Research
Publications
Efficiency Wages with Motivated Agents (joint with Lea Cassar, Anna Deréky and Florian Engl)
Games and Economic Behavior (2024), 145, pp. 66-83
Abstract
Many jobs serve a social purpose beyond profit maximization, contributing positively to society. This paper uses a modified principal-agent gift-exchange game with positive externality (prosocial treatment) to study how workers’ prosocial motivation interacts with the use of efficiency wages in stimulating effort. We find that prosocial motivation and efficiency wages are independent in stimulating effort: compared to a standard gift-exchange game (GE treatment), the presence of the externality shifts the agents’ effort choice function upwards without affecting its slope. Thus, if principals were profit-maximizers, wage offers should be the same in both treatments. However, principals offer higher wages in the prosocial treatment. We show that this is due to principals in the GE treatment highly underestimating agents’ reciprocity and thereby offering wages below the profit-maximizing level. Results from robustness-checks further suggest that our findings are unlikely to be driven by a simple efficiency effect.
Managing Anticipation and Reference-Dependent Choice (joint with Christopher Kops)
Journal of Mathematical Economics (2024), 112, 102988
Abstract
Extensive field and experimental evidence shows that reference points shape behavior. But, what shapes the reference point? Candidates put forward in the literature range from the status quo, to rational expectations and the narrow focus of dreaming or worrying about a single possible outcome. This paper develops a model that includes all of these candidate sources. It does so, by allowing the reference point to be any convex combination of the outcomes possible under a consumption lottery. We introduce new solution concepts for reference-dependent choices, characterize these solution concepts on the level of choice data and identify the model’s parameters.
Optimal Contracting with Endogenous Project Mission (joint with Lea Cassar)
Journal of the European Economic Association (2020), 18(5), pp. 2647-2676
Abstract
Empirical evidence suggests that workers care about the mission of their job, in addition to their wage. This paper studies how organizations can choose a mission to attract, incentivize, and screen their workers. We analyze a model in which a principal offers a contract to an agent for the development of a project and can influence the agent’s marginal return of effort through the choice of project mission. The principal’s and the agents’ mission preferences are misaligned and the agents vary in the intensity of their mission drive. Our main results highlight that how far the organization chooses to move from its preferred mission depends on the contractual environment in which it operates. Missions will be more agent-preferred in environments in which effort is noncontractible. In environments in which agents’ drive is unknown, missions will be less agent-preferred and the organization will find it optimal to offer contract menus that may be implemented via scoring auctions when there are competing agents. Our analysis applies to the design and allocation of aid contracts, research funding, and creative jobs.
This or That? Sequential Rationalization of Indecisive Choice Behavior (joint with Christopher Kops)
Theory and Decision (2018), 84(4), pp. 507-524
Abstract
Decision-makers frequently struggle to base their choices on an exhaustive evaluation of all options at stake. This is particularly so when the choice problem at hand is complex, because the available alternatives are hard (if not impossible) to compare. Rather than striving to choose the most valuable alternative, in such situations decision-makers often settle for the choice of an alternative which is not inferior to any other available alternative instead. In this paper, we extend two established models of boundedly rational choice, the categorize then choose heuristic and the rational shortlist method, to incorporate this kind of “indecisive” choice behavior. We study some properties of these extensions and provide full behavioral characterizations.
Working Papers
On the Optimal Mode of Selling Goods with Uncertain Consumption Quality (joint with Matthias Kräkel)
Abstract
We show that choosing a decentralized or a hybrid channel—that is, a retailer or an intermediary (e.g., sales representative, social media influencer)— instead of a centralized channel for selling goods with uncertain consumption quality can be optimal for a manufacturer as a self-commitment device. By this policy, the manufacturer can save costs from interacting with consumers (e.g., costs for sales activities). We derive conditions under which this self-commitment argument holds. In a second step, we discuss this argument under product competition, consumer naivety, product innovation, and product quality improvement.
Work in Progress
Predictive Completeness of Social Preference Theories: A Machine Learning Benchmark Approach (single-authored)
Abstract
We use machine learning methods as a benchmark to evaluate the predictive performance of parameterized social preference models within a random utility framework. Specifically, we analyze panel data from a laboratory experiment featuring binary dictator and reciprocity games, originally collected by Bruhin et al. (2019). To quantify each model’s predictive capability, we apply the concept of model completeness introduced by Fudenberg et al. (2022), which measures the fraction of predictable variation in the data that the model captures. To account for systematic variation that remains unexplained at the level of the representative agent, we extend the completeness framework to allow for heterogeneous preferences across individuals. This methodological extension enables us to (i) broaden the criteria for model comparison and evaluation, and (ii) quantify how completeness — and thereby explanatory power — changes when models are restricted in the number of allowed preference types.