Subhasish Dugar 

To what extent do pivotal nonpartisan voters believe and act upon potentially deceptive messages from partisans who privately observe candidates' ex-ante fitness-for-office attributes? How do nonpartisan voters' responses to messages vary with changing odds of candidates' fitness-for-office attributes? This paper derives contrasting predictions regarding pivotal nonpartisans' reactions to potential lies across two-candidate voting competitions and tests them in the laboratory. We find that the partisan voters lie substantially more when candidates possess unequal than equal ex-ante odds. The inferior (superior) candidate's base transmits more unfavorable (favorable) lies about their opponent (own) candidate. Facing candidates with different odds, the nonpartisan voters largely ignore the message and vote for the ex-ante superior candidate. Yet, lying lowers efficiency compared to when the message is always factual, and the efficiency loss is marginally higher when the candidates are ex-ante unequal than equal. We develop a behavioral framework to explain key features of our data.

We use a field experiment to evaluate the impacts of two price negotiation tactics on buyers’ bargaining payoffs in a marketplace where face-to-face haggling determines price and sellers often cheat on the weight. We implement three scripted interventions, all involving undercover buyers requesting a non-specific price discount. In one of the non-baseline interventions, buyers undervalue the product, while in the other, buyers reveal their inability to pay the quoted price, both at the discount-request phase. The data from a within-seller design show that compared to devaluing the opponent’s product, mentioning one’s lack of affordability leads to a higher rate of bargaining success and a higher mean price discount, culminating in a higher buyer payoff net of the monetary value of cheating. We also find that merely asking for a discount without furnishing a reason, as in our baseline intervention, leads to better bargaining outcomes for buyers than underestimating the opponent’s product.

We design a natural field experiment to examine the impacts of norm-based interventions in enhancing honesty in a large decentralized marketplace fraught with contractual breaches owing to individual dishonesty. Sellers in fish markets of Kolkata, India, frequently cheat on the weight of the fish purchased via bilateral bargaining over price. We approach this marketplace and make two interventions: triggering a business norm driven by sellers’ adherence to a superstitious belief and enacting a norm-nudge in the form of moral suasion. Our design exploits a within-seller design whereby experimenter-buyers make scripted one-time purchases. We discover that the sellers behave strikingly honestly when the superstitious business norm is made salient. In contrast, moral suasion significantly decreases dishonesty, but its effect is markedly weaker than the superstition-based business norm. Our results suggest that direct normative appeals have the potential to make substantial headway to mitigate fraud in credence good markets where fraud is hard to detect due to information asymmetry.

It is widely believed that successful bargaining helps consumers increase their surplus. We present evidence from a field experiment showing that bargaining over price reduces buyer surplus in a marketplace where sellers cheat on the weight whose value may more than offset the price discount. Our results show that bargaining entails hidden costs since sellers cheat significantly more when buyers bargain than not and they cheat significantly more when bargaining succeeds than fails. Overall bargaining reduces buyer surplus than not bargaining. Our result is relevant for credence goods markets where bargaining over prices may induce sellers to “undertreat” more.

We conducted a lab-in-the-field experiment to analyse if and how information about an individual’s social status influences efficient choices in a two-party hidden information game in which trust and trustworthiness play a central role. Recruitment of subjects from three status groups based on the Indian caste system allows us to distinguish between identity-based and status-based preferences. We find that all status groups exhibit strong in-group favouritism which fosters efficiency. The decisions of subjects from the two lower-status groups align well with identity-based preferences as they treat their out-group co-players in a statistically equivalent manner. However, subjects from the top of the hierarchy exhibit behaviour consistent with status-based preferences as their propensity to choose efficient actions systematically declines with an increase in the distance between their status and their co-player’s status. Thus, the behaviour of the top-status group closely conforms to the actual social rankings of these caste groups in India, whereas the behaviour of lower-status groups displays a binary classification of people into ‘us’ and ‘them’.

We study how decisions to lie extend to risky environments. We provide experimental evidence from a sender-receiver game where there is uncertainty over the amount by which a sender's lie reduces its receiver's payoff, which is known only to potential liar. Even though all reduction amounts are equiprobable, ex-post beliefs elicited from senders suggest that, unlike truth-tellers, most liars underestimate the extent of the actual reduction in the receiver's payoff and appear to exploit this self-serving bias, resulting in substantially more lying relative to a baseline treatment without the uncertainty. Subsequent treatments confirm the bias by either providing additional evidence or by removing possible confounds. An intervention treatment nudging senders toward correcting the bias reduces lying.

