A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects...

Recent experiments show that public goods can be provided at high levels when mutual monitoring and costly punishment are allowed. All these experiments, however, study monitoring and punishment in a setting where all agents can monitor and punish each other (i.e., in a complete network). The...

The enforcement of social norms often requires that unaffected third parties sanction offenders. Given the renewed interest of economists in norms, the literature on third party punishment is surprisingly thin, however. In this paper, we report on the results of an experiment designed to...

We provide evidence on how two important types of institutions – dismissal barriers, and bonus pay – affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and...

Because costly punishment is not credible, subgame perfection suggests that punishment will not deter free riding, regardless of the size or structure of groups. However, experiments show that people will punish free riders, even at considerable cost. To examine the implications of agents who...

Empirical studies of the principal-agent relationship find that extrinsic incentives work in many instances, linking rewards to performance increases effort, but that they can also backfire, reducing effort. Intrinsic motivation, the internal drive to work to master a skill or to improve one's...

We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition...

The theory of compensating differentials has proven difficult to test with observational data: the consequences of selection, unobserved firm and worker characteristics, and the broader macroeconomic environment complicate most analyses. Instead, we construct experimental, real-effort labor...

Economic theory predicts that agents will work harder if they believe in the "mission" of the organization. Well-identified estimates of exactly how much harder they will work have been elusive, however, because agents select into jobs. We conduct a real effort experiment with participants who...