We will use this space each week in the news blast for Justin to share new ideas he thinks may be of interest for our behavioral & experimental community. If you ever have ideas for topics, please share your ideas with
Justin
.
This Week's BRITE Idea:
For this week's BRITE IDEA we want to highlight a
working paper
by Goswami and Urminsky with a nice approachable write-up for a public audience available
he
re
. In this paper, the authors conduct simple lab experiments where subjects work for either a flat wage for completing a task or for a payment that is based on the length of time they work. The key focus on the paper is on the decisions by another set of subjects who are the "managers" in the experiment and have to decide whether to offer the flat wage or time-varying contract.
They find that most managers choose the flat wage, but that paying by the minute would actually be much more profitable. They show that the reason for this is that the managers systematically over-estimate how long it will take people to complete the tasks.
The results here are interesting, but we also wanted to highlight it as a BRITE idea for two methodological points. First, this is a nice example of eliciting
beliefs and expectations
of subjects in the experiment as a way of understanding the mechanism behind the main effect. This is quite common in psychology but is probably under-used by those coming from the experimental-econ background.
Second, the way that they sequenced the study is quite interesting. The conducted the first stage having people work on different contracts separately and gathered those results. Then for the managers, they conducted the study online and told people they could hire a randomly selected worker from one of the two conditions with full information about the conditions from that first-stage of the experiment.
This type of structure is a nice, clean way of running an experiment that does not require a complicated interactive programming (i.e., z-tree) or the need to have large session sizes with different people doing different things in the session.
