Research
Publications
Receiving credit: On delegation and responsibility
with Cedric Argenton and Jan Potters
Accepted at European Economic Review
Replication package available here
Abstract:
Evidence has shown that blame for a "bad" decision can be shifted by delegating the decision to someone else. We conduct experiments to examine whether the reverse is also true: Does one receive credit for taking a "good" decision as compared to delegating the decision to someone else? Our results indicate that the answer is affirmative. A person receives higher rewards when she makes a fair decision herself than when a delegate does. This indicates that responsibility attribution is a double-edged sword that applies to both bad and good outcomes.
A Survey of the Hold-Up Problem in the Experimental Economics Literature
Journal of Economic Surveys, 35(1), 227-246.
Abstract:
This paper reviews experimental studies on the so-called "hold-up problem". Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold-up problem, but to an extent less severe than what standard theory predicts. Hold-up occurs at the individual level, but exhibits a less severe pattern than theoretical predictions at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behaviors. Social preferences largely influence the results in hold-up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold-up problem. These findings in the laboratory setting are also relevant in a real life hold-up situation e.g. in the standard-setting context, but differences in the specific institution and environment may require more variations in the experimental design.
Working papers
Can strategic delegation solve the hold-up problem?
Abstract:
This paper investigates the potential of strategic delegation to mitigate the hold-up problem. In transactions with an investment stage followed by a bilateral bargaining stage, the lack of commitment induces underinvestment. Strategic delegation can work as a commitment device if a principal sets an appropriate incentive scheme for an agent. This paper conducts a laboratory experiment in which a player can delegate the allocation decision in the bargaining stage to an agent. The payoff of the agent can be linked with bargaining results via the incentive scheme. This enables the investor to make a credible threat to reject opportunistic offers, or the non-investor to make a credible promise to limit exploitation. The experiment finds more frequent investments and fewer opportunistic behaviors when the principals properly incentivize their agents.
Delegation with strategic complements and strategic substitutes: An experimental study
with Jan Potters
Abstract:
We examine strategic delegation in a two-stage game. Principals first set the incentive schemes for their respective agents upon which the agents set the strategies in the underlying game. Equilibrium predicts that principals set cooperative incentives in case the game is characterized by strategic complements and competitive incentives in case the game is characterized by strategic substitutes. We set up a lab experiment to test these predictions. Results show that, as predicted, principals choose competitive incentives for their agents with strategic substitutes, but contrary to prediction, principals do not set cooperative incentive case with strategic complements. It turns out that agents behave more cooperatively with strategic complements than equilibrium would predict them to do. This may explain why principals do not set cooperative incentive schemes in this case.