Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts

Research output: Working paperResearch

Documents

  • 0806

    Final published version, 1.45 MB, PDF document

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three phases. In the first two phases, P1 and P2; agents face simple games, which we use to estimate subjects' social and reciprocity concerns, together with their beliefs. In the last phase, P3; four principals, who face four teams of two agents, compete by offering agents a contract from a fixed menu. Then, each agent selects one of the available contracts (i.e. he "chooses to work" for a principal). Production is determined by the outcome of a simple effort game induced by the chosen contract. We find that (heterogeneous) social preferences are significant determinants of choices in all phases of the experiment. Since the available contracts display a trade-off between fairness and strategic uncertainty, we observe that the latter is a much stronger determinant of choices, for both principals and agents. Finally, we also see that social preferences explain, to a large extent, matching between principals and agents, since agents display a marked propensity to work for principals with similar social preferences
Original languageEnglish
PublisherDepartment of Economics, University of Copenhagen
Number of pages36
Publication statusPublished - 2008

Number of downloads are based on statistics from Google Scholar and www.ku.dk


No data available

ID: 3031723