Research

Pitfalls of pay transparency: Evidence from the lab and the field (joint with Huaiping Yuan)

Winner of the Reinhard Selten Award 2022

Media coverage: Financieele Dagblad, Volkskrant, ESB

Abstract: Wage transparency regulation is widely adopted to reduce the gender wage gap. Combining field and laboratory evidence, we investigate whether wage transparency can be effective and explore as a mechanism the role of belief adjustments. In the field, this paper studies a German wage transparency policy that allows employees to request wage information of comparable employees. Exploiting variation across firm size and time, we provide causal evidence that this regulation does not affect the gender wage gap. In an online laboratory experiment, we study whether the failure of this policy hinges on two aspects: (1) the endogenous availability of wage information, and (2) the absence of performance information. Both factors are essential. In contrast to endogenously acquired wage information, exogenously provided wage information increases overall wages. So does the provision of performance information. However, neither type of information reduces the gender wage gap. The social comparison inherent in negotiations with wage information even deters women from entering negotiations and leads to an unfavorable selection of workers requesting such information.

Brütt, Katharina, Arthur Schram & Joep Sonnemans (2020). Endogenous group formation and responsibility diffusion: An experimental study. Games and Economic Behavior, 121, 1-31. DOI: https://doi.org/10.1016/j.geb.2020.02.003

Abstract: We study the effects of varying individual pivotality and endogenous group entry on the selfishness of group decisions. Selfish choices by groups are often linked to the possibility of diffusing responsibility; the moral costs of these decisions appear smaller when individual pivotality is reduced. Our experimental design explores unanimity voting under distinct defaults to identify this effect. In exogenously formed groups we find evidence of responsibility diffusion, but this diminishes with repetition. Our results also demonstrate the role of self-selection in generating differences in group behaviour depending on individual pivotality. Driven by a heterogeneous selection pattern, endogenous group formation amplifies the effects of a change in pivotality. Some people actively seek an environment to diffuse responsibility, while others join groups to promote pro-social behaviour.

Huber, Christoph, Anna Dreber, Jürgen Huber, Magnus Johannesson, Michael Kirchler, Utz Weitzel, ... , Katharina Brütt, ... , Felix Holzmeister (2023). Competition and moral behavior: A meta-analysis of forty-five crowd-sourced experimental designs. PNAS, 120(23). DOI: https://doi.org/10.1073/pnas.2215572120 

Abstract: Does competition affect moral behavior? This fundamental question has been debated among leading scholars for centuries, and more recently, it has been tested in experimental studies yielding a body of rather inconclusive empirical evidence. A potential source of ambivalent empirical results on the same hypothesis is design heterogeneity—variation in true effect sizes across various reasonable experimental research protocols. To provide further evidence on whether competition affects moral behavior and to examine whether the generalizability of a single experimental study is jeopardized by design heterogeneity, we invited independent research teams to contribute experimental designs to a crowd-sourced project. In a large-scale online data collection, 18,123 experimental participants were randomly allocated to 45 randomly selected experimental designs out of 95 submitted designs. We find a small adverse effect of competition on moral behavior in a meta-analysis of the pooled data. The crowd-sourced design of our study allows for a clean identification and estimation of the variation in effect sizes above and beyond what could be expected due to sampling variance. We find substantial design heterogeneity—estimated to be about 1.6 times as large as the average standard error of effect size estimates of the 45 research designs—indicating that the informativeness and generalizability of results based on a single experimental design are limited. Drawing strong conclusions about the underlying hypotheses in the presence of substantive design heterogeneity requires moving toward much larger data collections on various experimental designs testing the same hypothesis.

How teams can overcome free riding in strategic experimentation (draft available upon request)

Abstract: Experimentation is at the core of innovation. This project studies collaborative experimentation in teams, focusing on the inherent two-dimensional free-riding problem; agents create a payoff and an informational externality, which both induce free riding. This theoretically results in inefficiently low experimentation. In particular, agents' experimentation being observable decreases experimentation because of a discouragement effect. Agents become pessimistic after observing high experimentation but no success. In a laboratory experiment, I study how distinct elements of the experimentation environment affect strategic experimentation. I vary (i) the observability of experimentation, and (ii) whether agents work on joint or separate projects. Teams largely overcome the free-riding problem. Both the observability of experimentation and experimenting jointly increase experimentation levels. There is no lack of sophistication in updating beliefs that drives this, neither do subjects disregard their experimentation's effect on others. Instead, the data can be best explained by joint, observable experimentation creating incentives to 'lead by example' and setting norms of high experimentation.