Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of 'fair sharing' and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also 'fair sharing' and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are 'reciprocity-compatible'. Principals recognize the agency problem and react accordingly.     

An Experimental Analysis of Intertemporal Allocation Behavior

If the future is uncertain, optimal intertemporal decisions rely on anticipating one's own optimal future behavior as is typical in dynamic programming. Our aim is to detect experimentally stylized facts about intertemporal decision making in a rich stochastic environment. Compared to previous experimental studies our experimental design is more complex since the time horizon is uncertain and termination probabilities have to be updated. In particular the decision task is non-stationary as in real life which seriously complicates the task of diagnosing behavioral regularities. In this study we give some illustrative results and provide some general perspectives. Our main result is that subjects' reaction to information about termination probablilities are qualitatively correct.     

Capacity Choices and Price Competition in Experimental Markets

We report on experimental duopoly markets with heterogeneous goods. In these markets, sellers first choose capacities and then prices. While capacities remain fixed for either five or ten periods, prices have to be chosen in every period. The experiments starts with two sets of exogenously predetermined capacities. Independently of the distribution of capacities is, a unique pure-strategy in prices is subgame perfect. In equilibrium, capacities should correspond to the Cournot prediction. Given capacities, price-setting behavior is in general consistent with the theory. Average capacities converge above the Cournot level. Capacities converge at the industry level but are somewhat dispersed. Sellers rarely manage to cooperate.     

Leadership,sourcing modes and IT project management

Information technology (IT) project management has always been a major concern for firms. Researchers have demonstrated that the different characteristics of a project directly affect project management practices and have suggested that different leadership profiles are better suited to different project conditions. The aim of the proposed model is to aid in the understanding of the relationship between the type of IT project (represented by its sourcing mode) and the leadership profile adopted by a project manager. Using a case approach, we studied four successful IT projects. Our results suggest that projects using a partnership or recuperation sourcing mode require a more flexible profile of management than projects characterized by internal governance or outsourcing, which require a more control‐oriented profile of management. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

On the Interaction of Risk and Time Preferences: An Experimental Study

Experimental studies of risk and time preference typically focus on one of the two phenomena. The goal of this paper is to investigate the (possible) correlation between subjects' attitude to risk and their time preference. For this sake we ask 61 subjects to price a simple lottery in three different scenarios. At the first, the lottery premium is paid 'now'. At the second, it is paid 'later'. At the third, it is paid 'even later'. By comparing the certainty equivalents offered by the subjects for the three lotteries, we test how time and risk preferences are interrelated. Since the time interval between 'now' and 'later' is the same as between 'later' and 'even later', we also test the hypothesis of hyperbolic discounting. The main result is a statistically significant negative correlation between subjects' degrees of risk aversion and their (implicit) discount factors. Moreover, we show that the negative correlation is independent of the method used to elicit certainty equivalents (willingness to pay versus willingness to accept).