Recall searching with and without recall

We revisit the sequential search problem by Hey (J Econ Behav Organ 8:137–144, 1987). In a 2 \(\times \) 2 factorial design, varying fixed and random cost treatments with and without recall, we address open research questions that were originally stated by Hey (1987). Our results provide clear evidence for Hey’s (1987) conjecture that recall negatively affects performance in sequential search. With experience, however, search behavior with and without recall converges toward the optimal reservation rule. We further find that the utilization of optimal reservation rules is independent from the stochastic nature of the search cost.     

Strategic risk in supply chain contract design

Supply chains facing asymmetric information can either operate in a cooperative mode with information and benefit sharing or can choose a non-cooperative form of interaction and align their incentives via screening contracts. In the cooperative mode, supply chain efficiency can be achieved, but high levels of trust and trustworthiness are required. In the non-cooperative mode, the contract mechanism guarantees a second best supply chain performance, but only if all parties choose their equilibrium strategies without trembles. Experimental evidence, however, shows that both operating modes often fail due to strategic risk. Cooperation is disrupted by deceptive signals and the lack of trust, whereas non-cooperative strategies suffer from persistent out-of-equilibrium behavior. We present two means to reduce strategic risk. First, a punishment mechanism leads to a better matching of trust and trustworthiness and supports the cooperative operating mode. Second, an enforcement of self-selection supports the non-cooperative equilibrium by increasing the attractiveness of screening contracts. We find that supply chain performance can benefit from reduced strategic risk in either operating mode.     

Fairness,Public Good,and Emotional Aspects of Punishment Behavior

We report an experiment on two treatments of an ultimatum minigame. In one treatment, responders reactions are hidden to proposers. We observe high rejection rates reflecting responders intrinsic resistance to unfairness. In the second treatment, proposers are informed, allowing for dynamic effects over eight rounds of play. The higher rejection rates can be attributed to responders provision of a public good: Punishment creates a group reputation for being tough and effectively educate proposers. Since rejection rates with informed proposers drop to the level of the treatment with non-informed proposers, the hypothesis of responders enjoyment of overt punishment is not supported.     

In Search of Workers' Real Effort Reciprocity—a Field and a Laboratory Experiment

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real‐effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer's surplus from the work contract is a crucial prerequisite for a positive wage–effort relation. This demonstrates that an employee's reciprocity requires a clear assessment of the surplus at stake. (JEL: C91, C92, J41)     

Strategic Inventory and Supply Chain Behavior

Based on a serial supply chain model with two periods and price‐sensitive demand, we present the first experimental test of the effect of strategic inventories on supply chain performance. In theory, if holding costs are sufficiently low, the buyer builds up a strategic inventory (even if no operational reasons for stock‐holding exist) to limit the supplier's market power, and to increase the own profit share. As it turns out, this enhances the overall supply chain performance. The supplier anticipates the effect of the strategic inventory and differentiates prices to capture a part of the increased supply chain profits. Our results show that the positive effects of strategic inventories are even more pronounced than theoretically predicted, because strategic inventories empower buyers by shifting the perception of the fair split. Overall, strategic inventories have a double positive effect, a strategic and a behavioral, both reducing the average wholesale prices and dampening the double marginalization effect. The latter effect leads to more equitable payoffs.     

Money Does Not Induce Risk Neutral Behavior,but Binary Lotteries Do even Worse

If payoffs are tickets for binary lotteries, which involve only two money prizes, then rationality requires expected value maximization in tickets. This payoff scheme was increasingly used to induce risk neutrality in experiments. The experiment presented here involved lottery choice and evaluation tasks. One subject group was paid in binary lottery tickets, another directly in money. Significantly greater deviations from risk neutral behavior are observed with binary lottery payoffs. This discrepancy increases when subjects have easy access to the alternatives' expected values and mean absolute deviations. Behavioral regularities are observed at least as often as with direct money payoffs.     

The Impact of Information Sharing on Supply Chain Performance under Asymmetric Information

The use of screening contracts is a common approach to solve supply chain coordination problems under asymmetric information. One main assumption in this context is that managers without specific incentives would rather use their private information strategically than reveal it truthfully. This harms supply chain performance. This study investigates the impact of information sharing in a principal‐agent setting that is typical for many supply chain transactions. We conduct a laboratory experiment to test whether information sharing has an influence on supply chain coordination. We find that information sharing within the supply chain has two positive effects. First, information sharing reduces the inefficiencies resulting from information deficits if there is a certain amount of trust in the supply chain. Second, communication can limit out‐of‐equilibrium behavior with a small impact on the firm's own payoff, but a large impact on the supply chain partner. Furthermore, we find that both effects are amplified when communication takes place in an environment that allows the less informed supply chain party to punish or to reward the better informed party. Although our extended mechanisms substantially enhance the poor performance of the theoretically optimal coordination contract menu, we find no mechanism that implements supply chain performance superior to the theoretically predicted second‐best level.