Work is ordinary and necessary for most people, but some people work excessively ("work persistence"), seemingly driven by internal forces. We theoretically and experimentally investigate the role of relative performance incentives in causing or exacerbating work persistence. In our setting, agents perform a task over two stages. In the first stage, they can earn prizes, which are allocated either randomly or according to relative performance. Afterwards, they have the opportunity to continue working in a second stage, with payment by piece rate and no competition against others. Our theoretical model of motivated belief updating predicts that agents adjust their beliefs asymmetrically: they attribute their relative performance more to their productivity if they win a prize, and more to luck if they lose. This bias leads winners of the first-stage prize to increase their effort in the subsequent piece-rate stage, but with no corresponding decrease in work effort by losers. Results from a real-effort experiment confirm these predictions: winners' effort in the piece-rate stage is roughly 30 percent higher when earlier bonus prizes had been allocated by performance, compared to when those prizes had been allocated randomly. Losers' effort is also higher-not lower-though this difference is not significant.

How do politicians' track records and campaign messaging interact and affect voters' welfare? We analyze this question theoretically and experimentally. In the theoretical model, which we implement in the experiment, politicians choose how much of an economy's resources to allocate to the citizenry-keeping the remainder for themselves-and then face reelection against a challenger. Both incumbents and challengers have private information about their own quality that determines the economy's level of resources. We vary whether candidates can send campaign messages and the level of variability in candidates' quality. We observe that both higher-quality variability and allowing campaigning benefit citizens by allowing them to better select and hold accountable higher-quality officials. Also, when incumbents have performed poorly or when quality variability is high, challengers' negative campaigning (criticizing the incumbent) increases and incumbents' positive campaigning (emphasizing their own strengths) decreases.

We investigate how asset prices and trading behaviour are impacted by the structure and framing of incentives, using a lab experiment. Subjects buy and sell a high-risk asset, a low-risk asset, and riskless cash over 10 rounds. We vary, between-subjects, the incentive scheme (relative versus absolute performance), and how the variable component of incentives is framed (bonus versus penalty), while holding constant the convexity of incentives. Both relative-performance (tournament) incentives and penalty framing are associated with significant increases in the price of the high-risk asset, relative to either its fundamental value or to the price of the low-risk asset. Additional analysis shows significant gender differences in trading behaviour and performance, and evidence that the two may be connected.

Background: Abnormal social decision-making is prominent in schizophrenia. Antipsychotic medication often improves interpersonal functioning but this action is poorly understood. Neuroeconomic paradigms are an effective method of investigating social decision-making in psychiatric disorders that can be adapted for use with neuroimaging. Using a neuroeconomic approach, it has been shown that healthy humans reproducibly alter their behavior in different contexts, including exhibiting loss aversion: a higher sensitivity to loss outcomes compared to gains of the same magnitude.Methods: Here, using a novel loss aversion task and fMRI, we tested three hypotheses: controls exhibiting normal behavioral loss aversion show changes in brain activity consistent with previous studies on healthy subjects; behavioral loss aversion is significantly reduced in schizophrenia and associated with abnormal activity in the same brain regions activated in controls during loss aversion behavior; and for the patient group alone, there is a significant correlation between increased psychotic symptoms, blunted loss aversion and abnormal brain activity. These hypotheses were tested in patients with schizophrenia and healthy controls using a loss aversion paradigm and fMRI.Results: The results support the hypotheses, with patients exhibiting significantly blunted behavioral loss aversion compared to controls. Controls showed a robust loss aversion brain activation pattern in the medial temporal lobe, insula and dopaminergic-linked areas, which was blunted in schizophrenia.Conclusions: Our results are consistent with blunted loss aversion being a reproducible feature of schizophrenia, likely due to abnormal dopaminergic and medial temporal lobe function, suggesting a route by which antipsychotics could influence interpersonal behavior.

Firms can donate a share of profits to charity as a form of corporate social responsibility (CSR). Recent experiments have found that such initiatives can induce higher effort by workers, generating benefits for both sides of the labour market. We design a novel version of the gift-exchange game to account for self-selection, and find that wages remain the most effective incentive to attract and motivate workers, with corporate donations playing a smaller role than previously suggested. We also show that firms substitute donations to charity with lower wage offers, keeping their profits constant but reducing workers' earnings. Initiatives of corporate philanthropy can thus be marginally beneficial for firms, but considerably costly for workers.

We examine the impact of two types of communication: (i) encouragement of honesty and (ii) encouragement of lying that benefits the group. Subjects choose contributions to a public good, with a portion of the contribution framed as determined by a self-reported die roll. While honesty is typically viewed as desirable, in our setting it is more equivocal, since it results in a sub-optimal group payoff. We find that when leaders encourage their followers to lie in a cooperative way, followers increase these "die roll" contributions. There is also a positive spillover into additional discretionary contributions to the public good. By contrast, the way leaders are chosen and their observed contribution history have little effect.