This paper is the first to compare the efficiency-enhancing capacity of two communication protocols in experimental stag-hunt games. The traditional restricted protocol that allows communicating intentions only fails to improve efficiency over the no-communication conditions. When players are allowed to send any messages (free-form), the majority of them send messages that underscore a reason for which players should choose the efficient action. To explore further whether the absence of such a richer message in the traditional restricted communication protocol can be the cause of its ineffectiveness, we ran an additional treatment that included the intention-based message as well as a reason-based message. The data show that the richer restricted communication is as effective as free-form communication, and that reason-based messages are an effective efficiency-enhancing device in this class of coordination games regardless of whether the protocol is restricted or free-form.

We conduct a natural field experiment in fish markets where sellers frequently cheat on weight and face negligible economic penalty. Exploiting exogenous variations in fish prices, an indicator of marginal economic benefit from cheating, we examine how dishonest behavior varies with rising economic benefit from cheating. We find that most sellers cheat but that cheating almost never exceeds ten percent of purchased quantity, and that the value of cheating is small. The data reveal a non-monotonic relationship wherein cheating initially increases and thereafter decreases in the fish price.

This article tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory. The games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms' marginal costs. While the standard theory requires the low-cost firm to set a price just equal to the high-cost firm's marginal cost, which is identical across all three games, and win the entire market, intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs. We develop a quantal response equilibrium model to test our competing conjecture.

An unresolved debate lingers concerning the effect of performance-contingent rewards on motivation and performance. Behavioral psychology and economics suggest that performance-contingent rewards improve performance. In contrast, cognitive evaluation theory predicts that performance-contingent rewards undermine motivation and performance. We discuss the predictions of these two streams and develop an experiment that resolves the limitations of previous studies by using a new measure of intrinsic motivation: self-selection into a specific area of knowledge, as revealed by choice of academic major. Students from mathematics-related and literature-related areas were selected and randomly assigned to math and English language tests. Participants received a participation fee or a performance-contingent payment in addition to a fee. Both performance-contingent rewards and intrinsic motivation improved motivation and performance, in contrast with cognitive evaluation theory’s predictions.

We experimentally test for the effect of social status on the likelihood of partnership formation. We consider a two-player game where the opportunity to perform a hidden action by one player may render partnership formation difficult. In this context, we study how the assignment of partners' status to the top, middle, or bottom position of a preexisting status hierarchy affects collaboration. We find that partnership formation is remarkably sensitive to the partners' status affiliations. Collaboration is easiest when both partners share the same social status, and the probability of partnership formation decreases significantly as the status gap between the partners increases, entailing massive inefficiency.

We use experiments to analyze multiple dimensions of the relationship between rank incentives and individual performance. In our experiment (i) rank is defined as subjects' relative position in their group based on their performance in a real effort task and (ii) subjects' earnings are independent of their performance. We find that any rank incentive improves mean performance than no rank incentive, and this result is independent of the group size. In the large group, the mean performance increases strictly in all except at the highest rank incentive, but in the small group the mean performance increases weakly in rank incentives. Finally, the mean performance is significantly higher in the large than in the small group because of a higher “prestige effect.” In additional treatments in which we do not reveal the identity of the status-prize winners, we find that average performance is identical to that in the baseline treatment without any status prizes. The last result signifies the important role that public revelation plays to enhance the strength of status. The results are important for managerial practices.

Studies in economics and management suggest that people invest effort to achieve pure status, and this investment increases in status incentives. We design field experiments to investigate these two behavioral hypotheses. We define status as the subjects' relative rank in their group based on their performance in a task. We explore two real tasks. In both of the tasks, subjects' earnings are nominal and independent of their performance; so status-seeking preference should be the sole reason for achieving higher ranks. Our results indicate that inducing higher status incentives may not necessarily improve individual performance and may depend upon the task.

We experimentally examine how real group identity of parties (a principal and an agent) facing a moral hazard problem may attenuate the problem and thereby implement the efficient outcome. We find that, the frequency of the efficient outcome is significantly higher when both parties share the same identity than when they do not. However, when we induce a substantially weaker form of identity or increase an outside-option payoff offered to the principal, the frequency of the efficient outcome diminishes considerably, even when the parties’ identities align perfectly. Our results have important implications for the design of nonpecuniary contract enforcement devices.

A large body of literature depicts that status-based discrimination is pervasive, but is silent on how economic incentive interacts with such discrimination. This study addresses this question by designing a field experiment in a reputable arranged marriage market that is prone to strong caste-status-based discrimination. We place newspaper advertisements of potential grooms by systematically varying their caste and income and focus on responses of higher-caste females to lower-caste males. The substantive finding is that despite the evidence of discrimination, discriminatory behavior of higher-status females decreases with an increase in the advertised monthly income of lower-status males.

