Joseph Schumpeter Lecture Psychological foundations of incentives � (2008)
During the last two decades economists have made much progress in understanding incentives, contracts and organizations. Yet, they constrained their attention to a very narrow and empirically...
Knoch, Daria, Nitsche, Michael A., Fischbacher, Urs, Eisenegger, Christoph, Pascual-Leone, Alvaro, Fehr, Ernst
Studying social behavior often requires the simultaneous interaction of many subjects. As yet, however, no painless, noninvasive brain stimulation tool existed that allowed the simultaneous affection...
Samuel Bowles, Robert Boyd, Ernst Fehr, Herbert Gintis
Experimental economists and other social scientists have discovered an important form of human behavior that has been inadequately analyzed by behavioral scientists. In public goods, ultimatum, and...
Psychological Foundations of Incentives Abstract (2007)
Ernst Fehr, Ernst Fehr, Armin Falk, Armin Falk, Jel-classification J
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
A THEORY OF FAIRNESS, COMPETITION AND COOPERATION (2007)
Mdccc Xxxiii, Ernst Fehr, Ernst Fehr, Klaus M. Schmidt, Klaus M. Schmidt, Jel-classification D
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Working Paper No. 20 Fairness, Incentives, and Contractual Choices * (2007)
Ernst Fehr, Klaus M. Schmidt, Ernst Fehr A
Abstract: This paper examines how the presence of a non-negligible fraction of reciprocally fair actors changes the provision of incentives through contracts. We provide experimental evidence that...
Testing Theories of Fairness- Intentions Matter * (2007)
Armin Falk, Armin Falk, Ernst Fehr, Ernst Fehr, Urs Fischbacher, Urs Fischbacher
Recently developed models of fairness can explain a wide variety of seemingly contradictory facts. The most controversial and yet unresolved issue in the modeling of fairness preferences concerns the...
Fairness, Incentives and Contractual Incompleteness * (2007)
Ernst Fehr, Er Klein, Klaus M. Schmidt, Ernst Fehr A, Alexander Klein B
Abstract: We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only...
Do Incentive Contracts Crowd out Voluntary Cooperation? (2007)
Mdccc Xxxiii, Ernst Fehr, Ernst Fehr, Simon Gächter, Simon Gächter, Jel-classification J
Do incentive contracts crowd out voluntary cooperation? *
Josef Falkinger, Ernst Fehr, Ernst Fehr, Simon Gächter, Simon Gächter, Rudolf Winter-ebmer, ...
A simple mechanism for the efficient provision of public goods-experimental evidence
Wage Differentials in Experimental Efficiency Wage Markets 1 (2007)
In recent years, many econometric studies have confirmed the existence of inter-industry wage differentials. Even after controlling for a large number of job- and worker related characteristics, and...
Does Money Illusion Matter? (2007)
Ernst Fehr, Ernst Fehr, Jean-robert Tyran, Jean-robert Tyran
Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences...
Reciprocity in Experimental Markets (2007)
This paper summarizes main findings of four experimental studies. These studies (Fehr,
Does Money Illusion Matter? An Experimental Approach (2007)
Ernst Fehr, Ernst Fehr, Jean-robert Tyran, Jean-robert Tyran, Jim Cox, Urs Fischbacher
Money illusion means that people behave differently when the same objective situation is represented in nominal or in real terms. To examine the behavioral impact of money illusion we studied the...
Psychological Foundations of Incentives Abstract (2007)
Ernst Fehr, Armin Falk, Jel-classification J
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
Ernst Fehr, Ernst Fehr, Urs Fischbacher, Urs Fischbacher, Elena Tougareva, Elena Tougareva
This paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours. In the high stake condition subjects earned between...
MORAL PROPERTY RIGHTS IN BARGAINING ∗ (2007)
Simon Gächter, Simon Gächter, Arno Riedl, Arno Riedl, Catherine Eckel, Armin Falk, ...
In many business transactions, in labor-management relations, in international conflicts, and welfare state reforms bargainers seem to hold strong entitlements that shape negotiations. Despite their...
Friedel Bolle, Simon Gächter, Simon Gächter, Ernst Fehr, Ernst Fehr
In this chapter we provide a selective survey of experiments to investigate the potential of social motivations in explaining labour market phenomena. We argue that laboratory experiments are a...
Ernst Fehr, Lorenz Goette, Christian Zehnder
Preliminary First Version Please do not cite without permission! Many labor markets are characterized by long-term employment relations and incomplete labor contracts. The employees ’ effort, in...
Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, Gintis, Herbert, ...
Researchers from across the social sciences have found consistent deviations from the predictions of the canonical model of self-interest in hundreds of experiments from around the world. This...
Fairness and the Optimal Allocation of Ownership Rights (2005)
Fehr, Ernst, Kremhelmer, Susanne, Schmidt, Klaus M.
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories (2005)
Fehr, Ernst, Schmidt, Klaus M.
This paper surveys recent experimental and field evidence on the impact of concerns for fairness, reciprocity and altruism on economic decision making. It also reviews some new theoretical attempts...
The Role of Equality and Equity in Social Preferences (2005)
Fehr, Ernst, Näf, Michael, Schmidt, Klaus M.
Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for...
The Neuroeconomics of Mind Reading and Empathy (2005)
The most fundamental solution concepts in Game Theory Nash equilibrium, backward induction, and iterated elimination of dominated strategies are based on the assumption that people are capable...
MATCHING AND SEGREGATION: AN EXPERIMENTAL STUDY ∗ (2005)
Yan Chen, Ernst Fehr, Urs Fischbacher, Peter Morgan
Social segregation is a ubiquitous feature of human life. People segregate along the lines of income, religion, ethnicity, language, race, and other characteristics. This study provides the first...
