NORM ENFORCEMENT: ANGER,INDIGNATION, OR RECIPROCITY?

The enforcement of social norms often requires that unaffected third parties sanction offenders. Given the renewed interest of economists in norms, the literature on third‐party punishment is surprisingly thin. In this paper, we report the results of an experiment designed to replicate the anger‐based punishment of directly affected second parties and evaluate two distinct explanations for third‐party punishment: indignation and group reciprocity. We find evidence in favor of both, with the caveat that the incidence of indignation‐driven sanctions is perhaps smaller than earlier studies have hinted. Furthermore, our results suggest that second parties use sanctions to promote conformism while third parties intervene primarily to promote efficiency.     

Vote‐Buying and Reciprocity

While vote‐buying is common, little is known about how politicians determine who to target. We argue that vote‐buying can be sustained by an internalized norm of reciprocity. Receiving money engenders feelings of obligation. Combining survey data on vote‐buying with an experiment‐based measure of reciprocity, we show that politicians target reciprocal individuals. Overall, our findings highlight the importance of social preferences in determining political behavior.     

Situated Food Safety Risk and the Influence of Social Norms

Previous studies of risk behavior observed weak or inconsistent relationships between risk perception and risk-taking. One aspect that has often been neglected in such studies is the situational context in which risk behavior is embedded: Even though a person may perceive a behavior as risky, the social norms governing the situation may work as a counteracting force, overriding the influence of risk perception. Three food context studies are reported. In Study 1 (N = 200), we assess how norm strength varies across different social situations, relate the variation in norm strength to the social characteristics of the situation, and identify situations with consistently low and high levels of pressure to comply with the social norm. In Study 2 (N = 502), we investigate how willingness to accept 15 different foods that vary in terms of objective risk relates to perceived risk in situations with low and high pressure to comply with a social norm. In Study 3 (N = 1,200), we test how risk-taking is jointly influenced by the perceived risk associated with the products and the social norms governing the situations in which the products are served. The results indicate that the effects of risk perception and social norm are additive, influencing risk-taking simultaneously but as counteracting forces. Social norm had a slightly stronger absolute effect, leading to a net effect of increased risk-taking. The relationships were stable over different social situations and food safety risks and did not disappear when detailed risk information was presented.     

THE ROLE OF SOCIAL WORK NORMS IN JOB SEARCHING AND SUBJECTIVE WELL‐BEING

Social norms are usually neglected in economics, because they are to a large extent enforced through nonmarket interactions and difficult to isolate empirically. In this paper, we offer a direct measure of the social norm to work and we show that this norm has important economic effects. The stronger the norm, the more quickly unemployed people find a new job. This behavior can be explained by utility differences, probably due to social pressure. Unemployed people are significantly less happy than employed people and their reduction in life satisfaction is the larger, the stronger the norm is. (JEL: I31, J64)     

GIFT EXCHANGE AND WORKERS' FAIRNESS CONCERNS: WHEN EQUALITY IS UNFAIR5

We study how different payment modes influence the effectiveness of gift exchange as a contract enforcement device. In particular, we analyze how horizontal fairness concerns affect performance and efficiency in an environment characterized by contractual incompleteness. In our experiment, one principal is matched with two agents. The principal pays equal wages in one treatment and can set individual wages in the other. We find that the use of equal wages elicits substantially lower efforts. This is not caused by monetary incentives per se because under both wage schemes it is profit‐maximizing for agents to exert high efforts. The treatment difference instead seems to be driven by the fact that the norm of equity is violated far more frequently in the equal wage treatment. After having suffered from violations of the equity principle, agents withdraw effort. These findings hold even after controlling for the role of intentions, as we show in a third treatment. Our results suggest that adherence to the norm of equity is a necessary prerequisite for successful establishment of gift‐exchange relations. (JEL: J33, D63, M52, C92, J41)     

EXPLAINING GIFT‐EXCHANGE—THE LIMITS OF GOOD INTENTIONS

This paper explores the limitations of intention‐based social preferences as an explanation of gift‐exchange between a firm and a worker. In a framework with one self‐interested and one reciprocal player, gift‐giving never arises in equilibrium. Instead, any equilibrium in a large class of multistage games must involve mutually unkind behavior of both players. Besides gift‐exchange, this class of games also includes moral hazard models and the rotten kid framework. Even though equilibrium behavior may appear positively reciprocal in some of these games, the self‐interested player never benefits from reciprocity. We discuss the relation of these results to the theoretical and empirical literature on gift‐exchange in employment relations.     

