An experiment on markets and contracts : do social preferences determine corporate culture?

Cabrales, Antonio and Miniaci, Raffaele and Piovesan, Marco and Ponti, Giovanni (2007) An experiment on markets and contracts : do social preferences determine corporate culture? [Working Paper]. p. 38. Economics Working Papers (No. 07-20). (Submitted)

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Official URL: http://e-archivo.uc3m.es/bitstream/10016/677/1/we0...

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Abstract/Index

This paper reports experimental evidence on a stylized labor market. The experiment is designed as a sequence of three treatments. In the last treatment, TR3, four principals, who face four teams of two agents, compete by offering the agents a contract from a fixed menu. In this menu, each contract is the optimal solution of a (complete information) mechanism design problem where principals face agents’ who have social (i.e. interdependent) distributional preferences a’ la Fehr and Schmidt [19] with a specific parametrization. Each agent selects one of the available contracts offered by the principals (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. In the first two treatments, TR1 and TR2, we estimate individual social preference parameters and beliefs in the effort game, respectively. We find that social preferences are significant determinants of the matching process between labor supply and demand in the market stage, as well as principals’ and agents’ contract and effort decisions. In addition, we also see that social preferences explain the matching process in the labor market, as agents display a higher propensity to choose to work for a principal with similar distributional preferences.


Item Type:Report / Paper (Working Paper)
Research documents and activity classification:Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions:Department of Business and Management
Uncontrolled Keywords:Social Preferences, Team Incentives, Mechanism Design, Experimental Economics.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Maria Teresa Nistico
Deposited On:14 Dec 2010 16:37
Last Modified:23 Apr 2013 14:44

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