scholarly journals How social preferences provide effort incentives in situations of financial support

PLoS ONE ◽  
2021 ◽  
Vol 16 (1) ◽  
pp. e0244972
Author(s):  
Christian Knoller ◽  
Stefan Neuß ◽  
Richard Peter
Keyword(s):  
Moral Hazard ◽  
Laboratory Experiment ◽  
Strong Evidence ◽  
Financial Support ◽  
Social Preferences ◽  
Monetary Incentives ◽  
Material Efficiency ◽  
Preventive Effort ◽  
Effort Provision ◽  
Level Effect

When people anticipate financial support, they may reduce preventive effort. We conjecture that the source of financial support can mitigate this moral hazard effect due to social preferences. We compare effort choices when another individual voluntarily provides financial support against effort choices under purely monetary incentives. When financial support is provided voluntarily by another individual, we expect recipients to exert more effort to avoid bad outcomes (level effect) and to reduce effort provision to a lesser degree as financial support becomes more generous (sensitivity effect). We conducted an incentivized laboratory experiment and find some evidence for the level effect and strong evidence for the sensitivity effect. This leads to significant gains in material efficiency with expected wealth being 5.5% higher and 37.3% less volatile.

scholarly journals Individual goals and social preferences in operational decisions

2019 ◽  
Vol 39 (1) ◽  
pp. 116-137 ◽  
Author(s):  
Nienke Hofstra ◽  
Wout Dullaert ◽  
Sander De Leeuw ◽  
Eirini Spiliotopoulou
Keyword(s):  
Decision Making ◽  
Social Preferences ◽  
Operational Planning ◽  
Future Research ◽  
Monetary Incentives ◽  
Content Type ◽  
Planning Decisions ◽  
Multiple Data ◽  
Human Decision ◽  
Insight Into

Purpose The purpose of this paper is to develop propositions explaining the influence of individual goals and social preferences on human decision making in transport planning. The aim is to understand which individual goals and social preferences planners pursue and how these influence planners’ decisions. Design/methodology/approach Propositions are developed based on investigation of decision making of transport planners in a Dutch logistics service provider using multiple data collection methods. Findings The study shows how decision making of transport planners is motivated by individual goals as well as social preferences for reciprocity and group identity. Research limitations/implications Further research including transaction data analysis is needed to triangulate findings and to strengthen conclusions. Propositions are developed to be tested in future research. Practical implications Results suggest that efforts to guide planners in their decision making should go beyond traditional (monetary) incentives and consider their individual goals and social preferences. Moreover, this study provides insight into why transport planners deviate from desired behaviour. Originality/value While individual decision making plays an essential role in operational planning, the factors influencing how individuals make operational planning decisions are not fully understood.

Social Preferences and Collusion: A Laboratory Experiment

2020 ◽  
Vol 0 (Online First) ◽  
pp. 1
Author(s):  
Stephen J. Cotten ◽  
Youping Li ◽  
Rudy Santore
Keyword(s):  
Laboratory Experiment ◽  
Social Preferences

Finanzhilfen bei internationalen Verschuldungskrisen?

2010 ◽  
Vol 61 (1) ◽  
pp. 1-20
Author(s):  
Dina D. Dreisbach ◽  
Hans Fehr ◽  
Fabian Kindermann
Keyword(s):  
Moral Hazard ◽  
Financial Support ◽  
Sovereign Debt ◽  
Numerical Solutions ◽  
Strategic Uncertainty ◽  
Trade Off ◽  
Liquidity Provision ◽  
Optimal Policies ◽  
Private Investors ◽  
Catalytic Effects

SummaryThe present paper focuses on the trade-off between official liquidity provision and debtor moral hazard in sovereign debt problems. The financial crisis is caused by the interaction of bad fundamentals, self-fulfilling runs of private investors and optimal policies of the national government and the official lender. Building on the global games approach of Morris and Shin (2006), we extend their analysis by calculating numerical solutions for different values of fundamental and strategic uncertainty. Our results indicate that limited financial support may even strengthen government efforts and improve welfare when fundamentals are weak but not too weak. On the other hand, we are also able to identify debtor moral hazard and welfare reducing catalytic effects with stronger fundamentals.

