The coordinating power of social norms

A popular empirical technique to measure norms uses coordination games to elicit what subjects in an experiment consider appropriate behavior in a given situation (Krupka and Weber, 2013). The Krupka-Weber method works under the assumption that subjects use their normative expectations to solve the coordination game. However, subjects might use alternative focal points to coordinate, in which case the method may deliver distorted measurements of the social norm. We test the vulnerability of the Krupka-Weber method to the presence of alternative salient focal points in two series of experiments with more than 3000 subjects. We find that the method is robust, especially when there are clear normative expectations about what constitutes appropriate behavior

Discretionary sanctions and rewards in the repeated inspection game

We experimentally investigate a repeated “inspection game” where, in the stage game, an employee can either work or shirk and an employer simultaneously chooses to inspect or not inspect. The unique equilibrium of the stage game is in mixed strategies with positive probabilities of shirking/inspecting while combined payoffs are maximized when the employee works and the employer does not inspect. We examine the effects of allowing the employer discretion to sanction or reward the employee after observing stage game payoffs. When employers have limited discretion, and can only apply sanctions and/or rewards following an inspection, we find that both instruments are equally effective in reducing shirking and increasing joint earnings. When employers have discretion to reward and/or sanction independently of whether they inspect we find that rewards are more effective than sanctions. In treatments where employers can combine sanctions and rewards employers rely mainly on rewards and outcomes closely resemble those of treatments where only rewards are possible

Group formation under limited resources: narrow basin of equality

The formation of groups in competition and the aggressive interactions between them are ubiquitous phenomena in society. These include student activities in the classroom, election races between political parties, and intensifying trade wars between countries. Why do individuals form themselves into groups? What is the optimal size of groups? And how does the group size distribution affect resource allocations? These questions have been the subjects of intense research in economics, political science, sociology, and ethology. In this study, we explore the group-size effects on the formation of groups and resource allocations from an economic standpoint. While being in a large group is generally advantageous in competition, an increase in the management costs would set an upper bound to the individual benefit of members. Under such counteracting size effects, we consider the dynamics of group formation in which people seek a conservative measure to reduce their possible maximum loss. We are especially interested in the effects of group size on social inequalities at both group and individual level in resource allocation. Our findings show that the low positive size-effect and the high negative size-effect result in different types of social inequalities. We conclude, from the relation between the inequality measures and group distributions predicted within the model, that overall social equality only can be achieved within a narrow region where two counteracting size-effects are balanced

A Self-Funding Reward Mechanism for Tax Compliance

We compare in a laboratory experiment two audit-based tax compliance mechanisms that collect fines from those found non-compliant. The mechanisms differ in the way fines are redistributed to individuals who were either not audited or audited and found to be compliant. The first, as is the case in most extant tax systems, does not discriminate between the un-audited and those found compliant. The second targets the redistribution in favor of those found compliant. We find that targeting increases compliance when paying taxes generates a social return. We do not find any increase in compliance in a control treatment where individuals audited and found compliant receive symbolic rewards. It is not the mere assigning of rewards, but the material incentives inherent in the rewards that improve compliance. We conclude that existing tax mechanisms have room for improvement by rewarding financially those audited and found compliant

Self-selection and variations in the laboratory measurement of other-regarding preferences across subject pools: evidence from one college student and two adult samples

We measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: college students, non-student adults from the community surrounding the college, and adult trainee truckers in a residential training program. The use of typical experimental economics recruitment procedures made the first two groups substantially self-selected. Because the context reduced the opportunity cost of participating dramatically, 91 % of the adult trainees solicited participated, leaving little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection is unlikely to bias inferences about the prevalence of other-regarding preferences among non-student adult subjects. Our data also reject the more specific hypothesis that approval-seeking subjects are the ones most likely to select into experiments. Finally, we observe a large difference between self-selected college students and self-selected adults: the students appear considerably less pro-social