When do two bargainers flip a coin? Experimental evidence (with Fabio Galeotti and Anders Poulsen)
We experimentally investigate an unstructured bargaining situation where two negotiators can, if both agree, get a non-binding recommendation from flipping a fair coin. We investigate how the likelihood of flipping a coin, and following the outcome of the coin flip, depends on what the feasible money payoffs are. We compare the data with a condition where the outcome of the coin flip is binding, and with a control condition where no coin is available. Our data allow us to assess the importance of considerations based on procedural fairness, the presence of focal outcomes, whether the outcome of the coin flip is binding or not, and the risk of disagreement.
Social reference points and effort provision (with Patrick Maus and Martin Sefton)
We report a laboratory experiment testing whether social reference points impact effort provision. Subjects are randomly assigned the role of worker or peer and the worker observes the peer’s earnings before participating in a real-effort task. Between treatments, we exogenously manipulate peer earnings. We find that the workers recall the earnings of their peer and are less satisfied with their own earnings when their peer earns more. Despite this, we do not observe a treatment effect in effort choices. Thus, although our subjects appear to care about income differentials, this does not translate to a change in behavior in our incentivized environment. We relate our results to recent studies of inequality and effort provision.