Frans van Winden

Incentive Systems in a Real Effort Experiment

In the reported experiment different payment schemes are examined on theirincentive effects. Payment based on individual, team and relative performance are compared. Subjects conducted computerized tasks that required substantial effort. The results show that individual and team payment induced the same effort levels. In team production free-riding occurred, but it was compensated by many subjects providing more effort than in case of individual pay. Effort was higher, but more variable in tournaments, while in case of varying abilities workers with relatively low ability worked very hard and drove up effort of the others. Finally, attitudes towards work and other workers differed strongly between conditions. This discussion paper has led to a publication in the European Economic Review 2001, 45(2), 187-214.

Lobbying and Asymmetric Information

Informational lobbying — the use by interest groups of their (alleged) expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies — is often regarded as an important means of influence. This paper analyzes this phenomenon in a game setting. On the one hand, the interest group is assumed to have private information which is relevant to the policymaker, whilst, on the other hand, the policymaker is assumed to be fully aware of the strategic incentives of the interest group to (mis)report or conceal its private information.It is shown that in a setting of partially conflicting interests a rationale for informational lobbying can only exist if messages bear a cost to the interest group and if the groups preferences carry information in the ‘right direction’. Furthermore, it is shown that it is not the content of the message as such, but rather the characteristics of the interest group that induces potential changes in the policymakers behavior. In addition, the model reveals some interesting results on the relation between, on the one hand, the occurrence and impact of lobbying and, on the other hand, the cost of lobbying, the stake which an interest group has in persuading the policymaker, the similarity between the policymakers and the groups preferences, and the initial beliefs of the policymaker. Moreover, we relate the results to some empirical findings on lobbying. qu]Much of the pressure placed upon government and its agencies takes the form of freely provided “objective” studies showing the important outcomes to be expected from the enactment of particular policies (Bartlett, 1973: 133, his quotation marks). qu]The analysis here is vague. What is needed is an equilibrium model in which lobbying activities have influence. Incomplete information ought to be the key to building such a model that would explain why lobbying occurs (information, collusion with decision makers, and so on) and whether lobbying expenses are socially wasteful. (Tirole, 1989: Ch. 1.3, p. 77, Rentseeking behavior).

An experimental examination of rational rent-seeking

The theoretical literature exploring various ramifications and applications of Tullocks (1980) rent-seeking model is extensive and rapidly growing. In contrast, there exist as yet only a few experimental evaluations of this model, with ambiguous results. Moreover, these studies focus on one particular case (proportional probabilities) and use a problematic experimental design. With an appropriate design we investigate the extreme cases of proportional probabilities and perfect discrimination, which offer the starkest contrast in theoretical predictions. We find substantial evidence for the predictive power of the rent-seeking model, particularly if one allows for the fact that people sometimes make mistakes or are confused about what to do.

Dynamics of social ties and local public good provision

Abstract A model is presented in which social ties between individuals and private contributions to a local public good are interrelated. Ties are formalized by means of utility interdependence, and depend on the history of social interaction, in this case the joint provision of the public good. The resulting dynamic model generates equilibrium values of the intensity of ties and the private provision level. The impact of public provision on these variables is analyzed. Our results are very different from those obtained with the standard model, where individuals are only interested in the utility from own consumption.

Why people vote: Free riding and the production and consumption of social pressure

Abstract A model is presented which places the decision to vote or abstain in a rational choice framework. It is shown that casting a vote may well be a rational act, following from an individual cost-benefit analysis. It is argued that (reference-)group interests play an important role when an individual determines actions in the political sphere. Through its (relative) turnout, a group can affect future tax rates to which its members are liable, and an optimal turnout level is derived for each group. Using this optimal level, within-group processes are analyzed, where certain group members (‘producers of social pressure’) try to convince others to go and vote. For these producers, voting is shown to be a rational act. Other members may give in to this pressure and be induced to cast a vote. These members may be thought to vote out of a sense of ‘civic duty’. Equilibria for the model, characterized by positive turnout, are derived, an example is presented, and the results are discussed.

Identification of Voters with Interest Groups Improves the Electoral Chances of the Challenger

This short paper investigates the consequences of voters identifying with special interest groups in a spatial model of electoral competition. We show that by effectively coordinating voting behavior, identification with interest groups leads to an increase in the size of the winning set, that is, the set of policy platforms for the challenger that will defeat the incumbent. Consequently, our paper points at a novel process through which interest groups can enhance the electoral chances of a challenger.

Professionals and students in a lobbying experiment: Professional rules of conduct and subject surrogacy

Lobbying is studied in a series of signaling game experiments. Students as well as professional lobbyists are used as subjects. In contrast with some earlier studies, comparing students and professionals, we find significant differences in the behavior of the two subject pools. Professional subjects appear to behave more in line with the game--theoretic predictions, display a higher degree of separation, and earn more money. We show that professional rules of conduct and professionalization can explain these differences. Although our results suggest that subject surrogacy is a relevant issue in this field of research, arguments are provided why experimentation with student subjects remains useful to study lobbying. Keyword(s): Lobbying; Experimental game theory; Professional rules of conduct; Subject surrogacy

Modelling political pressure as transmission of information

Studies offering a formal description of interest group behaviour aimed at influencing government policy typically use an ‘influence function’ to represent the transformation of resources into political influence. A formal model of the interaction underlying this transformation, however, appears to be lacking: the pressure process itself is treated as a ‘black box’. In this paper we try to shed some light on this process. To that purpose the paper starts out with a formalization of political pressure, central to which is the transmission of information. Then a simple but basic game is presented formalizing the interaction between a government and an interest group. It is shown that pressure can be part of a sequential equilibrium. The results and insights obtained from the model are discussed and evaluated in a broader game-theoretical perspective.

An empirical analysis of self-employment in the Netherlands

Abstract Using an endogenous switching model, applied to a unique data set, it is found that the choice between self-employment and paid-employment depends — among others — on the score of an IQ test applied at the age of 12, the employment status of the father, and the income differential.

A political economic analysis of labor migration and income redistribution

We present a two-country political economic model of income redistribution with internationally mobile labor. Migration can be exogenous and/or endogenous (i.e., determined by labor income differentials). Political influence is determined by the size and homogeneity of the groups, where the latter can be affected by immigration. We show that immigration can increase the transfers to, and the income of, the mobile group. We also investigate the possibility of migration regulation, tax-transfer policy competition and coordination and, finally, coordination of regulation policies. It is shown that the selection of any of those regimes will depend on the particular distribution of political influence among the relevant social groups in the two countries.