Job Market Paper
Decision-makers in positions of power often make unobserved action choices under risk and uncertainty. Outcomes are determined by a combination of their choices and luck. What inferences are made about these decision-makers when only outcomes are observed? Using a laboratory experiment, we investigate how the outcomes of decision-makers are evaluated in an environment where the payoffs of others depend on both the decision-makers’ choices and luck. Decision-makers face a trade-off between maximizing their own expected payoff and that of other individuals. We find that good outcomes are attributed more to luck and too little weight is placed on prior beliefs in updating behavior. Importantly, the biases tend to be driven by those subjects who make the selfish choice themselves when placed in the role of the decision-maker. Understanding these biases are important in determining what incentives individuals face in their decision-making process.
Results from laboratory experiments using real-effort tasks provide mixed evidence on the relationship between monetary incentives and effort provision. To examine this issue, we design three experiments where subjects participate in two-player real-effort tournaments with two prizes. Experiment 1 shows that subjects exert high effort even if there are no monetary incentives, suggesting that non-monetary incentives are contributing to their effort choices. Moreover, increasing monetary incentives does not result in higher effort provision. Experiment 2 shows that the impact of non-monetary incentives can be reduced by providing subjects with the option of leaving the laboratory early, using an incentivized timeout button, or working on an incentivized alternative activity. Experiment 3 revisits the relationship between monetary incentives and effort provision using the insights from Experiment 2. Using a design with an incentivized alternative activity, we show that participants increase effort in response to monetary incentives. Taken together, the findings from the three experiments suggest that results from real-effort tasks require a careful evaluation and interpretation of the motivations underlying the observed performance.
“Impact of rebates and refunds on contributions to threshold public goods: Evidence from a field experiment,” with Matthew Donazzan and Nisvan Erkal, 2016, Southern Economic Journal, 83(1), 69-86. [link] [pdf]
We investigate the impact of rebates and refunds on contributions to threshold public goods using evidence from a field experiment conducted in conjunction with an Australian charity, Life Goes On. We find that offering rebates and refunds has a significant positive impact on both participation and average donations in the absence of seed money. Our results suggest that offering rebates and refunds, and the existence of seed money may, to some extent, play substitute roles in encouraging giving behavior. Seed money has a significant positive effect on participation only. Seed money’s impact on average donations may be mitigated by a threshold effect.