In this paper, we report the results of an experiment designed to determine whether the manner in which income is obtained (earned vs. endowed) affects the relation between tax rates and taxpayer compliance. Our experiment consisted of an income phase and a tax-reporting phase. In the income...

As documented in the dynamics and outcomes, agents learn to attach meaning to a priori meaningless messages. For the common interest game, Game 1, this chapter observe the efficient separating outcome, although the learning process is gradual. For the partial common interest game, Game 2, the...

Business executives and academics frequently criticize budget-based compensation plans as providing incentives for subordinates to build slack into proposed budgets. In this paper, we examine whether either of two practices - using budgets to allocate scarce resources, or providing information...

We use a laboratory experiment to investigate how the level of a budget assigned to an employee by a firm owner affects employee effort. Consistent with reciprocity and fairness models, we find a negative relationship between budget levels and employee effort - many employees responded to a low...