CONVERGENCE: AN EXPERIMENTAL STUDY OF TEACHING AND LEARNING IN REPEATED GAMES

Nash equilibrium can be interpreted as a steady state where players hold correct beliefs about the other players’ behavior and act rationally. We experimentally examine the process that leads to this steady state. Our results indicate that some players emerge as teachers—those subjects who, by their actions, try to influence the beliefs of their opponent and lead the way to a more favorable outcome—and that the presence of teachers appears to facilitate convergence to Nash equilibrium. In addition to our experiments, we examine games, with different properties, from other experiments and show that teaching plays an important role in these games. We also report results from treatments in which teaching is made more difficult. In these treatments, convergence rates go down and any convergence that does occur is delayed.     

Diversity as a Basis for Shared Organizational Identity: The Norm Congruity Principle

Although the social identity approach is generally used to explain the negative consequences of diversity for the formation of a common identity within organizations, we propose that social identity processes can also lead employees to evaluate their differences in a positive way. We propose norm‐congruency as a central principle to understand these issues. We argue that when differences among team members in organizations are congruent with norms and expectations, diversity can become a basis for organizational identification.     

Norms in Mixed Sex and Mixed Race Work Groups

Abstract

Norms determine regular patterns of behavior and influence members' identification with a group. They are also a proximate way to predict and understand behavior in diverse work groups but, surprisingly, have not been extensively examined in this context. After reviewing research on group norms and the psychology of prejudice, I suggest that reaping the benefits of the increased range of available task relevant resources in demographically diverse work groups may depend on the strength and content of the norms it adopts, but that diverse groups face distinct obstacles in developing strong norms that create satisfying interpersonal interaction and effective work performance. I consider the difficulties diverse work groups have in forming strong norms and then focus on how anti‐bias norms, which are directed toward preventing behaviors associated with prejudice and discrimination and address members' security concerns, and openness norms, which promote people's ability to individuate those whom they might otherwise stereotype as well as address nurturance concerns, may increase a work group's ability to optimize social interaction and performance amidst diversity. I suggest that reorienting psychological and organizational research on prejudice to focus on group norm strength and content may be a way of both understanding and solving the greater challenges of discrimination.     

Paradigm lost: Reinvigorating the study of organizational culture

In spite of the importance of organizational culture, scholarly advances in our understanding of the construct appear to have stagnated. We review the state of culture research and argue that the ongoing academic debates about what culture is and how to study it have resulted in a lack of unity and precision in defining and measuring culture. This ambiguity has constrained progress in both developing a coherent theory of organizational culture and accreting replicable and valid findings. To make progress we argue that future research should focus on conceptualizing and assessing organizational culture as the norms that characterize a group or organization that if widely shared and strongly held, act as a social control system to shape members’ attitudes and behaviors. We further argue that to accomplish this, researchers need to recognize that norms can be parsed into three distinct dimensions: (1) the content or what is deemed important (e.g., teamwork, accountability, innovation), (2) the consensus or how widely shared norms are held across people, and (3) the intensity of feelings about the importance of the norm (e.g., are people willing to sanction others). From this perspective we suggest how future research might be able to clarify some of the current conflicts and confusion that characterize the current state of the field.     

Differences in Retail Inventory Investment Behavior During Macroeconomic Shocks: Role of Service Level

In this article, we analyze how retailers change their inventory investment behavior in response to macroeconomic shocks. We examine if service level, as measured by the ratio of stockout to inventory holding costs, can explain the differences in observed behavior across retailers. We use data on macroeconomic indicators and quarterly filings of US public retailers from 1985 to 2009 to estimate a dynamic model of short‐ and long‐term impact of macroeconomic shocks on inventory investment. Our results show that retailers with a high service level increase their inventory investment significantly more than those with a low service level during expansion shocks. Conversely, retailers with a low service level curtail their inventory investment significantly more than those with a high service level during periods of economic contractions. Thus, we show that the aggregate change in inventory investment documented in prior macroeconomics research is driven by different sets of retailers, as predicted by newsvendor logic. We draw implications of our findings to retailers as well as their suppliers.     

