Contributions published at Economics of Corporate Culture, Business Ethics and Social Responsiblity (Roberto A. Weber)

Reciprocity is common in economic and social domains, and it has been widely documented in the laboratory. While positive and negative reciprocity are observed in investment and ultimatum games, respectively, prior laboratory studies often neglect the effect of time delays that are common in real-world interactions. This research investigates the effect of time delays on reciprocity in the investment and ultimatum games. We manipulate the time delay after second movers have been informed about the first movers’ decisions. We find that a delay is correlated with fewer rejections in the ultimatum game, but we find no effect of delays in the investment game. A follow-up study explores some of the processes that occur during time delay in the ultimatum game. We find delays correlated to increased reported feelings of satisfaction and decreased reported feelings of disappointment. Increased satisfaction is correlated to an increased probability of rejection, while disappointment has a more complex relationship to the probability of rejection.

This chapter is about experiments that study aspects of organizational structure and economic performance. Relative to field studies using empirical data, experiments often have obvious advantages, especially that of control and randomized assignment to implement theoretical assumptions that can only be imperfectlymeasured or controlled econometricallywhenusing field data. Despite these advantages, the range of organizational hypotheses studied in experiments is small, although it is growing rapidly.

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Individuals sort into and out of economic environments based on their preferences and in response to relative prices. We demonstrate the importance of such sorting for the measurement of social preferences, using two laboratory experiments. First, allowing subjects to avoid environments in which sharing is possible significantly reduces sharing. This reveals the existence of a type of individual who shares reluctantly, preferring to avoid the opportunity to share. Second, after subsidizing the sharing environment, the aggregate amount shared increases, but less is shared, on average, by those who enter. Thus, subsidies intended to induce more sharing have weak effects since they attract those who share the least.

We advance the measurement of trust in economics in two ways. First, we highlight the importance of clearly identifying the target of trust, particularly for obtaining concordance between attitudinal and behavioral measures of trust. Second, we introduce a novel behavioral measure of (dis)trust, based on individuals? willingness to pay to avoid being vulnerable to the target of trust. We conduct an experiment in which we vary the target of trust among passersby at several locations around a city, measuring both behavioral distrust and trust attitudes towards these varying targets. We find that subjects discriminate based on perceived characteristics of different targets in determining whether to trust, in a manner consistent with trust elicited using attitudinal measures and with actual trustworthiness. Risk aversion and altruism do not correlate highly with our measure of distrust.

Slowing climate change will almost certainly require a reduction in greenhouse gas emissions, but agreement on who should reduce emissions by how much is difficult, in part because of the self-serving bias—the tendency to believe that what is beneficial to oneself is also fair. Conducting surveys among college students in the United States and China, we show that each of these groups displays a nationalistic self-serving bias in judgments of a fair distribution of economic burdens resulting from mitigation. Yet, we also show, by disguising the problem and the identity of the parties, that it is possible to elicit perceptions of fairness that are not influenced by national interests. Our research reveals that the self-serving bias plays a major role in the difficulty of obtaining agreement on how to implement emissions reductions. That is, the disagreement over what constitutes fair climate policy does not appear to be due to cross-national differences in what constitutes a fair distribution of burdens. Interventions to mitigate the self-serving bias may facilitate agreement.

We explore the relationship between outcomes in a coordination game and a pre-play asset market where asset values are determined by outcomes in the subsequent coordination game. Across two experiments, we vary the payoffs from the market relative to the game, the degree of interdependence in the game, and whether traders' asset payoffs are dependent on outcomes in their own or another game. Markets lead to significantly lower efficiency across treatments, even when they produce no distortion of incentives in the game. Market prices forecast game outcomes. Our experiments shed light on how financial markets may influence affiliated economic outcomes.

How effectively do democratic institutions provide public goods? Despite the incentives an elected leader has to free ride or impose majority tyranny, our experiment demonstrates that electoral delegation results in full provision of the public good. Analysis of the experimental data suggests that the result is primarily due to electoral selection: groups elect prosocial leaders and replace those who do not implement full contribution outcomes. However, we also observe outcomes in which a minimum winning coalition exploits the contributions of the remaining players. A second experiment demonstrates that when electoral delegation must be endogenously implemented, individuals voluntarily cede authority to an elected agent only when preplay communication is permitted. Our combined results demonstrate that democratic delegation helps groups overcome the free-rider problem and generally leads to outcomes that are often both efficient and equitable.

