Research

Human decision making often seems to be determined by the resolution of intrapersonal conflict. This paper conceptualizes the analysis of decisions governed by such dual-self processes in individual decision contexts and strategic interactions. For this purpose, we define the solution concept Dual-Selves Equilibrium and derive sufficient conditions for the existence of such equilibria. We show that our framework also helps to study the strategic interaction between boundedly rational players that have only one-self. In particular, our results extend several equilibrium existence results in Behavioral Game Theory and provide a simple sufficient condition for equilibrium existence.

Individuals often evaluate others’ actions based on both their perceived intentions and their resulting outcomes, rewarding favorable actions and punishing unfavorable ones. This study aims to isolate the influence of these factors on punishment. We experimentally demonstrate that, when outcomes are held constant, second movers punish first movers who choose selfish actions more severely than those who select considerate ones. Conversely, when intentions are fixed, the severity of punishment does not significantly differ between fair and unfair outcomes on average. However, this average masks gender-specific variations. Men tend to prioritize punishing unkind intentions, while women are more sensitive to the perceived fairness of outcomes. Social norms help explain punishment choices and gender differences. 

Incentive schemes based on relative performance provide high effort incentives, but may backfire by increasing incentives for misconduct. Previous literature supports this view by demonstrating that, as compared to individual incentive schemes based on absolute performance only, highly competitive environments are associated with higher degrees of lying and cheating. However, it is not clear if this is (mainly) driven by stronger financial incentives or by competition per se and its behavioral effects. We conduct an online experiment with competitive and individual incentive schemes in which the financial incentives to lie are held constant. From a behavioral perspective, a competitive environment may increase the willingness for misconduct via a desire-to-win, but may also decrease it via the negative payoff externality on competitors. Our results provide evidence of a significant lying-enhancing desire-to-win-effect and an insignificant lying-reducing negative externality effect. 

In the last two decades, the widespread use of web-based social networks has led to a higher visibility of workers to the labor market. We theoretically and experimentally analyze the consequences of such increased labor market transparency for the efficiency of job assignments, the wages of workers, and firm profits. Our theoretical results show that higher visibility of workers increases the efficiency of job assignments, leads to a redistribution of income between workers of different ability, and increases overall surplus. Our experimental findings generally support the theoretical results with the exception that increased visibility leads to higher worker turnover such that surplus does not increase. 

We study gender differences in relation to performance and sabotage in competitions. While we find no systematic gender differences in performance in the real effort task, we observe a strong gender gap in sabotage choices in our experiment. This gap is rooted in the uncertainty about the opponent’s sabotage: in the absence of information about the opponent’s sabotage choice, males expect to suffer from sabotage to a higher degree than females and choose higher sabotage levels themselves. If beliefs are exogenously aligned by implementing sabotage via strategy method, the gender gap in sabotage choices disappears. Moreover, providing a noisy signal about the sabotage level from which subjects might suffer leads to an endogenous alignment of beliefs and eliminates the gender gap in sabotage. 

We extend the literature on the determinants of lying to the impact of reciprocity in strategic interactions. We study a theoretical model with reciprocity by assuming that a player's degree of altruism depends on her perception of the other player's sltruism towards herself. Specifically, we consider a sequential two-player-contest and vary the second mover's degree of information on the first movers lying behavior. This yields predictions on the second mover's behavior which we study in a largescale online-experiment and the laboratory. Surprisingly, the second mover's lying propensity does not depend on her information on the first mover's lying behavior. To investigate whether this is specific to lying, we consider an additional treatment with the same payoff structure where subjects can increase their chances of winning by simple statements without lying. As we do find evidence for reciprocity there, the lack of reciprocity cannot solely be attributed to the contest structure. 

Many insights regarding rank-order tournaments rest upon contestants’ behavior in symmetric equilibria. As shown by Gill and Stone (Games Econ Behav 69:346–364, 2010), however, symmetric equilibria may not exist if contestants are expectation-based loss averse and have choice-acclimating expectations. We show that under choice-unacclimating—i.e., fixed—expectations both symmetric and asymmetric equilibria exist for all degrees of loss aversion. Importantly, a symmetric equilibrium also exists if players follow their preferred credible plan and the weight attached to psychological gain–loss utility does not strongly outweigh the weight put on material utility. Hence, for fixed expectations a focus on symmetric equilibria seems justifiable even if contestants are expectation-based loss averse. 

By extending the equilibrium concepts of Kőszegi and Rabin, 2006, Kőszegi and Rabin, 2007, this paper analyzes the strategic interaction of expectation-based loss-averse players. For loss-averse players with choice-acclimating expectations, the utility from playing a mixed strategy is not linear but convex in the probabilities they assign to their pure strategies. As a consequence, they are generally unwilling to randomize and an equilibrium may fail to exist. For players with choice-unacclimating expectations, by contrast, randomizing over their pure strategies may indeed constitute a credible best response and an equilibrium always exists. Building upon these insights, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences, derive novel strategic effects, discuss equilibrium selection, and derive equilibrium play for some simple games.

This paper provides evidence that inefficient promotion strategies and large wage increases upon promotion may both arise as a consequence of asymmetric employer information. Building on the seminal work by Waldman (1984a) and Milgrom and Oster (1987), we first present a model that illustrates how both phenomena may jointly arise due to the information revealing character of promotions. Using experimental labor markets, we find evidence consistent with asymmetric employer information being a causal factor for both inefficient promotions and large wage increases upon promotion. Furthermore, we analyze the effect of asymmetric employer information on profits and turnover.

We study the differences in behavior of males and females in a two-player tournament with sabotage in a controlled lab experiment. Implementing a real-effort design and a principal who is paid based on the agent's output, we find that males and females do not differ in their performance in the real effort task but in their choice of sabotage. Males select significantly more sabotage, leading to an, on average, higher winning probability but not to higher profits. If the gender of the opponent is revealed before the tournament, males increase their performance in the real-effort task especially if the opponent is female. The gender gap in sabotage is persistent. We discuss possible explanations for our findings and their implications.