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

Cabrales, Antonio and Miniaci, Raffaele and Piovesan, Marco and Ponti, Giovanni (2008) Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts. [Discussion Paper]. Koebenhavns Universitet, Oekonomisk Institut, Denmark. p. 51. Discussion Papers (No. 08-06).

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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.

Item Type: Report / Paper (Discussion Paper)
Research documents and activity classification: Working Papers > Refereed Working Papers / of international relevance
Divisions: Department of Business and Management
Additional Information: The definitive version of the paper has been published in "American Economic Review", Vol. 100(5), Pages 2261-2278, December 2010.
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 Nisticò
Date Deposited: 14 Dec 2010 14:08
Last Modified: 21 Apr 2015 23:13


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