scholarly journals Bounded Rationality in Principal-Agent Relationships

2017 ◽  
Vol 18 (4) ◽  
pp. 411-443
Author(s):  
Mathias Erlei ◽  
Heike Schenk-Mathes
Keyword(s):  
Experimental Data ◽  
Moral Hazard ◽  
Agency Theory ◽  
Bounded Rationality ◽  
Social Preferences ◽  
Principal Agent ◽  
Rational Behavior ◽  
Quantal Response ◽  
Boundedly Rational Behavior ◽  
Hidden Action

Abstract We conducted six treatments of a standard moral hazard experiment with hidden action. The behavior in all treatments and periods was inconsistent with established agency theory. In the early periods, behavior differed significantly between treatments. This difference largely vanished in the final periods. We used logit agent quantal response equilibrium (LAQRE) as a device to grasp boundedly rational behavior and found the following: (1) LAQRE predictions are much closer to subjects’ behavior in the laboratory; (2) LAQRE probabilities and experimental behavior show remarkably similar patterns; and (3) including social preferences in LAQRE does not better explain the experimental data; (4) LAQRE cannot explain the contract offers of some players who seem to choose some focal contract parameters.

Deferred Compensation in Multiperiod Labor Contracts: An Experimental Test of Lazear's Model

2011 ◽  
Vol 101 (2) ◽  
pp. 819-843 ◽  
Author(s):  
Steffen Huck ◽  
Andrew J Seltzer ◽  
Brian Wallace
Keyword(s):  
Experimental Test ◽  
Social Preferences ◽  
Monetary Incentives ◽  
Labor Contracts ◽  
Deferred Compensation ◽  
Ex Ante

This paper provides the first experimental test of Edward Lazear's (1979) model of deferred compensation. We examine the relation ship between firms' wage offers and workers' effort supply in a multi-period environment. If firms can ex ante commit to a wage schedule with deferred compensation, workers should respond by supplying sufficient effort to avoid dismissal. We contrast this full-commitment case to controls with no commitment and computer-generated wages in order to examine the roles of monetary incentives, social preferences, and reciprocity. Finally, we examine a setup without formal commitment, but where firms can build a reputation for paying deferred wages. (JEL D86, J22, J31, J33, J41)

Contingent Fees, Moral Hazard, and Attorney Rents: A Laboratory Experiment

2007 ◽  
Vol 36 (2) ◽  
pp. 253-273 ◽  
Author(s):  
Michael McKee ◽  
Rudy Santore ◽  
Joel Shelton
Keyword(s):  
Moral Hazard ◽  
Laboratory Experiment ◽  
Contingent Fees

scholarly journals Irrational Diversification: An Examination of Individual Portfolio Choice

2011 ◽  
Vol 46 (5) ◽  
pp. 1463-1491 ◽  
Author(s):  
Guido Baltussen ◽  
Gerrit T. Post
Keyword(s):  
Laboratory Experiment ◽  
Portfolio Choice ◽  
Strong Evidence ◽  
Stochastic Dominance ◽  
Marginal Distribution ◽  
Substantial Influence ◽  
Portfolio Decisions ◽  
First Order ◽  
Order Stochastic Dominance ◽  
Problem Presentation

AbstractWe study individual portfolio choice in a laboratory experiment and find strong evidence for heuristic behavior. The subjects tend to focus on the marginal distribution of an asset, while largely ignoring its diversification benefits. They follow a conditional 1/n diversification heuristic as they exclude the assets with an “unattractive” marginal distribution and divide the available funds equally between the remaining “attractive” assets. This strategy is applied even if it leads to allocations that are dominated in terms of first-order stochastic dominance and is clearly irrational. In line with these findings, we find that framing and problem presentation have substantial influence on portfolio decisions.

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