How effectively do democratic institutions provide public goods? Despite the incentives an elected leader has to free ride or impose majority tyranny, our experiment demonstrates that electoral delegation results in full provision of the public good. Analysis of the experimental data suggests that the result is primarily due to electoral selection: groups elect prosocial leaders and replace those who do not implement full contribution outcomes. However, we also observe outcomes in which a minimum winning coalition exploits the contributions of the remaining players. A second experiment demonstrates that when electoral delegation must be endogenously implemented, individuals voluntarily cede authority to an elected agent only when preplay communication is permitted. Our combined results demonstrate that democratic delegation helps groups overcome the free-rider problem and generally leads to outcomes that are often both efficient and equitable.

We explore the relationship between outcomes in a coordination game and a pre-play asset market in which values are determined by outcomes in the subsequent coordination game. Across two experiments, we vary the payoffs from the market relative to the game, the degree of interdependence in the game, and whether traders' asset payoffs are dependent on outcomes in their own or another game. Markets lead to significantly lower efficiency across treatments, even when they produce no distortion of incentives in the game. Market prices forecast game outcomes. Our experiments shed light on how financial markets may influence affiliated economic outcomes.

Psychologists have long recognized two kinds of learning: one that is relatively shallow and domain-specific; and another that is deeper, producing generalizable insights that transfer across domains. The game theory literature has only recently considered this distinction, and the conditions that stimulate the latter kind of “meaningful” learning in games are still unclear. Three experiments demonstrate that one kind of meaningful learning — acquisition of iterated dominance — occurs in the absence of any feedback. We demonstrate that such feedback-free meaningful learning transfers to new strategically similar games, and that such transfer does not typically occur when initial games are played with feedback. The effects of withholding feedback are similar to, and substitutable with, those produced by requiring players to explain their behavior, a method commonly employed in psychology to increase deliberation. This similarity suggests that withholding feedback encourages deeper thinking about the game in a manner similar to such self-explanation.

We demonstrate that people can adopt a favorable view of ambiguous risks relative to ones with known probabilities, contrary to the usual attitude of ambiguity aversion, when doing so permits justification for unfair behavior. We use binary dictator games involving a choice between a relatively equitable allocation and an “unfair” allocation that is both less generous and makes the recipient's payment dependent on a p=0.5 lottery. Dictators choose the unfair option more frequently when the recipient's allocation depends on an ambiguous lottery than on a lottery with a known probability — even though the objective distributions of outcomes are identical under the two kinds of lotteries. Dictators' estimates of the expected value of the recipients' allocations are inflated under ambiguity, indicating that dictators form self-serving beliefs about ambiguity. Finally, increased unfair behavior under ambiguity is extinguished when dictators are constrained by their own initial unmotivated, and negative, attitudes towards ambiguity.

Principal-agent relationships are typically assumed to be motivated by efficiency gains from comparative advantage. However, principals may also delegate tasks to avoid taking direct responsibility for selfish or unethical behavior. We report three laboratory experiments in which principals repeatedly either decide how much money to share with a recipient or hire agents to make sharing decisions on their behalf. Across several experimental treatments, recipients receive significantly less, and in many cases close to nothing, when allocation decisions are made by agents.

Economic models typically allow for “free disposal” or “reversibility” of information, which implies non-negative value. Building on previous research on the “curse of knowledge” we explore situations where this might not be so. In three experiments, we document situations in which participants place positive value on information in attempting to predict the performance of uninformed others, even when acquiring that information diminishes their earnings. In the first experiment, a majority of participants choose to hire informed—rather than uninformed—agents, leading to lower earnings. In the second experiment, a significant number of participants pay for information—the solution to a puzzle—that hurts their ability to predict how many others will solve the puzzle. In the third experiment, we find that the effect is reduced with experience and feedback on the actual performance to be predicted. We discuss implications of our results for the role of information and informed decision making in economic situations.

This paper reports an experiment examining the effect of social norms on pro-social behavior. We test two predictions derived from work in psychology regarding the influence of norms. The first is a “focusing” influence, whereby norms only impact behavior when an individual’s attention is drawn to them; and the second is an “informational” influence, whereby a norm exerts a stronger impact on an individual’s behavior the more others he observes behaving consistently with that norm. We find support for both effects. Either thinking about or observing the behavior of others produces increased pro-social behavior – even when one expects or observes little pro-social behavior on the part of others – and the degree of pro-social behavior is increasing in the actual and expected pro-social behavior of others. This experiment eliminates strategic influences and thus demonstrates a direct effect of norms on behavior.

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