In this appendix we use data from the National Diet and Nutrition Survey 20082011, which is an intake study of a representative sample of 3,073 UK adults and children. In Figure A.1 we document widespread excess consumption of added sugar. Panel (a) shows the cumulative distribution of calories from added sugar per day (separately for females and males) and panel (b) shows the cumulative distribution of the share of calories from added sugar. In both graphs we denote recommended medical levels with vertical lines. In the case of the level of calories from added sugar, the American Heart Association recommends no more than 100 calories per day from added sugar for females, and no more than 150 for males. In the case of the share of calories from added sugar, the World Health Organization recommends that ideally fewer than 5% of calories should be obtained from added sugar. The figure makes clear that the majority of individuals exceed these targets by a considerable amount.

In past experiments involving a wide range of bargaining settings, individuals exploited their bargaining position less fully than standard theory predicts. Typically, these experiments allocated bargaining position randomly, so that bargainers, viewing their position as unearned, may have been reluctant to fully exploit it. We investigate the impact of earned bargaining power using theory and experiment. In our "Earned" treatment, disagreement payoffs - and hence bargaining power - are based on performance on a real-effort task. In our "Assigned" treatment, subjects perform the task but disagreement payoffs are randomly assigned. Our "Notask" treatment is like the Assigned treatment but without the task. Comparison of our Earned and Assigned treatments provides our main result: subjects are more responsive to changes in bargaining position when it is earned. Responsiveness is also often higher in our Assigned treatment than in our Notask treatment - suggesting a possible effect of merely including a status-irrelevant task - though these differences are usually insignificant. (C) 2019 Elsevier B.V. All rights reserved.

We examine the interplay between unethical behaviour and competition with a lab experiment. Subjects play the role of firms in monopoly, weak competition (Bertrand–Edgeworth duopoly) or strong competition (Bertrand duopoly). Costs are determined either by a computer draw or a self-reported die roll, and pricing decisions are made with knowledge of one’s own costs and—in duopoly—the rival firm’s costs. Under self-reporting, lying is profitable and undetectable except statistically. We find that competition and lying are mutually reinforcing. We observe strong evidence that (behavioural) competition in both duopoly treatments is more intense when lying is possible: prices are significantly lower than when lying is impossible, even controlling for differences in costs. We also observe more lying under duopoly than monopoly—despite the greater monetary incentives to lie in the monopoly case—though these differences are not always significant.

Moral licensing, equivalently called "self-licensing", is the instrumental use of a Good Act to cover up a Bad Act. This paper's thesis is that "instrumental apology" i.e., bad-faith apology, is a case of moral licensing. A decision maker may issue an apology (Good Act) after committing a Bad Act, but if the decision maker uses the apology instrumentally, he or she is using the apology to justify the Bad Act. Hence, the apology is insincere. Sincerity is the fine line between a good-faith apology or, more generally, a Good Act, on one hand, and an instrumental apology or, more generally, moral licensing, on the other. In this light, moral licensing should be separated from genuine apology that attains moral equilibrium, which is called in the literature moral "self-regulation' and "conscience accounting." According to Kantian ethics, not just the consequences of an act matter, but also the sincerity with which the act was conducted. This pits Kant against the utilitarian view, which downplays intentions and focuses on consequences. We take Kant to the lab. Participants play a modified ultimatum game, where proposers in some treatments have the option of issuing apology messages and responders have both costly and costless options for rewarding or punishing proposers. We introduce different treatments of the apology message to allow responders to form doubts about the sincerity of the apology messages. Our results support the Kantian position: responders, once they become suspicious of the sincerity of the proposers' apology, exhibit "insincerity aversion" and punish proposers.

Policymakers are increasingly using whistle‐blowing incentives aimed at curtailing illegal or unethical behavior. We theoretically and experimentally investigate one version of whistle‐blowing incentive: leniency programs aimed at curbing anticompetitive activities by firms, by reducing the punishment faced by a cartel member who reports the cartel's behavior. The theoretical model captures the two important effects of whistle‐blowing incentives: the direct effect, a reduction in the stability of cartels, and the counterproductive indirect effect, an increase in the incentives to form cartels in the first place by lowering the cost of exiting them. As these point in opposite directions, the net theoretical effect is indeterminate. Our laboratory experiment compares two leniency programs—full immunity from fines and partial immunity—against a baseline with no whistle‐blowing incentives in place. We find evidence of the direct effect but not the indirect effect, and thus both programs reduce the extent of price fixing and the damage associated with it.