Insurance,Public Assistance,and Household Flood Risk Reduction: A Comparative Study of Austria,England, and Romania

In light of increasing losses from floods, many researchers and policymakers are looking for ways to encourage flood risk reduction among communities, business, and households. In this study, we investigate risk‐reduction behavior at the household level in three European Union Member States with fundamentally different insurance and compensation schemes. We try to understand if and how insurance and public assistance influence private risk‐reduction behavior. Data were collected using a telephone survey (n = 1,849) of household decisionmakers in flood‐prone areas. We show that insurance overall is positively associated with private risk‐reduction behavior. Warranties, premium discounts, and information provision with respect to risk reduction may be an explanation for this positive relationship in the case of structural measures. Public incentives for risk‐reduction measures by means of financial and in‐kind support, and particularly through the provision of information, are also associated with enhancing risk reduction. In this study, public compensation is not negatively associated with private risk‐reduction behavior. This does not disprove such a relationship, but the negative effect may be mitigated by factors related to respondents' capacity to implement measures or social norms that were not included in the analysis. The data suggest that large‐scale flood protection infrastructure creates a sense of security that is associated with a lower level of preparedness. Across the board there is ample room to improve both public and private policies to provide effective incentives for household‐level risk reduction.     

Time Horizon and Cooperation in Continuous Time

We study social dilemmas in (quasi‐) continuous‐time experiments, comparing games with different durations and termination rules. We discover a stark qualitative contrast in behavior in continuous time as compared to previously studied behavior in discrete‐time games: cooperation is easier to achieve and sustain with deterministic horizons than with stochastic ones, and end‐game effects emerge, but subjects postpone them with experience. Analysis of individual strategies provides a basis for a simple reinforcement learning model that proves to be consistent with this evidence. An additional treatment lends further support to this explanation.     

Efficient Use of Information and Social Value of Information

This paper analyzes equilibrium and welfare for a tractable class of economies (games) that have externalities, strategic complementarity or substitutability, and heterogeneous information. First, we characterize the equilibrium use of information: complementarity heightens the sensitivity of equilibrium actions to public information, raising aggregate volatility, whereas substitutability heightens the sensitivity to private information, raising cross‐sectional dispersion. Next, we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective; the efficient use of information reflects the social value of aligning choices across agents. Finally, we examine the comparative statics of equilibrium welfare with respect to the information structure; the social value of information is best understood by classifying economies according to the inefficiency, if any, in the equilibrium use of information. We conclude with a few applications, including production externalities, beauty contests, business cycles, and large Cournot and Bertrand games.     

Estimation of Nonparametric Conditional Moment Models With Possibly Nonsmooth Generalized Residuals

This paper studies nonparametric estimation of conditional moment restrictions in which the generalized residual functions can be nonsmooth in the unknown functions of endogenous variables. This is a nonparametric nonlinear instrumental variables (IV) problem. We propose a class of penalized sieve minimum distance (PSMD) estimators, which are minimizers of a penalized empirical minimum distance criterion over a collection of sieve spaces that are dense in the infinite‐dimensional function parameter space. Some of the PSMD procedures use slowly growing finite‐dimensional sieves with flexible penalties or without any penalty; others use large dimensional sieves with lower semicompact and/or convex penalties. We establish their consistency and the convergence rates in Banach space norms (such as a sup‐norm or a root mean squared norm), allowing for possibly noncompact infinite‐dimensional parameter spaces. For both mildly and severely ill‐posed nonlinear inverse problems, our convergence rates in Hilbert space norms (such as a root mean squared norm) achieve the known minimax optimal rate for the nonparametric mean IV regression. We illustrate the theory with a nonparametric additive quantile IV regression. We present a simulation study and an empirical application of estimating nonparametric quantile IV Engel curves.     

Claiming more than equality: Should leaders ask for forgiveness?