Contracts, Fairness, and Incentives (2004)
Fehr, Ernst, Klein, Alexander, Schmidt, Klaus M.
We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are...
Fairness and Incentives in a Multi-Task Principal-Agent Model (2004)
Fehr, Ernst, Schmidt, Klaus M.
This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus...
The Hidden Costs and Returns of Incentives – Trust and Trustworthiness among CEOs (2004)
E. Fehr, Ernst Fehr, John A. List, John A. List
We examine experimentally how Chief Executive Officers (CEOs) respond to incentives and how they provide incentives in situations requiring trust and trustworthiness. As a control we compare the...
Relational contracts and the nature of market interactions (2004)
Martin Brown, Armin Falk, Ernst Fehr
We provide evidence that long-term relationships between trading parties emerge endogenously in the absence of third party enforcement of contracts and are associated with a fundamental change in the...
The role of cognition and emotion in cooperation (2003)
McElreath, Richard, Clutton-Brock, Timothy H., Fehr, Ernst, Fessler, Daniel M. T., Hagen, Edward H., Hammerstein, Peter, ...
Group report : The role of cognition and emotion in cooperation (2003)
McElreath, Richard, Clutton-Brock, Timothy H., Fehr, Ernst, Fessler, Daniel M. T., Hagen, Edward H., Hammerstein, Peter, ...
Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism (2003)
strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the violation of cooperation and fairness norms even in anonymous one-shot encounters with...
Abstract Third-party punishment and social norms (2003)
We examine the characteristics and relative strength of third-party sanctions in a series of experiments. We hypothesize that egalitarian distribution norms and cooperation norms apply in our...
Why labour market experiments (2003)
Over the last decades, there has been a steady increase in the use of experimental methods in economics. We discuss the advantages of experiments for labour economics in this paper. Control is the...
Examining Trust and Trustworthiness By Integrating Behavioral Experiments Into . . . (2003)
Ernst Fehr, Ernst Fehr, Urs Fischbacher, Jürgen Schupp, Urs Fischbacher, Bernhard Von Rosenbladt, ...
Typically, laboratory experiments suffer from homogeneous subject pools and selfselection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism (2003)
Ernst Fehr, Ernst Fehr, Joseph Henrich, Joseph Henrich
In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the...
On the Nature of Fair Behavior (2003)
Falk, Armin, Fehr, Ernst, Fischbacher, Urs
This article shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts...
Psychological Foundations of Incentives (2002)
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment (2002)
Ernst Fehr, Ernst Fehr, Lorenz Götte, Lorenz Götte
Abstract: The canonical model of life-cycle labor supply predicts a positive response of labor supplied to transitory wage changes. We tested this prediction by conducting a randomized field...
Appropriating the commons: A theoretical explanation. In (2002)
Armin Falk, Ernst Fehr, Urs Fischbacher, D Wkhruhwlfdo H{sodqdwlrq, Duplq Idon, Huqvw Ihku, ...
hqfhv h{sodlqv pdmru h{shulphqwdo uhjxodulwlhv ri frpprq srro uhvrxufh +FSU, h{shulphqwv1 Wkh hylghqfh lqglfdwhv wkdw lq vwdqgdug FSU jdphv zlwkrxw frp0 pxqlfdwlrq dqg zlwkrxw vdqfwlrqlqj...
Contractual incompleteness and the nature of market interactions (2002)
Martin Brown, Martin Brown, Armin Falk, Armin Falk, Ernst Fehr, Ernst Fehr, ...
We provide experimental evidence that contractual incompleteness, i.e., the absence of third party enforcement of workers' effort or the quality of the good traded, causes a fundamental change...
Why Social Preferences Matter - The Impact of Non-Selfish . . . (2002)
Ernst Fehr, Urs Fischbacher, Ernst Fehr A, Urs Fischbacher B, Frank Hahn Lecture
A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of...
Limited Rationality and Strategic Interaction: The Impact of the Strategic . . . (2002)
Ernst Fehr, Ernst Fehr, Jean-Robert Tyran, Jean-robert Tyran, Jel C, Charles Goodhart, ...
The evidence from many experiments suggests that people are heterogeneous with regard to their abilities to make rational, forward looking, decisions. This raises the question when the rational types...
In search of Homo economicus: Behavioral experiments in 15 small-scale societies (2001)
Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin F., Fehr, Ernst, Gintis, Herbert, ...
We can summarize our results as follows. First, the canonical model is not supported in any society studied. Second, there is considerably more behavioral variability across groups than had been...
In search of Homo economicus: Behavioral experiments in 15 small-scale societies (2001)
Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin F., Fehr, Ernst, Gintis, Herbert, ...
We can summarize our results as follows. First, the canonical model is not supported in any society studied. Second, there is considerably more behavioral variability across groups than had been...
Theories of Fairness and Reciprocity (2001)
Fehr, Ernst, Schmidt, Klaus M.
Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have...
Fairness, Incentives and Contractual Incompleteness (2001)
Fehr, Ernst, Klein, Alexander, Schmidt, Klaus M.
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish...
In search of homo economicus : Behavioral experiments in 15 small-scale societies (2001)
Henrich, Joseph, Boyd, Robert, Bowles, Samuel, Camerer, Colin, Fehr, Ernst, Gintis, Herbert, ...
In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies (2001)
Joseph Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, Ernst Fehr, Herbert Gintis, ...
