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Conspiracy theories are widespread in the modern information era. Being exposed to conspiracy theories may affect behaviour, for example, by spreading mistrust among people and within organisations...

We conduct an experiment with professional internal auditors and evaluate their performance and objectivity, measured as the extent to which they truthfully report the performance of other participants in a real-effort task. It has been suggested in the literature that incentive-based compensation for auditors has the potential to lead to dishonest behavior, for instance when their payoff depends on the performance of the unit they are auditing. In line with our hypotheses, we find that incentive-based compensation increases dishonest behavior among internal auditors: competitive incentives lead to under-reporting of other participants’ performance, while collective incentives lead to over-reporting of performance. In addition, we find that moving from an environment with objective performance evaluation towards a peer evaluation scheme reduces performance.

Ostracism, or exclusion by peers, has been practiced since ancient times as a severe form of punishment against transgressors of laws or social norms. The purpose of this paper is to offer a comprehensive analysis on how ostracism affects behavior and the functioning of a social group. We present data from a laboratory experiment, in which participants face a social dilemma on how to allocate limited resources between a productive activity and theft, and are given the opportunity to exclude members of their group by means of majority voting. Our main treatment features an environment with heterogeneity in productivity within groups, thus creating inequalities in economic opportunities and income. We find that exclusion is an effective form of punishment and decreases theft by excluded members once they are re-admitted into the group. However, it also leads to some retaliation by low-productivity members. A particularly worrisome aspect of exclusion is that punished group members are stigmatized and have a higher probability of facing exclusion again. We discuss implications of our findings for penal systems and their capacity to rehabilitate prisoners.

Recent experimental evidence reveals that information is often avoided by decision makers in order to create and exploit a so-called “moral wiggle room,” which reduces the psychological and moral costs associated with selfish behavior. Despite the relevance of this phenomenon for corrupt practices from both a legal and a moral point of view, it has hitherto never been examined in a corruption context. We test for information avoidance in a framed public procurement experiment, in which a public official receives bribes from two competing firms and often faces a tradeoff between maximizing bribes and citizen welfare. In a treatment where officials have the option to remain ignorant about the implications of their actions for citizens, we find practically no evidence of information avoidance. We discuss possible reasons for the absence of willful ignorance in our experiment.

We use a framed field experiment to assess resource harvesting behavior and its interaction with prosocial and antisocial punishment in the Kavango woodland savannah of Namibia. We impleme...

We conduct a field experiment on conflict in swimming pools. When all lanes are occupied, an actor joins the least crowded lane and asks one of the swimmers to move to another lane. The lane represents a contested scarce resource. We vary the actor’s valuation (high and low) for the good through the message they deliver. Also, we take advantage of the natural variation in the number of swimmers to proxy for their valuation. Consistent with theoretical predictions, a swimmer’s propensity to engage in conflict increases in scarcity (incentive effect) and decreases in the actor’s valuation (discouragement effect). We complement the results with survey evidence.

We measure the willingness to compete of entrepreneurs and salaried workers in an experiment. We let participants choose between a piece-rate and a tournament scheme either in private or in public. We find that in the private condition entrepreneurs are less competitive than salaried workers, but that in the public condition this ordering is reversed. Data from a follow-up survey suggest that social image concerns of entrepreneurs and perceived norms can explain why entrepreneurs are more competitive when decisions are publicly observable. Our survey also reveals that more competitive entrepreneurs earn higher profits in their businesses.

Competition for limited resources is ubiquitous in social and economic life and has sparked a large body of research on the determinants of competitive behavior. While we know a lot about the role of contextual factors and personality traits, no link has been established between competitive behavior and physical appearance. In this study, we document a strong positive association between attractiveness, measured through ratings of headshots from experimental participants, and the competitive behavior of female participants in the form of opting for a tournament payment scheme in a real-effort task. We also show that individuals are better than chance at predicting the competitiveness of experimental participants, just by looking at participants’ headshots. These findings significantly advance our understanding of the factors that underlie competitive attitudes and of the role of observable physical characteristics as telltale signs of behavior.

