This paper explores the role of identity in voters’ decision to retain corrupt politicians. We build up a model of electoral accountability with pure moral hazard and bring it to the lab. Politicians must decide whether to invest in a public project with uncertain returns or to keep the funds for themselves. Voters observe the outcome of the project but not the action of the politician; if the project is unsuccessful, they do not know whether it was because of bad luck or because the politician embezzled the funds. We run two treatments; a control and a treatment where subjects are assigned an identity using the minimal group paradigm. Our main result is that, upon observing a failed project, voters approve politicians of their same identity group significantly more often than in the control and compared to politicians of a different identity group. This is partially driven by a belief on same-identity politicians being more honest. We also observe that subjects acting as politicians embezzle funds less often than expected by the equilibrium prediction. 

In an investment trading game where the profitability of the new investment (the fundamental) is a random variable, entrepreneurs’ higher-order beliefs about the future asset price of the realised investment enter into their investment decisions. The financial market uses aggregate investment as a signal of the underlying fundamental. If agents have dispersed information, endogenous strategic complementarity in actions emerges owing to the information spillover and generates inefficiency in the economy. We introduce endogenous information acquisition in this two-way feedback between real and financial sectors to study (i) how entrepreneurs’ investment decisions will be affected when they costly acquire information by choosing how much attention to pay to the signal; (ii) what information is acquired in equilibrium (iii) the implications of information acquisition on asset price informativeness.

People generally sign an employment contract when joining an organization. At the same time, they often enter into a social contract—an implicit agreement to go beyond the formal job description to support the organization when needed. Such behaviors, known as organizational citizenship behaviors (OCBs), include volunteering for non-contractual tasks that are essential for institutional functioning but not formally assigned. We investigate two factors that influence individuals’ willingness to engage in discretionary OCBs: (i) perceived fairness in compensation, and (ii) the observability of voluntary effort opportunities. We implement a pre-registered, real effort gift-exchange experiment with six treatment conditions that vary systematically when principals and agents learn about a voluntary effort task. We find strong support for reciprocity based predictions at both the extensive margin (whether agents provide voluntary effort) and the intensive margin (how much effort they provide). Fairness perceptions have heterogeneous, treatment- dependent effects. Notably, agents frequently provide voluntary effort even when principals cannot observe it, pointing to intrinsic motivation beyond purely strategic reciprocity. Information structure matters: the proportion of non-providers is highest in the treatment where principals receive information only immediately before the splitting decision.

This paper studies the consequences of heterogeneous beliefs on voting behaviour and the welfare implications driven by them. I assume an asymmetric change in voters' beliefs about the ability of an incumbent and a challenger politician to govern after an implicit negative economic shock. Voters lose faith in the incumbent and trust an outsider challenger without prior office experience. We use a model of electoral competition and we show that the incumbent loses his power irrespective of the platform he proposes. Moreover, our welfare analysis shows that electoral competition may under-provide public goods compared to a utilitarian social planner, depending on the belief distribution regarding the challenger.