Recent investigations have uncovered large, consistent deviations from the predictions of the textbook representation of Homo economicus (Alvin E. Roth et al., 1991; Ernst Fehr and Simon Gächter,...
Driving forces of informal sanctions (2001)
Armin Falk, Armin Falk, Ernst Fehr, Ernst Fehr, Urs Fischbacher, Urs Fischbacher
Abstract: Informal sanctions are a major determinant of a society’s social capital because they are key to the enforcement of implicit agreements and social norms. Yet, little is known about the...
Are People Willing to Pay to Reduce Others ’ Incomes? (2001)
Daniel John Zizzo, Andrew Oswald, Michael Bacharach, Ernst Fehr, Michael M, Claude Meidinger
This paper studies utility interdependence in the laboratory. We design an experiment where subjects can reduce (“burn”) other subjects ’ money. Those who burn the money of others have to give...
A simple mechanism for the efficient provision of public goods - Experimental evidence (2000)
Simon Gaechter, Josef Falkinger, Ernst Fehr, Rudolf Winter-Ebmer
Zych: Intertemporal Choice under Habit Formation (2000)
Ernst Fehr, Ernst Fehr, Peter K. Zych, Peter K. Zych
Abstract: Many of the most important choices in people’s lives have an inter-temporal dimension, i.e., these choices are associated with a flow of benefits or costs that accrue in the future. In...
Fairness and Retaliation: The Economics of Reciprocity (2000)
Ernst Fehr, Ernst Fehr, Simon Gächter, Simon Gächter
Abstract: This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the...
Cooperation and punishment in public goods experiments (2000)
Ernst Fehr, Ernst Fehr, Simon Gächter, Simon Gächter
Fischbacher who did the programming. Cooperation and Punishment in Public Goods Experiments This paper provides evidence that free riders are heavily punished even if punishment is costly and does...
A simple mechanism for the efficient provision of public goods: experimental evidence (2000)
Josef Falkinger, Ernst Fehr, Simon Gächter, Rudolf Winter-ebmer, John O. Ledyard
Free-riding incentives are a pervasive phenomenon of social life. In case of private provisions of public goods, free-riding leads to inefficient underprovision. Economic theory explains this by...
On the Nature of Fair Behavior (1999)
Armin Falk, Armin Falk, Ernst Fehr, Ernst Fehr, Urs Fischbacher, Urs Fischbacher
This paper shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts doubt...
When Social Norms Overpower Competition Gift Exchange in Experimental Labor Markets (1998)
Simon Gaechter, Ernst Fehr, Erich Kirchler, Andreas Weichbold
A Theory of Fairness, Competition and Cooperation
Fehr, Ernst, Schmidt, Klaus M.
There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding...
Theories of Fairness and Reciprocity - Evidence and Economic Applications
Fehr, Ernst, Schmidt, Klaus M.
Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have...
Fairness, Incentives and Contractual Incompleteness
Fehr, Ernst, Klein, Alexander, Schmidt, Klaus M.
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish...
Fairness and Incentives in a Multi-Task Principle-Agent Model
Fehr, Ernst, Schmidt, Klaus M.
This Paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus...
The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories
Behavioural Economics, Other-regarding Preferences, Fairness, Reciprocity, Altruism, Experiments, Incentives, Contracts, Competition
Individual Irrationality and Aggregate Outcomes
There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality...
Fairness and the Optimal Allocation of Ownership Rights
Ernst Fehr, Susanne Kremhelmer, Klaus M. Schmidt
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
Ernst Fehr, Urs Fischbacher, Bernhard Von Rosenbladt, Jürgen Schupp, Gert G. Wagner
Typically, laboratory experiments suffer from homogeneous subject pools and selfselection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
The Hidden Costs and Returns of Incentives-Trust and Trustworthiness Among CEOs
We examine experimentally how Chief Executive Officers (CEOs) respond to incentives and how they provide incentives in situations requiring trust and trustworthiness. As a control we compare the...
Contractual Incompleteness and the Nature of Market Interactions
Martin Brown, Armin Falk, Ernst Fehr
We provide experimental evidence that contractual incompleteness, i.e., the absence of third party enforcement of workers’ effort or the quality of the good traded, causes a fundamental change in...
Appropriating the Commons - A Theoretical Explanation
Armin Falk, Ernst Fehr, Urs Fischbacher
In this paper we show that a simple model of reciprocal preferences explains major experimental regularities of common pool resource (CPR) experiments. The evidence indicates that in standard CPR...
Fairness in the Labour Market – A Survey of Experimental Results
In this chapter we provide a selective survey of experiments to investigate the potential of social motivations in explaining labour market phenomena. We argue that laboratory experiments are a...
Do High Stakes and Competition Undermine Fairness? Evidence from Russia
Ernst Fehr, Urs Fischbacher, Elena Tougareva
This paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours. In the high stake condition subjects earned between...
The evidence from many experiments suggests that people are heterogeneous with regard to their abilities to make rational, forward looking, decisions. This raises the question when the rational types...
Markets Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism
In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the...
Ernst Fehr, Urs Fischbacher, Bernhard Von Rosenbladt, Jürgen Schupp, Gert G. Wagner
Typically, laboratory experiments suffer from homogeneous subject pools and self-selection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
The Role of Equality and Efficiency in Social Preferences
Fehr, Ernst, Naef, Michael, Schmidt, Klaus M.
Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for...
Fairness and the Optimal Allocation of Ownership Rights
Fehr, Ernst, Kremhelmer, Susanne, Schmidt, Klaus M.
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment
Abstract: Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is not clear, however, whether these results are due to institutional...
