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On Inequity Aversion - A Reply to Binmore and Shaked
Fehr, Ernst; Schmidt, Klaus M. - Volkswirtschaftliche Fakultät, … - 2009
In this paper we reply to Binmore and Shaked’s criticism of the Fehr-Schmidt model of inequity aversion. We put the theory and their arguments into perspective and show that their criticism is not substantiated. Finally, we briefly comment on the main challenges for future research on...
Persistent link: https://www.econbiz.de/10005835217
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Why and How Identity Should Influence Utility
Wichardt, Philipp C. - Volkswirtschaftliche Fakultät, … - 2007
This paper provides an argument for the advantage of a preference for identity-consistent behaviour from an evolutionary point of view. Within a stylised model of social interaction, we show that the development of cooperative social norms is greatly facilitated if the agents of the society...
Persistent link: https://www.econbiz.de/10005785811
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The Role of Experiments for the Development of Economic Theories
Schmidt, Klaus M. - Volkswirtschaftliche Fakultät, … - 2009
Economic experiments interact with economic theories in various ways. First of all they are used to test economic … applicability, the robustness and the predictive power of a theory. Furthermore, economic experiments discover and isolate phenomena … and challenge economic theorists to explain them. Finally, many economic experiments are “material†models. They are …
Persistent link: https://www.econbiz.de/10005785905
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How Does Socio-Economic Status Shape a Child's Personality?
Thomas, Deckers; Armin, Falk; Fabian, Kosse; Hannah, … - Volkswirtschaftliche Fakultät, … - 2015
We show that socio-economic status (SES) is a powerful predictor of many facets of a child's personality. The facets of personality we investigate encompass time preferences, risk preferences, and altruism, as well as crystallized and fluid IQ. We measure a family's SES by the mother's and...
Persistent link: https://www.econbiz.de/10011252547
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Credence Goods, Costly Diagnosis, and Subjective Evaluation
Bester, Helmut; Dahm, Matthias - Volkswirtschaftliche Fakultät, … - 2014
We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low–cost service is sufficient or whether a high–cost treatment is required to solve the consumer’s problem. This involves moral hazard because...
Persistent link: https://www.econbiz.de/10011140964
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Use and Abuse of Authority
Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M. - Volkswirtschaftliche Fakultät, … - 2012
Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to...
Persistent link: https://www.econbiz.de/10011140971
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Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion
Herweg, Fabian; Karle, Heiko; Müller, Daniel - Volkswirtschaftliche Fakultät, … - 2014
We consider a simple trading relationship between an expectation-based loss-averse buyer and profit-maximizing sellers. When writing a long-term contract the parties have to rely on renegotiations in order to ensure materially efficient trade ex post. The type of the concluded long-term contract...
Persistent link: https://www.econbiz.de/10011140976
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Tournaments with Gaps
Imhof, Lorens; Kräkel, Matthias - Volkswirtschaftliche Fakultät, … - 2013
A standard tournament contract specifies only tournament prizes. If agents’ performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive...
Persistent link: https://www.econbiz.de/10011140989
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Bonus Pools and the Informativeness Principle
Imhof, Lorens; Kräkel, Matthias - Volkswirtschaftliche Fakultät, … - 2013
Previous work on moral-hazard problems has shown that, under certain conditions, bonus contracts create optimal individual incentives for risk-neutral workers. In our paper we demonstrate that, if a firm employs at least two workers, it may further bene.t from combining worker compensation via a...
Persistent link: https://www.econbiz.de/10011140991
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Pricing a Package of Services - When (not) to bundle
Ketelaar, Felix; Szalay, Dezsö - Volkswirtschaftliche Fakultät, … - 2014
We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely,...
Persistent link: https://www.econbiz.de/10011099432