Sebastian J. Goerg

Treating Equals Unequally: Incentives in Teams, Workers' Motivation and Production Technology

The importance of fair and equal treatment of workers is at the heart of the debate in organizational management. In this regard, we study how reward schemes and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially increase productivity by facilitating coordination and that the effect strongly interacts with the exact shape of the production function. Taken together, our data highlight the relevance of the production function for organization construction and suggest that equal treatment of equals is neither a necessary nor a sufficient prerequisite for eliciting high performance in teams.

On the Prevalence of Framing Effects Across Subject-Pools in a Two-Person Cooperation Game

In this experimental study, involving subjects from Abu-Dis (West Bank), Chengdu (China), Helsinki (Finland), and Jerusalem (Israel), we test for a presentation bias in a two-person cooperation game. In the positive frame of the game, a transfer creates a positive externality for the opposite player, and in the negative frame, a negative one. Subjects in Abu-Dis and Chengdu show a substantially higher cooperation level in the positive externality treatment. In Helsinki and Jerusalem, no framing effect is observed. These findings are also reflected in associated first-order beliefs. We argue that comparisons across subject-pools might lead to only partially meaningful and opposed conclusions if only one treatment condition is evaluated. We therefore suggest a complementary application and consideration of different presentations of identical decision problems within (cross-cultural) research on subject-pool differences.

Fusing enacted and expected mimicry generates a winning strategy that promotes the evolution of cooperation

Although cooperation and trust are essential features for the development of prosperous populations, they also put cooperating individuals at risk for exploitation and abuse. Empirical and theoretical evidence suggests that the solution to the problem resides in the practice of mimicry and imitation, the expectation of opponent’s mimicry and the reliance on similarity indices. Here we fuse the principles of enacted and expected mimicry and condition their application on two similarity indices to produce a model of mimicry and relative similarity. Testing the model in computer simulations of behavioral niches, populated with agents that enact various strategies and learning algorithms, shows how mimicry and relative similarity outperforms all the opponent strategies it was tested against, pushes noncooperative opponents toward extinction, and promotes the development of cooperative populations. The proposed model sheds light on the evolution of cooperation and provides a blueprint for intentional induction of cooperation within and among populations. It is suggested that reducing conflict intensities among human populations necessitates (i) instigation of social initiatives that increase the perception of similarity among opponents and (ii) efficient lowering of the similarity threshold of the interaction, the minimal level of similarity that makes cooperation advisable.

Symmetric vs. Asymmetric Punishment Regimes for Bribery

In major legal orders such as UK, the U.S., Germany, and France, bribers and recipients face equally severe criminal sanctions. In contrast, countries like China, Russia, and Japan treat the briber more mildly. Given these differences between symmetric and asymmetric punishment regimes for bribery, one may wonder which punishment strategy is more effective in curbing corruption. For this purpose, we designed and ran a lab experiment in Bonn (Germany) and Shanghai (China) with exactly the same design. The results show that, in both countries, with symmetric punishment recipients are less likely to grant the socially undesirable favor, while bribers are more likely to report to the authorities with asymmetric punishment. In addition, when punishment was asymmetric, corrupt offers were significantly more likely in Shanghai, but not in Bonn. Our results suggest a tradeoff between deterrence and law enforcement. In a forward-looking perspective, lawmakers must decide which aim carries more weight.

Goals (Th)at Work – Goals, Monetary Incentives, and Workers’ Performance

In a randomized field experiment, we investigate the connection between work goals, monetary incentives, and work performance. Employees are observed in a natural work environment where they have to do a simple, but effort-intense task. Output is perfectly observable and workers are paid for performance. While a regular piece-rate contract serves as a benchmark, in some treatments workers are paid a bonus conditional on reaching a pre-specified goal. We observe that the use of personal work goals leads to a significant output increase. The positive effect of goals not only prevails if they are self-chosen by the workers, but also if goals are set exogenously by the principal – although in the latter case, the exact size of the goal plays a crucial role. Strikingly, the positive effect of self-chosen goals persists even if the goal is not backed up by monetary incentives. We propose a novel incentive contract where – through the choice of a personal work goal – workers themselves determine the risk and the size of their bonus payment at the same time.