Despite the economic and social significance of crime reduction and criminals' rehabilitation, research evaluating the effects of incarceration on behavior is surprisingly scarce. We conduct an experiment with 105 prison inmates and complement it with administrative data in order to explore several aspects of their social behavior. We first perform a comprehensive analysis of behavior in three economic games, finding evidence of discrimination against a sample from outside prison. In addition, our regression analysis reveals that inmates generally become less pro-social towards this out-group the longer they remain incarcerated. Finally, we introduce and evaluate a priming intervention that asks inmates to reflect on their time spent in prison. This intervention has a very sizeable and significant impact, increasing pro-sociality towards the out-group. Hence, a simple, low-cost intervention of this sort can have desirable effects in promoting rehabilitation and integration into social and economic life after release.

We study in five diverse countries a laboratory social dilemma game in which incentives to steal from others lead to the socially inefficient diversion of resources from production unless the members of a given mini-society can abide by norms of non-theft or engage in low cost collective protection of their members’ wealth accumulations. We compare two treatments in which subjects have opportunities to exchange free-form messages to one without such opportunities, finding that most subjects allocate far less to theft and most groups achieve much greater efficiency in the presence of communication. Ease of identifying who has engaged in theft varies across the two communication treatments, but is of minor importance to the outcome. We find several coding-amenable elements of message content to be statistically significant predictors of group and individual outcomes. Contributing to the literature on culture, norms, and preferences, we find that the degree to which communication fosters cooperation varies among countries in a manner correlated with variation in survey based trust and with desistance from theft at the outset of our communication-free experiment treatment.

According to the theory of guilt aversion, agents suffer a psychological cost whenever they fall short of other people’s expectations. In this paper, we suggest that there may be limits to this kind of motivation. We present evidence from an experimental dictator game showing that behavior is consistent with guilt aversion for relatively low levels of recipient expectations, roughly up to the point where the recipient expects half of the available surplus. Beyond that point the relationship between expectations and transfers becomes negative. Moreover, we examine this relationship at the individual level and establish a typology of subjects depending on how and whether they condition their behavior on recipient expectations.

We examine the emotional component of rejections in the Impunity Game in a dual-process framework. Subjects reject unfair offers more frequently when decisions are taken under time pressure. This supports the role of emotions as a commitment device.

Secure property rights result from a combination of public enforcement, private protective measures, and voluntary norm-compliance. We conduct a laboratory experiment to study how culture interacts with institutions in shaping individuals' behaviors and group outcomes in a property rights dilemma. The experiment is conducted in five countries: Austria, Mexico, Mongolia, South Korea and the United States. We find that the security of property varies with the experimentally available institutions and country-level indicators such as trust and quality of government. Subjects from countries with higher levels of trust are more likely to abstain initially from theft, devote more resources to production and support funding public protection of property through taxation. Our findings highlight the relevance of cultural and institutional factors, and their interaction, in addressing the collective action problem of safeguarding property rights.

Tournaments are widely used in organizations, explicitly or implicitly, to reward the best-performing employees, for example, by promotion or bonuses, and/or to penalize the worst-performing employees, for example, by demotion, withholding bonuses, or unfavorable job assignments. These incentive schemes can be interpreted as various prize allocations based on the employees' relative performance. While the optimal prize allocation in tournaments of symmetric agents is relatively well understood, little is known about the impact of the allocation of prizes on the effectiveness of tournament incentive schemes for heterogeneous agents. We show that while multiple prize allocation rules are equivalent when agents are symmetric in their ability, the equivalence is broken in the presence of heterogeneity. Under a wide range of conditions, loser-prize tournaments, that is, tournaments that award a low prize to relatively few bottom performers, are optimal for the firm. The reason is that low-ability agents are discouraged less in such tournaments, as compared to winner-prize tournaments awarding a high prize to few top performers, and hence can be compensated less to meet their participation constraints. (JEL M52, J33, J24)

We review the literature on credence goods since Dulleck and Kerschbamer (2006). We consider various markets for credence goods and briefly discuss evidence on the extent of fraud. We then review theoretical and empirical contributions on the determinants of seller and consumer behavior in markets for credence goods. The topics include informational asymmetries, pro-social motivations and seller characteristics, as well as several features of the market structure and institutional environment (separation of diagnosis and treatment, liability, verifiability, reputational concerns, competition between experts and second opinions). We also describe recent developments in this area of research (such as the role of investing in more precise diagnostic technologies) and offer an outlook on future questions.