Driving Forces Behind Informal Sanctions
Armin Falk, Ernst Fehr, Urs Fischbacher
This paper investigates the driving forces behind informal sanctions in cooperation games and the extent to which theories of fairness and reciprocity capture these forces. We find that cooperators'...
The Role of Equality and Efficiency in Social Preferences
Ernst Fehr, Michael Naef, Klaus M. Schmidt
Engelmann and Strobel (AER 2004) claim that a combination of efficiency seeking and minmax preferences dominates inequity aversion in simple dictator games. This result relies on a strong subject...
Fairness and the Optimal Allocation of Ownership Rights
Ernst Fehr, Susanne Kremhelmer, Klaus M. Schmidt
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
Fairness and Retaliation: The Economics of Reciprocity
This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the possibilities...
Money Illusion and Coordination Failure
Fehr, Ernst, Tyran, Jean-Robert
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms,...
Contracts, Fairness, and Incentives
Ernst Fehr, Alexander Klein, Klaus Schmidt
We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are...
Fairness and the Optimal Allocation of Ownership Rights
Ernst Fehr, Susanne Kremhelmer, Klaus Schmidt
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
Ernst Fehr, Alexander Klein, Klaus M. Schmidt
We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts in a moral hazard context. Bonus contracts that offer a voluntary and...
The Role of Equality and Equity in Social Preferences
Fehr, Ernst, Näf, Michael, Schmidt, Klaus M.
Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for...
In a recent paper Engelmann and Strobl claim that a combination of a preference for efficiency and a Rawlsian motive for helping the least well-off is far more important than inequity aversion. Here...
Loss Aversion and Labor Supply
Lorenz Goette, David Huffman, Ernst Fehr
In many occupations, workers' labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor...
Appropriating the Commons A Theoretical Explanation
Armin Falk, Ernst Fehr, Urs Fischbacher
In this paper we show that a simple model of fairness preferences explains major experimental regularities of common pool resource (CPR) experiments. The evidence indicates that in standard CPR games...
The Incidence of an Extended Ace Corporation Tax
This paper deals with the efficiency and distributional consequences of a switch from the current German income and corporate tax system to one special variant of an intertemporally neutral tax, an...
Gift Exchange and Reciprocity in Competitive Experimental Markets
Fehr, Ernst, Kirchsteiger, Georg, Riedl, Arno
One of the outstanding results of three decades of laboratory market research is that under rather weak conditions prices and quantities in competitive experimental markets converge to the...
When Social Forces Remove the Impact of Competition. Social Exchange in Experimental Labor Markets
Fehr, Ernst, Kirchler, Erich, Weichbold, Andreas
Do competitive markets remove the impact of social norms and customs on market out-comes? Or are these social forces capable of exerting a persistent influence? Many economists seem to believe that...
The Behavioural Effects of Minimum Wages
Falk, Armin, Fehr, Ernst, Zehnder, Christan
The prevailing labour market models assume that minimum wages do not affect the labour supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have...
Neuroeconomic Foundation of Trust and Social Preferences
Fehr, Ernst, Fischbacher, Urs, Kosfeld, Michael
This paper discusses recent neuroeconomic evidence related to other-regarding behaviours and the decision to trust in other people’s other-regarding behaviour. This evidence supports the view that...
The Neuroconomics of Mind Reading and Empathy
The most fundamental solution concepts in Game Theory – Nash equilibrium, backward induction, and iterated elimination of dominated strategies – are based on the assumption that people are...
Economic Man in Cross-Cultural Perspective: Behavioral Experiments in Fifteen Small-Scale Societies
Joseph Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, Ernst Fehr, Herbert Gintis, ...
Experimental behavioral scientists have found consistent deviations from the predictions of the canonical model of self-interest in over a hundred experiments from around the world. Prior research...
Cooperation, Reciprocity and Punishment in Fifteen Small-scale Societies
Joseph Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, Ernst Fehr, Herbert Gintis, ...
Recent investigations have uncovered large, consistent deviations from the predictions of the textbook representation of Homo Economicus: in addition to their own material payoffs, many experimental...
Adding a Stick to the Carrot? The Interaction of Bonuses and Fines
In this paper we report on a principal-agent experiment where the principal can choose whether to rely on an unenforcable bonus contract or to combine the bonus contract with a fine if the agent’s...
How Robust are Nominal Wage Rigidities?
Several studies indicate that firms are reluctant to cut nominal wages during periods of relatively high nominal per capita GDP growth. It has been argued, however, that in an environment with a low...
Relational Contracts and the Nature of Market Interactions
Martin Brown, Armin Falk, Ernst Fehr
We provide evidence that long-term relationships between trading parties emerge endogenously in the absence of third party enforcement of contracts and are associated with a fundamental change in the...
Reciprocity as a Contract Enforcement Device: Experimental Evidence
Ernst Fehr, Simon Gachter, Georg Kirchsteiger
Numerous experimental studies indicate that people tend to reciprocate favors and punish unfair behavior. It is hypothesized that these behavioral responses contribute to the enforcement of contracts...
This paper shows that a small amount of individual-level money illusion may cause considerable aggregate nominal inertia after a negative nominal shock. In addition, our results indicate that...
Fairness and Retaliation: The Economics of Reciprocity
This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the possibilities...
Individual Irrationality and Aggregate Outcomes
In their personal lives, many economists recognize that they are surrounded by individuals who are less than fully rational. In their professional lives, however, economists often use models that...
Does Money Illusion Matter? An Experimental Approach
Fehr, Ernst, Tyran, Jean-Robert
Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences...
