Discussion Paper No. 204
November 9, 2021
Organizing for Entrepreneurship: Field-Experiment Evidence on the Performance Effects of Autonomy in Choosing Project Teams Ideas
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Organizations constantly strive to unleash their entrepreneurial potential to keep up with market and technology changes. To this end, they engage employees in practices like corporate crowdsourcing, incubators, accelerators or hackathons. These organizational practices emulate independent “green-field” entrepreneurship by relinquishing hierarchical control and granting employees autonomy in the choices of how to conduct work. We aim to shed light on two such choices that are fundamental in differentiating hierarchical from entrepreneurial modes of organizing work: (1) choosing projects ideas to work on and (2) choosing project teams to work with. Both of these choices are typically pre-determined in hierarchies and self-determined in entrepreneurship. We run a field experiment in an entrepreneurship course carefully designed to disentangle the separate and joint effects of granting autonomy in both choosing teams and choosing ideas compared to a pre-determined base case. Our results show that high autonomy in choosing implies a trade-off between personal satisfaction and objective performance. Self-determined choices along both dimensions promote subjective well-being in a complementary way, but their joint performance impact is diminishing. After ruling out alternative explanations related to differing project qualities and homophilic team choices, the detrimental performance impact of too much choice seems to be related to the implied cognitive burden and overconfidence.
Keywords:
teams; ideation; entrepreneurial performance; field experiment;
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Discussion Paper No. 196
Do Performance Ranks Increase Productivity? Evidence from a Field Experiment
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Can a firm increase its workers' eff ort by introducing competition through performance-based ranking? On one hand such ranking can increase eff ort because of individuals' desire for status from high ranks, but on the other, it can demotivate them or make them wary of outperforming peers. This paper disentangles the e ffects of demotivation, social conformity, and status associated with ranking through a randomized experiment at a Bangladeshi sweater factory. Treated workers receive monthly information on their relative performance either in private or in public. Both a simple theoretical framework and empirical evidence from the field show that workers' intrinsic desire to be good at work induces privately ranked workers to increase eff ort upon receiving positive feedback, but they get demotivated and decrease e ffort upon receiving negative feedback. Public ranking lead to lower net eff ort relative to private ranking because of a strong preference not to outperform friends. The negative e ffects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers.
Keywords:
peer effects; productivity; rank incentives;
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Discussion Paper No. 178
November 8, 2021
Managerial Payoff and Gift-Exchange in the Field
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We conduct a field experiment where we vary both the presence of a gift-exchange wage and the effect of the worker's effort on the manager's payoff. Results indicate a strong complementarity between the initial wage-gift and the agent's ability to "repay the gift". We control for differences in ability and reciprocal inclination and show that gift-exchange is more effective with more reciprocal agents. We present a principal-agent model with reciprocal subjects that motivates our findings. Our results help to reconcile the conflicting evidence on the efficacy of gift-exchange outside the lab.
Keywords:
incentives; field experiments; gift-exchange; reciprocity;
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Discussion Paper No. 173
Boolean Representations of Preferences under Ambiguity
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We propose a class of multiple-prior representations of preferences under ambiguity where the belief the decision-maker (DM) uses to evaluate an uncertain prospect is the outcome of a game played by two conflicting forces, Pessimism and Optimism. The model does not restrict the sign of the DM's ambiguity attitude, and we show that it provides a unified framework through which to characterize different degrees of ambiguity aversion, as well as to represent context-dependent negative and positive ambiguity attitudes documented in experiments. We prove that our baseline representation, Boolean expected utility (BEU), yields a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni and Marinacci, 2004), which drops uncertainty aversion from maxmin expected utility (Gilboa and Schmeidler, 1989), while extensions of BEU allow for more general departures from independence.
Keywords:
multiple priors; ambiguity; dual-self models;
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Discussion Paper No. 164
An Economic Model of the Meat Paradox
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Many individuals have empathetic feelings towards animals but frequently consume meat. We investigate this "meat paradox" using insights from the literature on motivated reasoning in moral dilemmata. We develop a model where individuals form self-serving beliefs about the suffering of animals caused by meat consumption in order to alleviate the guilt associated with their dietary choices. The model makes several specific predictions: in particular, it predicts a positive relationship between individuals' taste for meat and their propensity to engage in self-deception, a high price elasticity of demand for meat, and a causal effect of prices and aggregate consumption on individual beliefs.
Keywords:
motivated reasoning; moral dilemmata; self-deception; meat paradox; meat price-elasticity; animal welfare;
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Discussion Paper No. 139
Learning About One's Self
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How can naivete about present bias persist despite experience? To answer this question, our experiment investigates participants' ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naivete cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms.
Keywords:
naivete; present bias; learning;
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Discussion Paper No. 127
Behavioral Characterizations of Naivete for Time-Inconsistent Preferences
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We propose nonparametric definitions of absolute and comparative naivete. These definitions leverage ex-ante choice of menu to identify predictions of future behavior and ex-post (random) choices from menus to identify actual behavior. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behavior. An individual is sophisticated if she is indifferent ex ante between retaining the option to choose from a menu ex post or committing to her actual distribution of choices from that menu. She is naive if she prefers the flexibility in the menu, reflecting a mistaken belief that she will act more virtuously than she actually will. We propose two definitions of comparative naivete and explore the restrictions implied by our definitions for several prominent models of time inconsistency.
Keywords:
naive; sophisticated; time inconsistent; comparative statics;
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Discussion Paper No. 124
It's not my Fault! Self-Confidence and Experimentation
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We study the inference and experimentation problem of an agent in a situation where the outcomes depend on the individual's intrinsic ability and on an external variable. We analyze the mistakes made by decision-makers who hold inaccurate prior beliefs about their ability. Overconfident individuals take too much credit for their successes and excessively blame external factors if they fail. They are too easily dissatisfied with their environment, which leads them to experiment in variable environments and revise their self-confidence over time. In contrast, underconfident decision-makers might be trapped in low-quality environments and incur perpetual utility losses.
Keywords:
overconfidence; attribution bias; experimentation; learning;
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Discussion Paper No. 106
November 5, 2021
Relational Contracts with Private Information on the Future Value of the Relationship
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We analyze a relational contracting problem, in which the principal has private information about the future value of the relationship. In order to reduce bonus payments, the principal is tempted to claim that the value of the future relationship is lower than it actually is. To induce truth-telling, the optimal relational contract may introduce distortions after a bad report. For some levels of the discount factor, output is reduced by more than would be sequentially optimal. This distortion is attenuated over time even if prospects remain bad. Our model thus provides an alternative explanation for indirect short-run costs of downsizing.
Keywords:
relational contracts; sequential inefficiencies; downsizing;
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Discussion Paper No. 88
November 4, 2021
Individual Differences and Contribution Sequences in Threshold Public Goods
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Following the notion that organizations often face public good dilemmas when collective action is needed, we use a real-time provision-point mechanism to experimentally explore the process of achieving cooperative equilibria. Specifically, besides exploring group outcomes, we identify individual antecedents for the timing of the contribution to the public good. In addition, we study the role of different situational factors for sustaining high rates of cooperation: information about others' actions and the number of individuals necessary for public good provision. We find that contribution and implementation rates are relatively high, with only a moderate decline over time, and that social value orientation as well as several personality traits help to explain the observed contribution sequences.
Keywords:
provision-point mechanism; real-time protocol; personality traits;
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