Discussion Paper No. 12
November 3, 2021
Auction versus Negotiations
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Abstract:
For the procurement of complex goods the early exchange of informa- tion is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, a scoring auction implements the efficient allocation. If this is not feasible, the buyer must choose between a price-only auction (discouraging early information exchange) and bilateral negotiations with a preselected seller (reducing compe- tition). Bilateral negotiations are superior if potential design improvements are important, if renegotiation is particularly costly, and if the buyer’s bargaining position is strong. Moreover, negotiations provide stronger incentives for sellers to investigate design improvements.
Keywords:
adaption costs; auctions; behavioral contract theory; loss aversion; negotiations; procurement; renegotiation;
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Discussion Paper No. 23
Cooperating Over Losses and Competing Over Gains: a Social Dilemma Experiment
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Abstract:
Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the traveler’s dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Furthermore, our results suggest that this treatment effect is best explained by reference-dependent risk preferences and reference-dependent strategic sophistication. We discuss the implications of our results and relate our findings to other experimental games played in the loss domain.
Keywords:
traveler's dilemma; loss domain; diminishing sensitivity; strategic sophistication;
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Discussion Paper No. 25
Deception and Self-Deception
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Abstract:
Why are people so often overconfident? We conduct an experiment to test the hypothesis that people become overconfident to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed that they can earn money by convincing others of their superior performance. The privately elicited beliefs of informed subjects are significantly more confident than the beliefs of subjects in the control condition. By generating exogenous variation in confidence with a noisy performance signal, we are also able to show that higher confidence indeed makes subjects more persuasive in the subsequent face-to-face interactions.
Keywords:
overconfidence; self-deception; motivated cognition; persuasion; deception;
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Discussion Paper No. 1
January 7, 2017
You Owe Me
Author:
Abstract:
In business and politics, gifts are often aimed at influencing the recipient at the expense of third parties. In an experimental study, which removes informational and incentive confounds, subjects strongly respond to small gifts even though they understand the gift giver’s intention. Our findings question existing models of social preferences. They point to anthropological and sociological theories about gifts creating an obligation to reciprocate. We capture these effects in a simple extension of existing models. We show that common policy responses (disclosure, size limits) may be ineffective, consistent with our model. Financial incentives are effective but can backfire.
Keywords:
gift exchange; externalities; lobbyism; corruption; reciprocity; social preferences;
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