A recurring puzzle in bargaining experiments is that individuals under-exploit their bargaining position, compared to theoretical predictions. We conduct an experiment using two institutions: Nash demand game (NDG) and unstructured bargaining game (UBG). Unlike most previous experiments, disagreement payoffs are earned rather than assigned, and about one-fourth of the time, one bargainer's disagreement payoff is more than half the cake size ("dominant bargaining power"), so that equal splits are not individually rational. Subjects under-respond to their bargaining position most severely in the NDG without dominant bargaining power. Responsiveness increases in the UBG, but is still lower than predicted; the same is true for the NDG with dominant bargaining power. Only in the UBG with dominant bargaining power – the combination of a bargaining institution with low strategic uncertainty and elimination of the 50–50 "security blanket" – do subjects approximately fully exploit their bargaining position.

We use a competitive search price-posting framework to experimentally examine how buyer information and fairness perceptions affect market behavior. We observe that moving from zero to one uninformed buyers leads to higher prices in both 2 seller×2 buyer and 2 × 3 markets: the former as predicted under standard preferences, the latter the opposite of the theoretical prediction. Perceptions of fair prices-elicited in the experiment-are a powerful driver of behavior. For buyers, fair prices correlate with price responsiveness, which varies systematically across treatments and impacts sellers' pricing incentives. For sellers, fair prices correlate with underpricing, which also varies systematically across treatments.Data and the online appendix are available at https://doi.org/10.1287/mnsc.2016.2620.This paper was accepted by Uri Gneezy, behavioral economics.

We examine theoretically and experimentally how individuals' willingness to follow third party recommendations in 2 x 2 games is affected by payoff asymmetry. We consider six versions of Battle-of-the-Sexes. Recommendations imply monetary payoffs that are equal ex ante, but unequal ex post. So, although following recommendations constitutes a Nash equilibrium under standard preferences, sufficiently inequity-averse players can rationally disobey a recommendation that would lead to a very unfavourable payoff distribution, as long as the cost of doing so is not too large. Our theoretical model incorporates inequity aversion, along with level-k reasoning. Our main experimental result is consistent with the model: as either payoff asymmetry increases or the cost of disobeying an unfavourable recommendation decreases, subjects are more likely to disobey recommendations. (C) 2018 Elsevier B.V. All rights reserved.

Loss aversion, whereby losses weigh more heavily than equal-sized gains, has been demonstrated in many decision-making settings. Previous research has suggested reduced loss aversion in schizophrenia, but with little evidence of a link between loss aversion and schizophrenia illness severity. In this study, 20 individuals with schizophrenia and 16 control participants, matched by age and sex, played two versions of the Iterated Prisoners' Dilemma, one version with only positive payoffs and another version in which negative payoffs were possible, with the second version being derived from the first by subtracting a constant value from all payoffs. The control group demonstrated significantly lower cooperation rates under negative payoffs, compared with the version with only positive payoffs, indicative of loss aversion. The patient group on average showed no loss aversion response. Moreover, the extent of loss aversion in patients was found to be negatively correlated with schizophrenia illness severity, with less ill patients showing loss aversion more similar to controls. Results were found to be robust to the inclusion of potential confounding factors as covariates within rigorous probit regression analyses. Reduced loss aversion is a feature of schizophrenia and related to illness severity.

Numerous studies have examined factors influencing the likelihood of cooperative outcomes in nonzero-sum games, but there has been little study of the interaction between two of the most important: group size and pre-play cheap talk. We report results from an experiment in which groups of size between 2 and 15 play a one-shot multi-player threshold public-good game. In our random leader treatment, all group members select a suggestion (e.g., “Everyone should choose X”), with one randomly chosen to be broadcast to the group. In a choice only treatment, subjects choose suggestions but none is sent, and in a baseline treatment, there are no suggestions at all. We find a negative interaction between group size and this kind of communication: the beneficial effect of both suggestions overall and cooperative suggestions on cooperation, cooperative outcomes, and payoffs decreases sharply as the group size increases. We find a similar negative interaction in a follow-up treatment in which all group members’ suggestions are broadcast to the group. Our results suggest that care should be taken in generalising conclusions from small-group experiments to large groups.

We examine retrospective- and prospective-voting considerations in an experiment implementing a simple voting model. In each period, the official chooses how much rent to appropriate from a social endowment. Announcement of this choice is followed by an election between the official and a randomly selected challenger, with the winner becoming the official in the next period. We vary two features of the setting: (a) the discount factor, and (b) whether candidates can make costless, non-binding “campaign promises” about their behaviour if elected. Consistent with the model's predictions, both raising the discount factor and introducing campaign promises lead to lower rent appropriation by officials and worse electoral outcomes (other things equal) for incumbents. Campaign promises, despite being cheap talk, have real effects: promising less appropriation is rewarded by voters, but breaking such promises is punished. Finally, we find a weak positive association between campaign promises and officials' subsequent behaviour.