Interdependent preferences and segregating equilibria

Cabrales, Antonio; Calvó‐Armengol, Antoni

doi:10.1016/j.jet.2007.08.003

Cited by 17 publications

(7 citation statements)

References 45 publications

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“…3 3 Cabrales and Calvó‐Armengol (2008) and von Siemens (forthcoming) look at worker segregation by ability if workers are also inequity averse. They assume that effort is contractible and do not analyze cooperation within teams.…”

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confidence: 99%

Competition, cooperation, and corporate culture

Kosfeld¹,

Siemens²

2011

The RAND J of Economics

113

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Cooperation between workers can be of substantial value to a firm, yet its level often varies substantially between firms. We show that these differences can unfold in a competitive labor market if workers have heterogeneous social preferences and preferences are private information. In our model, workers differ in their willingness to cooperate voluntarily. We show that there always exists a separating equilibrium in which workers self‐select into firms that differ in their monetary incentives as well as their level of worker cooperation. Our model highlights the role of sorting and worker heterogeneity in the emergence of heterogeneous corporate cultures. It also provides a new explanation for the coexistence of nonprofit and for‐profit firms. “Here you don’t communicate. And sometimes you end up not knowing things. … Everyone says we need effective communication. But it’s a low priority in action. … The hardest thing at the gates when flights are delayed is to get information.” “There is constant communication between service and the ramp. When planes have to be switched and bags must be moved, customer service will advise the ramp directly or through operations. If there’s an aircraft swap operations keeps everyone informed. … It happens smoothly.”

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confidence: 99%

Competition, cooperation, and corporate culture

Kosfeld¹,

Siemens²

2011

The RAND J of Economics

113

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“…Examples include Wambach (2010) andBartling (2011). Others focus on unobserved characteristics or screening problems, such as Cabrales et al (2007), Cabrales and Calvó-Armengol (2008) or Kosfeld and von Siemens (2011). The literature on auctions has investigated, among other behavioral phenomena, spiteful preferences (Morgan et al 2003) and their role for the empirical phenomenon of overbidding.…”

Section: Related Literaturementioning

confidence: 99%

Mechanism Design and Intentions

Bierbrauer

Netzer

2012

SSRN Journal

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We introduce intention-based social preferences into a Bayesian mechanism design framework. We first show that, under common knowledge of social preferences, any tension between material efficiency, incentive compatibility, and voluntary participation can be resolved. Hence, famous impossibility results such as the one by Myerson and Satterthwaite (1983) are turned into possibility results. Second, we provide a systematic account of the welfare implications of kindness sensations. Finally, we turn to an environment without common knowledge of social preferences and introduce the notion of a psychologically robust mechanism. Such a mechanism can be implemented without information about the type or the intensity of social preferences. We show that the mechanisms which have been the focus of the conventional mechanism design literature can be modified to achieve psychological robustness.

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“…The cost of effort function is convex in the effort level, c (e i ) = e 1.5 i 20 . 7 The total production of each group is equal to the sum of the effort levels of the two agents in the group, e i + e j . The group production is supposed perfectly observable but the individual output cannot be observed with certainty.…”

Section: Modelmentioning

confidence: 99%

Experimental Evidence on Inequity Aversion and Self-Selection Between Incentive Contracts

Teyssier

2008

SSRN Journal

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This paper reports on the results of an experiment testing whether the agents selfselect between a competitive payment scheme and a revenue-sharing scheme depending on their inequity aversion. Average efficiency should be increased when these payment schemes are endogenously chosen by agents. We show that the choice of the competition is negatively affected by disadvantageous inequity aversion and risk aversion. In the second half of the experiment, the effect of individual preferences is indirect through the effect of past results. The self-selection of agents increases the efficiency of the competitive scheme but not that of the revenue-sharing scheme, due to a heterogeneity of behaviors.

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Interdependent preferences and segregating equilibria

Cited by 17 publications

References 45 publications

Competition, cooperation, and corporate culture

Competition, cooperation, and corporate culture

Mechanism Design and Intentions

Experimental Evidence on Inequity Aversion and Self-Selection Between Incentive Contracts

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