Psychological Foundations of Incentives
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
Fehr, Ernst, Fischbacher, Urs, Von Rosenbladt, Bernhard, Schupp, Jürgen, Wagner, Gert G.
Typically, laboratory experiments suffer from homogeneous subject pools and self-selection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
Loss Aversion and Labor Supply
Goette, Lorenz, Huffman, David, Fehr, Ernst
In many occupations workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor...
Do Workers Work More When Wages Are High? Evidence from a Randomized Field Experiment
Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is not clear, however, whether these results are due to institutional constraints on...
Driving Forces Behind Informal Sanctions
Armin Falk, Ernst Fehr, Urs Fischbacher
This paper investigates the driving forces behind informal sanctions in cooperation games and the extent to which theories of fairness and reciprocity capture these forces. We find that...
Involuntary Unemployment and Non-compensating Wage Differentials in an Experimental Labour Market.
Fehr, Ernst, Kirchsteiger, Georg, Riedl, Arno
In this paper, the authors report the results of a series of efficiency wage experiments. Some of the key predictions of the efficiency wage hypothesis are qualitatively confirmed by the data: higher...
Insider Power, Wage Discrimination and Fairness.
Fehr, Ernst, Kirchsteiger, Georg
The exercise of insider power is frequently considered as a major cause of involuntary unemployment. The authors show that under standard assumptions--insiders are selfish and they need not fear the...
Fairness and Incentives in a Multi-task Principal-Agent Model
This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus...
The theory of rational addiction assumes that addicts' behavior is fully rational. Common sense and psychological introspection suggest, however, that addictive behavior is irrational. Without...
Self-Reinforcing Market Dominance
Daniel Halbheer, Ernst Fehr, Lorenz Goette, Armin Schmutzler
Are initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no...
In experiments, animals often prefer smaller, immediate rewards over larger rewards that are deferred — thus failing to maximize their total gain. Many people exhibit similar behaviour.
Some of the most fundamental questions concerning our evolutionary origins, our social relations, and the organization of society are centred around issues of altruism and selfishness. Experimental...
Third-party punishment and social norms
We examine the characteristics and relative strength of third-party sanctions in a series of experiments. We hypothesize that egalitarian distribution norms and cooperation norms apply in our...
Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments: Comment
Much evidence suggests that people are heterogeneous with regard to their abilities to make rational, forward-looking decisions. This raises the question as to when the rational types are decisive...
Robustness and Real Consequences of Nominal Wage Rigidity
Recent studies found evidence for nominal wage rigidity during periods of relatively high nominal GDP growth. It has been argued, however, that in an environment with low nominal GDP growth, when...
Does Money Illusion Matter? An Experimental Approach
Money illusion means that people behave differently when the same objective situation is represented in nominal or in real terms. To examine the behavioral impact of money illusion we studied the...
Cooperation and Punishment in Public Goods Experiments
This paper provides evidence that free riders are heavily punished even if punishment is costly and does not provide any material benefits for the punisher. The more free riders negatively deviate...
Deception and Incentives: How Dishonesty Undermines Effort Provision
In this paper we show that subtle forms of deceit undermine the effectiveness of incentives. We design an experiment in which the principal has an interest in underreporting the true performance...
Ernst Fehr, Urs Fischbacher, Bernhard Von Rosenbladt, Juergen Schupp, Gert G. Wagner
Typically, laboratory experiments suffer from homogeneous subject pools and selfselection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism
In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the...
Psychological Foundations of Incentives
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device
Brown, Martin, Falk, Armin, Fehr, Ernst
When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is...
Fairness and the Optimal Allocation of Ownership Rights
Fehr, Ernst, Kremhelmer, Susanne, Schmidt, Klaus M.
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
The Economics of Fairness, Reciprocity and Altruism – Experimental Evidence and New Theories
Fehr, Ernst, Schmidt, Klaus M.
This paper surveys recent experimental and field evidence on the impact of concerns for fairness, reciprocity and altruism on economic decision making. It also reviews some new theoretical attempts...
Fairness and Incentives in a Multi-Task Principal-Agent Model
Fehr, Ernst, Schmidt, Klaus M.
This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus...
Contracts, Fairness, and Incentives
Fehr, Ernst, Klein, Alexander, Schmidt, Klaus M.
We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are...
Fairness, Incentives and Contractual Incompleteness
Fehr, Ernst, Klein, Alexander, Schmidt, Klaus M.
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish...
Theories of Fairness and Reciprocity
Fehr, Ernst, Schmidt, Klaus M.
Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have...
Much evidence suggests that people are heterogeneous with regard to their abilities to make rational, forward-looking decisions. This raises the question as to when the rational types are decisive...
Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment
Most previous studies on intertemporal labor supply found very small or insignificant substitution effects. It is possible that these results are due to constraints on workers' labor supply choices....
The Robustness and Real Consequences of Nominal Wage Rigidity
Recent studies found evidence for nominal wage rigidity during periods of relatively high nominal GDP growth. It has been argued, however, that in an environment with low nominal GDP growth, when...
Fairness, Incentives and Contractual Incompleteness
Ernst Fehr, Alexander Klein, Klaus Schmidt
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish...
Theories of Fairness and Reciprocity -- Evidence and Economic Applications
Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have...
The Economics of Fairness, Reciprocity and Altruism - Experimental Evidence and New Theories
Fehr, Ernst, Schmidt, Klaus M., S. Kolm, Jean Mercier Ythier
Most economic models are based on the self-interest hypothesis that assumes that material self-interest exclusively motivates all people. Experimental economists have gathered overwhelming evidence...
