24/2006
November
Inequality or Strategic Uncertainty? An Experimental Study on Incentives and Hierarchy
 
Dunia Lopez-Pintado, Giovanni Ponti, Eyal Winter


We run an experiment based on a model in which agents have the option of reducing the probability of failure by investing towards their decisions. In this case, asymmetric (unequal) benefit schemes appears to enhance agents' productivity, compared with schemes in which benefits are equally distributed across agents. Our evidence also shows how discrepancy between theory and evidence can be explained in terms of social preferences and social norms of reciprocity.

 
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