Generalized Impulse Balance: An Experimental Test for a Class of 3 × 3 Games

In this paper, we introduce a generalized version of impulse balance equilibrium. The stationary concept is applied to 3 × 3 games based on the Bailiff and Poacher Game (Selten, 1991) and its predictive success is experimentally tested against the one of Nash equilibrium. Experiments with 26 different games were conducted; 12 games with completely mixed Nash equilibria and 14 games with partially mixed Nash equilibria. In all the games, generalized impulse balance yields predictions that are closer to the data than the ones of Nash equilibrium. Overall, generalized impulse balance has a significantly higher predictive success than Nash equilibrium.

Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US

Abstract How do barely incentivized norms impact incentive-rich environments? We take social enterprise legislation as a case in point. It establishes rules on behalf of constituencies without institutionalized means of enforcement. By relying primarily on managers’ other-regarding concerns while leaving corporate incentive structures unaltered, how effective can such legislation be? We ran a laboratory experiment with a framing likened to German corporate law which traditionally includes social standards. Our results show that a stakeholder provision, as found in both Germany and more recent US regulation, cannot overcome material incentives. Yet even in the absence of adverse incentives the stakeholder duty does not foster other-regarding behavior. Our experiment illustrates the paramount importance of taking into account both incentives and framing effects when designing institutions. We tentatively discuss potential policy implications for social enterprise legislation and the stakeholder debate.

In Wrong Anticipation – Miscalibrated Beliefs between Germans, Israelis, and Palestinians

The reconcilability of actions and beliefs in inter-country relationships, either in business or politics, is of vital importance as incorrect beliefs on foreigners’ behavior can have serious implications. We study a typical inter-country interaction by means of a controlled laboratory investment game experiment in Germany, Israel and Palestine involving 400 student participants in total. An investor has to take a risky decision in a foreign country that involves transferring money to an investee/allocator. We found a notable constellation of calibrated and un-calibrated beliefs. Within each country, transfer standards exist, which investees correctly anticipate within their country. However, across countries these standards differ. By attributing the standard of their own environment to the other countries investees are remarkably bad in predicting foreign investors’ behavior. The tendency to ignore this potential difference can be a source of misinterpreting motives in cross-country interaction. Foreigners might perceive behavior as unfavorable or favorable differentiation, even though—unknown to them—investors actually treat fellow-country people and foreigners alike.

Do Teams Procrastinate? Strategic Procrastination in a Dynamic Environment

Abstract We experimentally study strategic procrastination in a dynamic team environment. Two team members work for a finite number of periods on a joint project. The project’s success probability depends on the effort provided by both group members. Payment is conditional on finishing the project successfully. Between treatments, we vary whether both agents are free to choose their effort level or only a single agent can do so. If only one agent can choose effort, the effort of the other member is exogenously fixed; either to providing effort only shortly before the deadline or to providing effort in all periods. While in the former case we observe some effort patterns that resemble rational procrastination, the results from the other two treatments suggest that this seems to be caused by other-regarding concerns rather than being due to the strategic motives inherent in the mechanics of rational procrastination models.

Does Political Representation through Parties Decrease Voters' Acceptance of Decisions?

Are decisions by political parties more or less accepted than direct-democratic decisions? The literature on parties as brand names or labels suggests that the existence of political parties lowers information and transaction costs of voters by providing ideological packages. Building on this important argument, we posit that this informational rationale for parties is not universally applicable and is contingent on the context of the decision that is made. Intermediary political decision-making institutions may impose additional costs on voters in situations where the decision is perceived to be personally important to the individual voter. We conduct an experimental online vignette study to substantiate these claims. The results imply that a combination of representative democracy and direct democracy, conditional on the distribution of issue importance among the electorate, is optimal with regard to acceptance of a decision.