Does Social Exchange Increase Voluntary Cooperation?
Gachter, Simon, Fehr, Ernst, Kment, Christiane
There is a lot of empirical and experimental evidence that people give considerable amounts to charities and contribute to public goods. In many cases, fellow citizens get to know the contributions...
Ernst Fehr, Alexander Klein, Klaus M Schmidt
We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts in a moral hazard context. Bonus contracts that offer a voluntary and...
Is Strong Reciprocity a Maladaptation? On the Evolutionary Foundations of Human Altruism
In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the...
Relational Contracts and the Nature of Market Interactions
Brown, Martin, Falk, Armin, Fehr, Ernst
We provide evidence that long-term relationships between trading parties emerge endogenously in the absence of third party enforcement of contracts and are associated with a fundamental change in the...
Money Illusion and Coordination Failure
Fehr, Ernst, Tyran, Jean-Robert
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms,...
The Behavioral Effects of Minimum Wages
Armin Falk, Ernst Fehr, Christian Zehnder
The prevailing labor market models assume that minimum wages do not affect the labor supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have...
Neuroeconomic Foundations of Trust and Social Preferences
This paper discusses recent neuroeconomic evidence related to other-regarding behaviors and the decision to trust in other people’s other-regarding behavior. This evidence supports the view that...
The Neuroeconomics of Mind Reading and Empathy
The most fundamental solution concepts in Game Theory - Nash equilibrium, backward induction, and iterated elimination of dominated strategies - are based on the assumption that people are capable of...
On the Nature of Fair Behaviour
Falk, Armin, Fehr, Ernst, Fischbacher, Urs
This Paper shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts doubt...
Do Incentive Contracts Crowd Out Voluntary Cooperation?
In this Paper we provide experimental evidence indicating that incentive contracts may cause a strong crowding out of voluntary cooperation. This crowding-out effect constitutes costs of incentive...
Wage Rigidity in a Competitive Incomplete Contract Market
Do employers and workers underbid prevailing wages if there is unemployment? Do employers take advantage of workers’ underbidding by lowering wages? We hypothesize that under conditions of...
Insider Power, Wage Discrimination, and Fairness
Ernst Fehr, Georg Kirchsteiger
Insider Power, Wage Discrimination, Fairness
THE HIDDEN COSTS AND RETURNS OF INCENTIVES — TRUST AND TRUSTWORTHINESS AMONG CEOs
We examine experimentally how Chief Executive Officers (CEOs) respond to incentives and how they provide incentives in situations requiring trust and trustworthiness. As a control we compare the...
LOSS AVERSION AND LABOR SUPPLY
Ernst Fehr, David Huffman, Lorenz Goette
In many occupations, workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor...
ROBUSTNESS AND REAL CONSEQUENCES OF NOMINAL WAGE RIGIDITY
Recent studies found evidence for nominal wage rigidity during periods of relatively high wage inflation. It has been argued, however, that in an environment with low wage inflation, when nominal...
Social norms and human cooperation
The existence of social norms is one of the big unsolved problems in social cognitive science. Although no other concept is invoked more frequently in the social sciences, we still know little about...
Altruistic Punishment in Humans
Human cooperation is an evolutionary puzzle. Unlike other creatures, people frequently cooperate with genetically unrelated strangers, often in large groups, with people they will never meet again,...
Detrimental effects of sanctions on human altruism
Ernst Fehr, Bettina Rockenbach
The existence of cooperation and social order among genetically unrelated individuals is a fundamental problem in the behavioural sciences. The prevailing approaches in biology and economics view...
Strong Reciprocity, Human Cooperation and the Enforcement of Social Norms
Ernst Fehr, Urs Fischbacher, Simon Gächter
This paper provides strong evidence challenging the self-interest assumption that dominates the behavioral sciences and much evolutionary thinking. The evidence indicates that many people have a...
In Search of Homo Economicus: Behavioral Experiments in 15 Small- Scale Societies,
Ernst Fehr, Joseph Henrich, Robert Boyd
Homo Economicus, Behavioral Experiments, Small-Scale Societies,
A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of...
Money illusion and coordination failure
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms,...
The evidence from many experiments suggests that people are heterogeneous with regard to their abilities to make rational, forward looking, decisions. This raises the question when the rational types...
Reasons for Conflict: Lessons from Bargaining Experiments
Armin Falk, Ernst Fehr, Urs Fischbacher
In this paper we experimentally study the effects of fairness, spite, and reputation formation on conflict. We show that fairness preferences are a potential source of conflict and that intentions...
The Robustness and Real Consequences of Nominal Wage Rigidity
Recent studies found evidence for nominal wage rigidity during periods of relatively high nominal GDP growth. It has been argued, however, that in an environment with low nominal GDP growth, when...
Does Money Illusion Matter? An Experimental Approach
Fehr, Ernst, Tyran, Jean-Robert
Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences...
Appropriating the Commons - A Theoretical Explanation
Falk, Armin, Fehr, Ernst, Fischbacher, Urs
In this Paper we show that a simple model of fairness preferences explains major experimental regularities of common pool resource (CPR) experiments. The evidence indicates that in standard CPR games...
Psychological Foundations of Incentives
During the last two decades economists have made much progress in understanding incentives, contracts and organizations. Yet, they constrained their attention to a very narrow and empirically...
Contractual Incompleteness and the Nature of Market Interactions
Brown, Martin, Falk, Armin, Fehr, Ernst
We provide experimental evidence that contractual incompleteness, ie, the absence of third party enforcement of workers’ effort or the quality of the good traded causes a fundamental change in the...