The features and determinants of human decision making, especially under competitive environments, have been a central theme of research in economics and psychology alike. This special issue centers on applying sports data to understand behavior and decision making in competitive environments. In particular, we assemble original research with sports data that provides us with insights into hitherto unanswered questions relating to various strategic and psychological aspects of decision making.

Men have been observed to have a greater willingness to compete compared to women, and it is possible that this contributes to gender differences in wages and career advancement. Policy interventions such as quotas are sometimes used to remedy this but these may cause unintended side-effects. Here, we present experimental evidence that a simple and practically costless tool—priming subjects with power—can close the gender gap in competitiveness. While in a neutral as well as in a low-power priming situation men are much more likely than women to choose competition, this gap vanishes when subjects are primed with a high-power situation. We show that priming with high power makes competition entry decisions more realistic and also that it reduces the level of risk tolerance among male participants, which can help explain why it leads to a closing down of the gender gap in competitiveness., Men are often more willing to compete compared to women, which may contribute to gender differences in wages and career advancement. Here, the authors show that ‘power priming’ - encouraging people to imagine themselves in a situation of power - can close the gender gap in competitiveness.

We utilize a laboratory experiment to compare effort provision under optimal tournament contracts with different distributions of prizes which motivate agents to compete to be first, avoid being last, or both. We find that the combined tournament contract incorporating both incentives at the top and at the bottom induces the highest effort, especially in larger groups. Avoiding being last produces the lowest variance of effort and is more effective at motivating employees compared to competing for the top.

In a field experiment in the market for taxi rides we investigate a phenomenon called second-degree moral hazard - the tendency of the supply side in a market to react to anticipated moral hazard on the demand side by increasing the extent or price of the service. Our moral hazard manipulation consists of some passengers explicitly stating that their expenses will be reimbursed. This has a strong positive effect on the likelihood and the amount of overcharging and consequently increases consumer expenditure. Our results suggest that second-degree moral hazard may have a severe impact on the provision of credence goods.

We experimentally examine the impact of tax evasion attempts on the performance of credence goods markets, where contractual incompleteness results from asymmetric information on the welfare maximizing quality of the goods. Our results suggest that tax evasion attempts – independently of whether they are successful or not – lead to efficiency losses in the form of too low quality and less frequent trade. Thus, shadow economies may reduce welfare not only by inducing agents to incur costs to hide or to uncover taxable transactions, by imposing risk on uncertainty-averse tax evaders and by distorting competition, but also by creating an additional efficiency loss in the underlying market by forfeiting possible gains from trade and by inducing insufficient quality provision. We call these the hidden costs of tax evasion.

We study the willingness to compete of 588 children and teenagers aged ten to seventeen. We replicate the gender difference in tournament entry choices usually found in the literature for adults. We then show that policy interventions like quotas and preferential treatment help to close down the gender gap without leading to losses in efficiency, during or after a tournament. Given that differences in competitive behavior are prevalent from an early age, the application of interventions to promote females in competitions may be desirable already at early ages to promote equal chances for women on labor markets later on.

Tournament incentives prevail in labor markets, in particular with respect to promotions. Yet, it is often unclear to competitors how many winners there will be or how many applicants compete in the tournament. While it is hard to measure how this uncertainty affects work performance and willingness to compete in the field, it can be studied in a controlled lab experiment. We present a novel experiment where subjects can compete against each other, but where the number of winners is either uncertain (i.e., unknown numbers of winners, but known probabilities) or ambiguous (unknown probabilities for different numbers of winners). We compare these two conditions with a control treatment with a known number of winners. We find that ambiguity induces a significant increase in performance of men, while we observe no change for women. Both men and women increase their willingness to enter competition with uncertainty and ambiguity, but men react slightly more than women. Overall, both effects contribute to men winning the tournament significantly more often than women under uncertainty and ambiguity. Hence, previous experiments on gender differences in competition may have measured a lower bound of differences between men and women.

Affirmative action rules are often implemented to promote women on labor markets. Little is known, however, about how and whether such rules emerge endogenously in groups of potentially affected subjects. We experimentally investigate whether subjects vote for affirmative action rules, against, or abstain. If approved by the vote, a quota rule is implemented that favors women in one treatment, but members of an artificially created group based on random color assignment in another treatment. We find that quota rules based on gender are implemented frequently and do not affect the performance of men and women in a contest. Quota rules based on an arbitrary criterion, however, are less often approved and lead to strong individual reactions of advantaged and disadvantaged group members and to efficiency losses. These results show that the effects of affirmative action policies largely depend on whether these policies are viewed favorably within the affected groups.