In organizations, leaders are often paid more than lower-level employees. Social dilemma research also shows that leaders feel entitled to earn more, and because of this, are more inclined to contribute less than an equal share to a public good, which may damage the collective. In two experiments, the social dilemma context is used to examine how group members react when either a leader or a follower violates the equality norm. Moreover, we demonstrate how asking for forgiveness sometimes mitigates people's reactions to equality norm violations. Results show that asking for forgiveness attenuates negative emotions, retribution, and non-cooperation—but more so if followers, relative to leaders, violated equality. In fact, leaders are less likely to be seen as even violating norms, suggesting that group members perceive leaders to be entitled.     

Flexible Work Arrangements and Intentions of Unemployed Women in Cyprus: A Planned Behaviour Model

Drawing from the theory of planned behaviour, we use 18 focus groups with 113 unemployed women and 150 mail questionnaires to explore whether and how unemployed Cypriot women's subjective norms, attitudes, perceived behavioural control and job versus career aspirations influence their intentions to adopt employee‐ and employer‐driven flexible work arrangements. To analyse the information gathered, we used a combination of content analysis, an external panel of practitioners and academics, principal components analysis, and regressions. Results show that women's positive attitudes towards child‐caring and self‐enhancement and their subjective norms of organizational inflexibility were positively related mainly with intentions to adopt employee‐driven flexible work arrangements. Further, women who found childcare support and employer requirements limiting were more interested in telework; the latter were also more interested in temporary work. Finally, women's career aspirations were related with weekend work and telework, whilst their job aspirations were associated with temporary work. Results raise issues for employers and policy‐makers in Cyprus, and possibly other southern European countries facing similar challenges, in supporting women to become fully integrated in the labour market.     

The importance of key celebrity characteristics for customer segmentation by age and gender: Does beauty matter in professional football?

This paper examines through the lens of sport whether male and female customers as well as differently aged customers focus on different celebrity characteristics and whether they are influenced by celebrities’ facial attractiveness. Drawing on psychological and sociological theories like attachment theory, social role theory of gender, or social norm theory as well as on the academic literature on celebrity endorsement in general, we develop several hypotheses regarding how a fan’s age and gender affect the importance of key characteristics of football stars—namely experience, personality, exemplary behavior, and skills. Using a proprietary dataset that combines archival data concerning professional football players and clubs with survey data of more than 2100 football fans, we find evidence that female fans attach more importance to a player’s personality and behavior while male fans seem to focus on experience and skills. We further find that when fans get older, the importance of a player’s behavior and experience increases. Moreover, our results show that the facial attractiveness of players clearly influences fan perceptions. Our results contribute to existing research on customer segmentation by providing a more differentiated picture of the effects of key celebrity characteristics on different customers.     

Complexity Theory and Strategic Change: an Empirically Informed Critique*

We present a four‐year ethnographic study of a public‐sector organization and use narrative to describe its development in terms of four complexity theory concepts: sensitivity to initial conditions, negative and positive feedback processes, disequilibrium and emergent order. Our study indicates that order emerges at the boundary between the organization's legitimate and shadow systems. We suggest that the underlying dynamic leading to the emergent order is the need to reduce anxiety. Our findings cause us to question the assertion that organizations are naturally complex adaptive systems producing novel forms of order. We propose an alternate view that in social systems, equilibrium‐seeking behaviour is the norm; such systems can self‐organize into hierarchy. We draw attention to some of the difficulties we found in applying complexity‐theory concepts to a social system and conclude by advocating the development of complexity theory through the incorporation of insights from psychology and social theory.     

Tenable Strategy Blocks and Settled Equilibria

When people interact in familiar settings, social conventions usually develop so that people tend to disregard alternatives outside the convention. For rational players to usually restrict attention to a block of conventional strategies, no player should prefer to deviate from the block when others are likely to act conventionally and rationally inside the block. We explore two set‐valued concepts, coarsely and finely tenable blocks, that formalize this notion for finite normal‐form games. We then identify settled equilibria, which are Nash equilibria with support in minimal tenable blocks. For a generic class of normal‐form games, our coarse and fine concepts are equivalent, and yet they differ from standard solution concepts on open sets of games. We demonstrate the nature and power of the solutions by way of examples. Settled equilibria are closely related to persistent equilibria but are strictly more selective on an open set of games. With fine tenability, we obtain invariance under the insertion of a subgame with a unique totally mixed payoff‐equivalent equilibrium, a property that other related concepts have not satisfied.