Fehr, Ernst, Fischbacher, Urs, Schupp, Jürgen, Von Rosenbladt, Bernhard, Wagner, Gert Georg
Typically, laboratory experiments suffer from homogeneous subject pools and self-selection biases. The usefulness of survey data is limited by measurement error and by the questionability of their...
Is Strong Reciprocity a Maladaption? On the Evolutionary Foundations of Human Altruism
In recent years a large number of experimental studies have documented the existence of strong reciprocity among humans. Strong reciprocity means that people willingly repay gifts and punish the...
Money Illusion and Coordination Failure
Fehr, Ernst, Tyran, Jean-Robert
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent pay-offs in nominal...
A Theory Of Fairness, Competition, And Cooperation
There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding...
Does Fairness Prevent Market Clearing? An Experimental Investigation.
Fehr, Ernst, Kirchsteiger, George, Riedl, Arno
This paper reports the results of an experiment that was designed to test the impact of fairness on market prices. Prices were determined in a one-sided oral auction, with buyers as pricemakers. Upon...
On the Nature of Fair Behavior
Armin Falk, Ernst Fehr, Urs Fischbacher
This article shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts...
Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device
Brown, Martin, Falk, Armin, Fehr, Ernst
When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is...
Other-regarding preferences in a non-human primate: Common marmosets provision food altruistically
Burkart, Judith M., Fehr, Ernst, Efferson, Charles, Van Schaik, Carel P.
Human cooperation is unparalleled in the animal world and rests on an altruistic concern for the welfare of genetically unrelated strangers. The evolutionary roots of human altruism, however, remain...
Cooperativeness and Impatience in the Tragedy of the Commons
Fehr, Ernst, Leibbrandt, Andreas
This paper examines the role of other-regarding and time preferences for cooperation in the field. We study the preferences of fishermen whose main, and often only, source of income stems from using...
Fairness and the Optimal Allocation of Ownership Rights
Ernst Fehr, Susanne Kremhelmer, KlausM. Schmidt
We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects...
On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity
Fehr, Ernst, Brown, Martin, Zehnder, Christian
We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the...
The Hidden Costs and Returns of Incentives - Trust and Trustworthiness among CEOs
We examine experimentally how Chief Executive Officers (CEOs) respond to incentives and how they provide incentives in situations requiring trust and trustworthiness. As a control we compare the...
In Search of Homo Economicus: Experiments in 15 Small-Scale Societies
Joseph Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, Herbert Gintis, Richard McElreath, ...
Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment
The canonical model of life-cycle labor supply predicts a positive response of labor supplied to transitory wage changes. We tested this prediction by conducting a randomized field experiment with...
Cooperativeness and Impatience in the Tragedy of the Commons
Ernst Fehr, Andreas Leibbrandt
This paper examines the role of other-regarding and time preferences for cooperation in the field. We study the preferences of fishermen whose main, and often only, source of income stems from using...
Fehr, Ernst, Hoff, Karla, Kshetramade, Mayuresh
In a wide variety of settings, spiteful preferences would constitute an obstacle to cooperation, trade, and thus economic development. This paper shows that spiteful preferences - the desire to...
On reputation: A microfoundation of contract enforcement and price rigidity
Ernst Fehr, Martin Brown, Christian Zehnder
We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the...
Social Norms as a Social Exchange
Social Norms are a pervasive phenomenon in social and economic life. They have important economic consequences and constitute powerful social constraints on individual behaviour beyond the legal...
A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence
Josef Falkinger, Ernst Fehr, Simon Gaechter
This paper presents an experimental examination of the Falkinger (1996) mechanism or overcoming the free-rider problem. The basic idea of the mechanism is that deviations from the mean contribution...
A Theory of Fairness, Competition and Cooperation
There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding...
Cooperation and Punishment in Public Goods Experiments
This paper provides evidence that free riders are heavily punished even if punishment is costly and does not provide any material benefits for the punisher. The more free riders negatively deviate...
Money illusion means that people behave differently when the same objective situation is represented in nominal or in real terms. To examine the behavioral impact of money illusion we studied the...
Are People Conditionally Cooperative? Evidence from a Public Goods Experiment
Urs Fischbacher, Simon Gaechter, Ernst Fehr
We investigate to what extent contribution decisions to a public good depend on the contributions of others. We employ a novel experimental technique that allows us to elicit people's willingness to...
On the Nature of Fair Behavior
Armin Falk, Ernst Fehr, Urs Fischbacher
This paper shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts doubt...
Fairness, Incentives, and Contractual Choices
This paper examines how the presence of a non-negligible fraction of reciprocally fair actors changes the provision of incentives through contracts. We provide experimental evidence that principals...
Do Incentive Contracts Crowd out Voluntary Cooperation?
In this paper we provide experimental evidence indicating that incentive contracts may cause a strong crowding out of reciprocity-driven voluntary cooperation. This crowding out effect constitutes...
Fairness and Retaliation: The Economics of Reciprocitys
This paper shows that reciprocity has powerful implications for many economic domains. It is an important determinant in the enforcement of contracts and social norms and enhances the possibilities...
Intertemporal Choice under Habit Formation
Many of the most important choices in people's lives have an inter-temporal dimension, i.e., these choices are associated with a flow of benefits or costs that accrue in the future. In addition, such...
Robustness and Real Consequences of Nominal Wage Rigidity
Recent studies found evidence for nominal wage rigidity during periods of relatively high nominal GDP growth. It has been argued, however, that in an environment with low nominal GDP growth, when...
Does Money Illusion Matter? REVISED VERSION
Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences...
