around it, thus helps to shed light on it. The second proof builds on monotonicity conditions identified by Rochet (J Math Econ 16:191–200, 1987) and Bikhchandani et al. (Econometrica 74(4):1109–1132, 2006). This proof is for a weaker statement that assumes an additional condition of “player decisiveness”. Supported by grants from the Israeli Ministry of Science and the Israeli Academy of Sciences.     

Marginal revenue and labor strife in major league baseball

An improved model of baseball player performance and revenue generation shows that, overall, major league players are paid more than the marginal revenue they generate from spectators at the ballpark. Broadcast revenue is shown to be a factor in player salaries, although this revenue is not sensitive to individual player output. Under the current bargaining procedure, collective action in baseball is therefore viewed as the only way to entice owners to pay players for the broadcast revenue they generate.     

Choosing an electoral rule: Values and self-interest in the lab

We study the choice of multi-person bargaining protocols in the context of politics. In politics, citizens are increasingly involved in the design of democratic rules, for instance via referendums. If they support the rule that best serves their self-interest, the outcome inevitably advantages the largest group. In this paper, we challenge this pessimistic view with an original lab experiment, in which 252 subjects participated. In the first stage, these subjects experience elections under plurality and approval voting. In the second stage, they decide which rule they want to use for extra elections. We find that egalitarian values that subjects hold outside of the lab shape their choice of electoral rule in the second stage when a rule led to a fairer distribution of payoffs compared to the other one in the first stage. The implication is that people have consistent ‘value-driven preferences’ for decision rules.     

Unions and wage inequality

Summary and Conclusions The impact of unions on the structure of wages has recently attracted renewed interest as analysts have struggled to explain the rise in earnings inequality in several industrialized countries. Canada, the United Kingdom, and the United States provide a potentially valuable set of countries for examining this question. All three countries now collect comparable data on wages and union status in their regular labor force surveys. Several features of the collective bargaining institutions of these countries make them suitable for studying the relationship between unions and wage inequality. Bargaining is highly decentralized; there are no general mechanisms for extending collective bargaining provisions beyond the “organized” sector; and the fraction of the work force covered by collective bargaining is relatively modest. Thus it is possible to compare the structure of wages for workers covered by union contracts to those who are not covered, and potentially infer the effect of unions on overall wage inequality.     

Equality Bargaining: Where,Who, Why?

It is common to identify a role for trade unions in combating sex inequality at work through collective bargaining. This article uses a survey of paid union officers to identify the context in which equality bargaining by unions is likely to occur, using the specific issue of bargaining on equal pay. It concludes that equality bargaining is a function of women’s voice within unions, the characteristics and preferences of bargainers themselves and of a favourable public policy environment. Bargaining on equal pay is also more likely in centralized negotiations that cover multiple employers.     

Labor’s inequality of bargaining power: myth or reality?

This article responds to Morgan O. Reynolds’ paper which questions the inequality of labor’s bargaining power by addressing four issues: (1) the economic case for collective bargaining, (2) the concept of an inequality of bargaining power, (3) the extent of employer market power, and (4) the role of public policy. The author thanks Jack Blicksilver for helpful comments.     

Imperfect information processing in sequential bargaining games with present biased preferences

This paper studies an alternating-offers bargaining game between a time-consistent player and a time-inconsistent player who processes information on future self-preferences imperfectly. Time-inconsistency and information processing are modeled by using cognitive and mood state approaches, respectively. This model structure allows for the learning of the partially naive time-inconsistent agent. The results characterize the relationship among the level of naivete, the level of learning probability and the equilibrium. We find critical values of the model parameters that specify whether the agreement is delayed and characterize the probabilistic nature of the agreement. In addition, comparative static results are reported with respect to time preferences.