Many tournaments are plagued by sabotage among competitors. Typically, sabotage is welfare-reducing, but from an individual’s perspective an attractive alternative to exerting positive effort. Yet, given its illegal and often immoral nature, sabotage is typically hidden, making it difficult to assess its extent and its victims. Therefore, we use data from Judo World Championships, where a rule change in 2009 basically constituted a natural experiment that introduced one costless opportunity for sabotage. In Judo, competitors can break an opponent’s attack in an unsportsmanlike manner; these are seen as acts of sabotage. Based on a unique dataset of 1,422 fights, we find that the rule change in 2009 has led to a large increase in the use of sabotage. Moreover, sabotage is more likely to be employed by relatively less qualified individuals, and to be targeted at more qualified ones. From a survey among spectators, we show that sabotage is welfare reducing.

Highlights ► We study the relationship between distributional preferences and competitive behavior in the lab. ► We distinguish between efficiency-minded, inequality averse, and spiteful types. ► Spiteful types perform better than the other two types in a competitive environment. ► Efficiency-minded subjects are more likely to self-select into a competitive environment. ► Distributional and risk preferences largely explain the gender gap in the willingness to compete., We study experimentally the relationship between distributional preferences and competitive behavior. We find that spiteful subjects react strongest to competitive pressure and win in a tournament significantly more often than efficiency-minded and inequality averse subjects. However, when given the choice between a tournament and a piece rate scheme, efficiency-minded subjects choose the tournament most often, while spiteful and inequality averse subjects avoid it. When controlling for distributional preferences, risk attitudes and past performance, the gender gap in the willingness to compete is no longer significant, indicating that gender-related variables explain why twice as many men as women self-select into competition.

Girl Power The potential of affirmative action policies to reduce overall outcomes because of lower individual performance has been discussed widely and at length. But do quotas or preferential treatment of applicants alter the pool of candidates? Balafoutas and Sutter (p. 579 ; see the Perspective by Villeval ) used an existing laboratory-based task to assess the change in composition of winning candidates and the overall outcome as a function of three affirmative action policies. Policies designed to encourage more women to enter a competitive environment served to recruit enough high-performing individuals to ensure that the efficiency in performing the task was preserved. Beaman et al. (p. 582 , published online 12 January) examined the effects of a constitutionally mandated reservation of village-council and council-leader positions for women in West Bengal after two election cycles (1998 and 2003). The program appeared to narrow the gender gap in aspirations of parents for their children and of children for themselves; in addition, teenage girls spent more time in school and less on household chores. Beliefs and attitudes changed only after the second set of elections—that is, after a longer exposure to female role models—complementing the more rapid policy changes instituted by women council leaders after the first round of elections.

This paper presents experimental evidence from a simple three-person game showing that many individuals are willing to avenge third-party punishment in one-shot interactions. The threat of counter-punishment has a large negative effect on the willingness of third parties to punish selfish behavior. In spite of this, the extent of selfish behavior is identical to that in a treatment without counter-punishment opportunities. We discuss explanations for this puzzling finding.

This paper studies how income tax rates are determined and how they are related to government corruption in the form of fund capture. A model is presented where rich voters can block redistribution by buying the votes of some poor voters. In equilibrium there is only limited redistribution and income tax rates are a negative function of government corruption. When rich voters can bribe the government, an additional equilibrium with zero taxation is possible. The link between corruption and tax rates is tested using cross country data; the empirical evidence is fully consistent with the predictions of the model.

Significance Why do humans cooperate in one-time interactions with strangers? The most prominent explanations for this long-standing puzzle rely on punishment of noncooperators, but differ in the form punishment takes. In models of direct punishment, noncooperators are punished directly at personal cost, whereas indirect reciprocity assumes that punishment is indirect by withholding rewards. To resolve the persistent debate on which model better explains cooperation, we conduct the first field experiment, to our knowledge, on direct and indirect punishment among strangers in real-life interactions. We show that many people punish noncooperators directly but prefer punishing indirectly by withholding help when possible. The occurrence of direct and indirect punishment in the field shows that both are key to understanding the evolution of human cooperation.

Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard – the tendency of the supply side in a market to react to anticipated moral hazard on the demand side by increasing the extent or the price of the service. In the market for taxi rides, our moral hazard manipulation consists of some passengers explicitly stating that their expenses will be reimbursed by their employer. This has an economically important and statistically significant positive effect on the likelihood of overcharging, with passengers in that treatment being about 13% more likely to pay higher-than-justified prices for a given ride. This indicates that second-degree moral hazard may have a substantial impact on service provision in a credence goods market.

Extensive evidence from laboratory experiments indi cates that many individuals are willing to use costly punishment to enforce social norms, even in one-shot interactions. However, there appears to be little evidence in the literature of such behavior in the field. We study the propensity to punish norm violators in a natural fi eld experiment conducted in the main subway station in Athens, Greece. The large number of passengers ensures that strategic motives for punishing are minimized. We study violations of two distinct efficiencyenhancing social norms. In line with laboratory evi dence, we find that individuals punish norm violators. Men are more likely than women to punish violators, while the decision to punish is unaffected by the violator’s height and g ender. Interestingly, we find that violations of the better known of the two norms are substantia lly less likely to trigger punishment. We present additional evidence from two surveys provid ing insights into the determinants of norm enforcement.

Tournaments are widely used in organizations, explicitly or implicitly, to reward the best-performing employees, e.g., through promotion or bonuses, and/or to punish the worst-performing employees, e.g., through firing or unfavorable job assignments. We explore the impact of the allocation of prizes on the effectiveness of tournament incentive schemes. We show that while multiple prize allocation rules are equivalent when agents are symmetric in their ability, the equivalence is broken in the presence of heterogeneity. Under a wide range of conditions, punishment tournaments, i.e., tournaments that award a low prize to relatively few bottom performers, are optimal for the firm. The reason is that low-ability agents are discouraged less in punishment tournaments, and hence can be compensated less to meet their participation constraints.

We study experimentally the protection of property in five widely distinct countries— Austria, Mexico, Mongolia, South Korea and the United States. Our main results are that the security of property varies with experimental institutions, and that our subject pools exhibit significantly different behaviors that correlate with country-level property security, trust and quality of government. Subjects from countries with higher levels of trust or perceptions of safety are more prone to abstain initially from theft and devote more resources to production, and subjects from countries with higher quality political institutions are more supportive of protecting property through compulsory taxation. This highlights the relevance of socio-political factors in determining countries’ success in addressing collective action problems including safeguarding property rights.

Many tournaments are plagued by sabotage among competitors. Typically, sabotage is welfare-reducing, but from an individual's perspective an attractive alternative to exerting positive effort. Yet, given its illegal and often immoral nature, sabotage is typically hidden, making it difficult to assess its extent and its victims. Therefore, we use data from Judo World Championships, where a rule change in 2009 basically constituted a natural experiment that introduced one costless opportunity for sabotage. In Judo, competitors can break an opponent's attack in an unsportsmanlike manner; these are seen as acts of sabotage. Based on a unique dataset of 1,422 fights, we find that the rule change in 2009 has led to a large increase in the use of sabotage. Moreover, sabotage is more likely to be employed by relatively less qualified individuals, and to be targeted at more qualified ones. From a survey among spectators, we show that sabotage is welfare-reducing.

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behaviour by sellers. This article presents a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers' presumed information and income on the extent of fraud. We find that passengers with inferior information about optimal routes are taken on significantly longer detours, while lack of information on the local tariff system increases the likelihood of manipulated bills by about fifteen percentage points. Passengers' perceived income seems to have no effect on fraud. Copyright 2013, Oxford University Press.

Recent research has shown that women shy away from competition more often than men. We evaluate experimentally three alternative policy interventions to promote women in competitions: Quotas, Preferential Treatment, and Repetition of the Competition unless a critical number of female winners is reached. We find that Quotas and Preferential Treatment encourage women to compete significantly more often than in a control treatment, while efficiency in selecting the best candidates as winners is not worse. The level of cooperation in a post-competition teamwork task is even higher with successful policy interventions. Hence, policy measures promoting women can have a double dividend.