Our study analyzes the consequences of workers' participation in the wage setting process on effort exertion. The experimental design is based on a modified giftexchange game where the degree of workers’ involvement in the wage setting process is systematically varied among the workers. The...

We model deferred compensation as a share of an uncertain future profit granted by a financially constrained employer to her employee in mutual agreement. Deferred compensation serves as a retention mechanism, helping the employer to avoid bankruptcy. The optimal combination of cash and deferred...

A small lie appears trivial but it obviously violates moral commandments. We analyze whether the preference for others’ truth telling is absolute or depends on the size of a lie. In a laboratory experiment we compare punishment for different sizes of lies controlling for the resulting economic...

A small lie appears trivial but it obviously violates moral commandments. We analyze whether the preference for others’ truth telling is absolute or depends on the size of a lie. In a laboratory experiment we compare punishment for different sizes of lies controlling for the resulting economic...

Recent laboratory evidence suggests that employees who have the extraordinary right to self-determine their wages perform better. By conducting a natural field experiment, we aim to test whether this policy actually has the predicted positive effects in a real-labor market. Employees were hired...

The tendency to underestimate others’ relative performance compared to one’s own is widespread among individuals in all work environments. We examine the relationship between, and the driving forces behind, individual overconfidence and voluntary cooperation in team production. Our...