Charles Bellemare

On Representative Trust

This paper combines an economic experiment with survey data to investigate determinants of trust and trustworthiness in the Dutch society. We contrast the inferences which can be made on the trust propensity using stated and revealed measures and we test for participation bias in our experiment. We find that middle aged and educated individuals trust relatively more but are relatively less trustworthy. The effect of age and religion on trust is shown to depend heavily on whether experimental or survey trust measures are used. We find no evidence of participation bias in any experimental decisions.

Gift giving and worker productivity: Evidence from a firm-level experiment

We present results from a field experiment, designed to measure worker response to a monetary gift from their employer. The experiment took place inside a tree-planting firm paying its workforce incentive contracts. Firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity. We compare planter productivity--the number of trees planted per day--on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block, and thus under similar planting conditions. We find direct evidence that the gift had a significant and positive effect on daily planter productivity, controlling for planter-fixed effects, weather conditions and other random daily shocks.

Measuring the willingness to pay to avoid guilt: estimation using equilibrium and stated belief models

We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher-order beliefs are in equilibrium (i.e. consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the later case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between 0.40 and 0.80 Euro to avoid letting down proposers by 1 Euro. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio-economic characteristics of players.

Peer Pressure, Incentives, and Gender: An Experimental Analysis of Motivation in the Workplace

We present results from a real-effort experiment, simulating actual work-place conditions, comparing the productivity of workers under fixed wages and piece rates. Workers, who were paid to enter data, were exposed to different degrees of peer pressure under both payment systems. The peer pressure was generated in the form of private information about the productivity of their peers. We have two main results. First, we find no level of peer pressure for which the productivity of either male or female workers is significantly higher than productivity without peer pressure. Second, we find that very low and very high levels of peer pressure can significantly decrease productivity (particularly for men paid fixed wages). These results are consistent with models of conformism and self-motivation.

Gift exchange within a firm: evidence from a field experiment

We present results from a field experiment testing the gift-exchange hypothesis inside a tree-planting firm paying its workforce incentive contracts. Firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attribuable to past planting productivity. We compare planter productivity - the number of trees planted per day - on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block, and thus under similar planting conditions. We find direct evidence that the gift had a significant and positive effect on daily planter productivity, controlling for planter-fixed effects, weather conditions and other random daily shocks. Moreover, reciprocity is the strongest when the relationship between planters and the firm is long term.

ON THE RELEVANCE AND COMPOSITION OF GIFTS WITHIN THE FIRM: EVIDENCE FROM FIELD EXPERIMENTS*

We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers’ optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers’ outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages.

Flexible Approximation of Subjective Expectations Using Probability Questions

We propose a flexible method to approximate the subjective cumulative distribution function of an economic agent about the future realization of a continuous random variable. The method can closely approximate a wide variety of distributions while maintaining weak assumptions on the shape of distribution functions. We show how moments and quantiles of general functions of the random variable can be computed analytically and/or numerically. We illustrate the method by revisiting the determinants of income expectations in the United States. A Monte Carlo analysis suggests that a quantile-based flexible approach can be used to successfully deal with censoring and possible rounding levels present in the data. Finally, our analysis suggests that the performance of our flexible approach matches that of a correctly specified parametric approach and is clearly better than that of a misspecified parametric approach.

A note on testing guilt aversion

We compare three approaches to test for guilt aversion in two economic experiments. The first approach elicits second-order beliefs using self-reports. The second approach discloses first-order beliefs of matched players to decision makers, which are taken as exogenous second-order beliefs of decision makers. The third approach lets decision makers make choices conditional on a sequence of possible first-order beliefs of matched players. We find that the first and third approach generate similar results, both qualitatively and quantitatively. The second approach, however, generates significantly higher levels of ‘kindness’ for low levels of beliefs: at a second-order belief of zero, the probability of choosing the ‘kind’ action is between 43 and 65 percentage points higher than with the other approaches.

Learning About a Class of Belief-Dependent Preferences Without Information on Beliefs

We show how to bound the effect of belief-dependent preferences on choices in sequential two-player games without information about the (higher-order) beliefs of players. The approach can be applied to a class of belief-dependent preferences which includes reciprocity (Dufwenberg and Kirchsteiger, 2004) and guilt aversion (Battigalli and Dufwenberg, 2007) as special cases. We show how the size of the bounds can be substantially reduced by exploiting a specific invariance property common to all preferences in this class. We illustrate our approach by analyzing data from a large scale experiment conducted with a sample of participants randomly drawn from the Dutch population. We find that players in our experiment are significantly guilt averse, with some players willing to pay at least 0.16eto avoid ‘letting down’ another player by 1e. We also find that our approach produces narrow and thus very informative bounds on the effect of reciprocity in the games we consider. There, our bounds suggest that reciprocity is not a significant determinant of decisions in our experiment.

Multidimensional heterogeneity and the economic importance of risk and matching: evidence from contractual data and field experiments

We measure the cost of risk and the benefits of matching heterogeneous workers to risk levels within a firm that pays its workers piece rates. The workers of this firm are heterogeneous in two dimensions: risk preferences and ability. Our results suggest that workers’ willingness to pay to avoid risk is heterogeneous. It can attain 40% of their expected net earnings but averages to only 1%. Moreover, the benefits to the firm of matching are relatively small: profits are predicted to increase by only 2.3%, 4% if we restrict attention to cases where matching is possible. Although labor-market sorting contributes to this result (the workers in this firm are relatively risk tolerant), it is not the primary cause. More important is the relative homogeneity of risk conditions in this firm that give rise to limited opportunities for matching.