Observability and overcoming coordination failure in organizations: An experimental study

Motivated by problems of coordination failure in organizations, we examine how overcoming coordination failure and maintaining coordination depend on the ability of individuals to observe others’ choices. Subjects’ payoffs depend on coordinating at high effort levels in a weak-link game. Treatments vary along two dimensions. First, subjects either start with low financial incentives for coordination, which typically leads to coordination failure, and then are switched to higher incentives or start with high incentives, which usually yield effective coordination, and are switched to low incentives. Second, as the key treatment variable, subjects either observe the effort levels chosen by all individuals in their experimental group (full feedback) or observe only the minimum effort (limited feedback). We find three primary results: (1) When starting from coordination failure the use of full feedback improves subjects’ ability to overcome coordination failure, (2) When starting with good coordination the use of full feedback has no effect on subjects’ ability to avoid slipping into coordination failure, and (3) History-dependence, defined as dependence of current effort levels on past incentives, is strengthened by the use of full feedback. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C92, D23, J31, L23, M52     

Competitive rivalry,social disposition,and subjective well-being: An experiment

This paper experimentally studies the effects of competitive rivalry in a social dilemma where people's actions cannot be contractually fixed. We find that, in comparison with no rivalry, the presence of rivalry does neither increase efficiency nor does it yield any gains in earnings for the short side of the exchange relation. Moreover, rivalry has a clearly negative impact on the disposition towards others and on the experienced well-being of those on the long side. Since subjective well-being improves only for those on the short side rivalry contributes to larger inequalities in experienced well-being. All in all rivalry does not show up as a positive force in our environment.     

Population uncertainty,social insurance,and actuarial bias

The authors examine the relation between changes in the size of the working population and the value of a social insurance contract between unborn workers and future retirees. They develop a model suggesting that such a contract will benefit both of the generations concerned. The implied geographical focus is on developed countries.     

Forward induction and entry deterrence: an experiment

The Dixit (Econ J 90:95–106, 1980) hypothesis that incumbents use investment in capacity to deter potential entrants has found little empirical support. Bagwell and Ramey (J Econ 27:660–680, 1996) propose a model where, in the unique game-theoretic prediction based on forward induction or iterated elimination of weakly-dominated strategies, the incumbent does not have the strategic advantage. We conduct an experiment with games inspired by these models. In the Dixit-style game, the incumbent monopolizes the market most of the time even without the investment in capacity. In our Bagwell-and-Ramey-style game, the incumbent also tends to keep the market, in contrast to the predictions of an entrant advantage. Nevertheless, we find strong evidence that forward induction affects the behavior of most participants. The results of our games suggest that players perceive that the first mover has an advantage without having to pre-commit capacity. In our Bagwell–Ramey game, evolution and learning do not drive out this perception. We back these claims with data analysis and a theoretical framework for dynamics. Financial support by the Spanish Ministerio de Ciencia and Tecnología (SEC2002-01352 and SEJ2006-11665-C02-01) and the Barcelona Economic Program of CREA and excellent research assistance by David Rodríguez are gratefully acknowledged. The authors thank Aurora García Gallego and Armin Schmutzler for helpful comments.     

Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games

In experiments with two-person sequential games we analyze whether responses to favorable and unfavorable actions depend on the elicitation procedure. In our hot treatment the second player responds to the first player's observed action while in our cold treatment we follow the strategy method and have the second player decide on a contingent action for each and every possible first player move, without first observing this move. Our analysis centers on the degree to which subjects deviate from the maximization of their pecuniary rewards, as a response to others' actions. Our results show no difference in behavior between the two treatments. We also find evidence of the stability of subjects' preferences with respect to their behavior over time and to the consistency of their choices as first and second mover.     

Asymmetric Demand Information in Uniform and Discriminatory Call Auctions: An Experimental Analysis Motivated by Electricity Markets

We study experimental multi-unit uniform and discriminatory auctions with demand uncertainty, motivated by the ongoing debate about market design in the electricity industry. We study the effect of asymmetric demand-information in the two auction institutions. In our treatment condition some sellers have less information than in our baseline conditions. In both conditions transaction prices and price volatility are not significantly different under the two auction institutions. However, under asymmetric information discriminatory auctions are significantly less efficient. These results are not in line with typical arguments made in favor of discriminatory pricing in electricity industries; namely, lower prices and less volatility.     

Reference Points and Negative Reciprocity in Simple Sequential Games

We investigate experimentally whether preferences over an outcome depend on what other possible outcomes of the situation under consideration are, i.e., whether choices are “menu dependent.” In simple sequential games we analyze whether reactions to a certain benchmark outcome are influenced by changes in the payoffs of another outcome, not attainable at that time, called the “reference point.” Our data provide evidence that is favorable to the notion of menu dependence. Alterations of the reference point can lead to quantitatively significant changes in behavior at the benchmark outcome. The behavior we observe can be interpreted in terms of negative reciprocity. Journal of Economic Literature Classification Numbers: C91, C92, C72.     

Not just like starting over - Leadership and revivification of cooperation in groups

We conduct a laboratory experiment to study how, after a history of decay, cooperation in a repeated voluntary contribution game can be revived in an enduring way. Simply starting the repeated game over—a simple fresh start—leads to an initial increase of cooperation, but to a subsequent new decay. Motivated by cooperation decay in organizations we study the potential of three interventions of triggering higher and sustained cooperation, which take place at the same time as a restart. Surprisingly, we find that the detailed explanation of the causes of the decay in cooperation of Fischbacher and Gächter (Am Econ Rev 100:541–556, 2010) combined with an advice on how to prevent decay do not have an effect beyond that of just starting over. In contrast, a one-way free form communication message sent by the leader to the followers strongly revives cooperation. We find evidence that repeated free form communication by the leader further strengthens the reviving effect on cooperation. Combining the two previous interventions does not outperform the pure effect of communication. Our content analysis reveals that leader communication is more people oriented than the expert advice.     

How strategy sensitive are contributions?

Summary. We test six hypotheses for contributions in dilemma games, a category that includes the prisoner's dilemma and public goods games. Our experiment focuses specifically on the strategic interdependence of contributing behavior, and manipulates the strategy space of a two-person dilemma game especially designed for the task. The hypothesis that contributors have non-linear preferences over own and the other player's payoffs accurately matches the strategic pattern of contributing that we observe across treatments. None of the reasons for contributing advanced by the other hypotheses, whether alone or in additive combination, does so.