Coordination games represent coordination problems that arise across social science disciplines. Focal points have been found to be an effective way to solve many of these coordination problems. We experimentally analyze the efficiency-enhancing power of focal points in 2 × 2 Pareto-ranked coordination games. We find that the power of focal labels, when attached to the Pareto-efficient strategy, to promote efficiency critically depends upon the alternative strategy's label salience. When the relative salience of our focal labels is considerably weaker, focal labels mostly fail to raise expected efficiency beyond the mixed-strategy prediction. But when the relative salience of our focal labels is markedly stronger, focal labels raise expected efficiency much beyond the mixed-strategy prediction. Furthermore, we find that the efficiency-enhancing power of focal labels decreases as a measure of risk-dominance increases across games.

This study reports data from a laboratory experiment that investigates the incentive effect of three distinct social communication schemes on free-riding behavior. We use performance-based approval and disapproval ratings and a linear public good game to address the above issues. The treatments vary in terms of subjects' opportunities to anonymously assign (1) only the approval ratings to other group members, (2) only the disapproval ratings to other group members, and (3) either the approval or the disapproval ratings to other group members (but not both to the same group member), after they play a standard linear public good game. Despite the Nash prediction of zero individual contribution in all three treatments, the data show that the disapproval points generate significantly higher contribution than the approval points. The treatment in which subjects could communicate either the approval or the disapproval points produces the highest level of contribution. We discuss the implications that these findings may have for efficient design of organizations.

A growing body of experimental research documents that nonmonetary sanctions and rewards may be important instruments for enforcing efficient behavior. This study contributes to this literature by reporting results from a laboratory experiment. The experiment is designed to test whether nonmonetary sanctions or rewards alone can yield the optimal level of efficiency in a game with Pareto-ranked equilibria. Performance based disapproval and approval ratings, assigned by group members, are used as proxies for nonmonetary sanction and reward, respectively. Although these ratings are costless and payoff neutral, results show that expression of disapproval facilitates coordination on the most efficient equilibrium. In contrast, statement of approval induces subjects to converge towards the most inefficient outcome. We conclude that induced approval and disapproval ratings have asymmetric behavioral effects on coordination.

The Braess Paradox consists of showing that, in equilibrium, adding a new link that connects two routes running between a common origin and common destination may raise the travel cost for each network user. We report the results of two experiments designed to study whether the paradox is behaviorally realized in two simulated traffic networks that differ from each other in their topology. Both experiments include relatively large groups of participants who independently and repeatedly choose travel routes in one of two types of traffic networks, one with the added links and the other without them. Our results reject the hypothesis that the paradox is of marginal value and its force diminishes with experience. Rather, they strongly support the alternative hypothesis that with experience in traversing the networks financially motivated players converge to choosing the equilibrium routes in the network with added capacity despite sustaining a sharp decline in earnings.

The Braess paradox (BP) in traffic and communication networks is a powerful illustration of the possible counterintuitive implications of the Nash equilibrium solution. It shows that, paradoxically, when one or more links are added to a directed network with affine link cost functions that depend on congestion, and each user selfishly seeks her best possible route, then the equilibrium travel cost of each and every user may increase. We report the results of a traffic network game experiment designed to test the implications of the BP. The experiment included two network games: a basic network game with three alternative routes, and an augmented network game with two additional routes. Both networks included asymmetric link cost functions, and each game was iterated 60 times with complete outcome information. On each round of the game, the subjects were asked to independently choose a route from a common origin to a common destination in an attempt to minimize individual travel cost. Focusing on aggregate and individual frequencies of route choice and route switching, our results show that with experience in traversing the network, aggregate, but not individual, choice frequencies approach the user equilibrium solution as implied by the BP.

Price-matching guarantees have been alleged to sustain collusive prices in a homogenous product market. Theories in this literature also suggest that there exist multiple equilibria (i.e., a set of price equilibria between the competitive and the monopoly price) when all sellers adopt these guarantees in such a market. Theoretical prediction in this case fails to pin down the actual behavior of players a priori. This paper illustrates the essential role of controlled experiment in testing the collusive theory of price-matching guarantees and thereby shedding light on the embedded equilibrium selection problem. In particular, this paper studies two highly stylized market models, obtains testable predictions, and lays out the design of the controlled experiment. Results indicate that these guarantees facilitate collusion among sellers and thus solve the equilibrium selection problem considerably.

We experimentally investigate whether the collusion-facilitating nature of price-matching guarantees survives the introduction of hassle costs incurred by buyers to enforce these guarantees. The presence of an arbitrarily small number of positive hassle costs buyers may completely undermine incentives for collusion. To evaluate this possibility, we develop four one-shot price competition models that test the hassle cost argument by varying proportions of positive and zero hassle cost buyers present in the market. Although the theory predicts that the competitive price should emerge in equilibrium in all four models, we experimentally find significant price differences.