Driving Forces of Informal Sanctions
Armin Falk, Ernst Fehr, Urs Fischbacher
Informal sanctions are a major determinant of a society's social capital because they are key to the enforcement of implicit agreements and social norms. Yet, little is known about the driving forces...
Testing Theories of Fairness - Intentions Matter
Armin Falk, Ernst Fehr, Urs Fischbacher
Recently developed models of fairness can explain a wide variety of seemingly contradictory facts. The most controversial and yet unresolved issue in the modeling of fairness preferences concerns the...
Fairness, Incentives and Contractual Incompleteness
Ernst Fehr, Alexander Klein, Klaus M. Schmidt
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish...
Theories of Fairness and Reciprocity - Evidence and Economic Applications
Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have...
Why Social Preferences Matter - The Impact of Non-Selfish Motives on Competition,
A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of...
Psychological Foundations of Incentives
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically...
Measuring Social Norms and Preferences using Experimental Games: A Guide for Social Scientists
Experimental games turned out to be remarkably productive tools for examining the nature of social preferences and social norms. This paper describes the methods and tools of experimental game theory...
Third Party Punishment and Social Norms
We examine the characteristics and the relative strength of third party sanctions in a series of experiments. We hypothesize that egalitarian distribution norms and cooperation norms apply in our...
Fairness, Errors and the Power of Competition
Urs Fischbacher, Christina M. Fong, Ernst Fehr
One of the most basic questions in economics concerns the effects of competition on market prices. We show that the neglect of both fairness concerns and decision errors prevents a satisfactory...
Money Illusion and Coordination Failure
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms,...
Loss Aversion and Labor Supply
Lorenz Goette, David Huffman, Ernst Fehr
In many occupations workers’ labor supply choices are constrained by institutional rules regulating labor time and effort provision. This renders explicit tests of the neoclassical theory of labor...
Fairness and Incentives in a Multi-Task Principal-Agent Model
This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus...
The Behavioral Effects of Minimum Wages
Armin Falk, Ernst Fehr, Christian Zehnder
The prevailing labor market models assume that minimum wages do not affect the labor supply schedule. We challenge this view in this paper by showing experimentally that minimum wages have...
Individual Irrationality and Aggregate Outcomes
There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality...
Deception and Incentives. How Dishonesty Undermines Effort Provision
In this paper we show that subtle forms of deceit undermine the effectiveness of incentives. We design an experiment in which the principal has an interest in underreporting the true performance...
Contracts as Reference Points - Experimental Evidence
Ernst Fehr, Oliver D. Hart, Christian Zehnder
In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and important aspects of the employment relation. However, so far there exists no...
Self-Reinforcing Market Dominance
Daniel Halbheer, Ernst Fehr, Lorenz Goette, Armin Schmutzler
Are initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no...
Wage Differentials in Experimental Efficiency Wage Markets
Fehr, Ernst, Gächter, Simon, Charles R. Plott, Vernon L. Smith
Intertemporal Choice under Habit Formation
Fehr, Ernst, Zych, Peter K., Charles R. Plott, Vernon L. Smith
Contracts as reference points – experimental evidence
Ernst Fehr, Oliver Hart, Christian Zehnder
In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no...
A behavioral account of the labor market: the role of fairness concerns
Ernst Fehr, Lorenz Goette, Christian Zehnder
In this paper, we argue that important labor market phenomena can be better understood if one takes (i) the inherent incompleteness and relational nature of most employment contracts and (ii) the...
Moral Sentiments and Material Interests: The Foundations of Cooperation in Economic Life
Herbert Gintis, Samuel Bowles, Robert T. Boyd, Ernst Fehr
Moral Sentiments and Material Interests presents an innovative synthesis of research in different disciplines to argue that cooperation stems not from the stereotypical selfish agent acting out of...
Contracts as Reference Points: Experimental Evidence
Fehr, Ernst, Hart, Oliver, Zehnder, Christian
In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no...
On the Economics and Biology of Trust
In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of...
A Behavioral Account of the Labor Market: The Role of Fairness Concerns
Fehr, Ernst, Goette, Lorenz, Zehnder, Christian
In this paper, we argue that important labor market phenomena can be better understood if one takes (i) the inherent incompleteness and relational nature of most employment contracts and (ii) the...
On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity
Fehr, Ernst, Brown, Martin, Zehnder, Christian
We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the...
On the Economics and Biology of Trust
In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of...
Contracts, Reference Points, and Competition-Behavioral Effects of The Fundamental Transformation
Ernst Fehr, Oliver Hart, Christian Zehnder
In this paper we study the role of incomplete ex ante contracts for ex post trade. Previous experimental evidence indicates that a contract provides a reference point for entitlements when the terms...
On The Economics and Biology of Trust
In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of...
On Inequity Aversion A Reply to Binmore and Shaked
In this paper we reply to Binmore and Shaked’s criticism of the Fehr-Schmidt model of inequity aversion. We put the theory and their arguments into perspective and show that their criticism is not...
On the economics and biology of trust
In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of...
Fehr, Ernst, Zehnder, Christian
The evidence suggests that relational contracting and legal rules play an important role in credit markets but on the basis of the prevailing field data it is difficult to pin down their causal...
Caste and Punishment: The Legacy of Caste Culture in Norm Enforcement
Hoff, Karla, Kshetramade, Mayuresh, Fehr, Ernst
Well-functioning groups enforce social norms that restrain opportunism, but the social structure of a society may encourage or inhibit norm enforcement. Here we study how the exogenous assignment to...
Caste and punishment : the legacy of caste culture in norm enforcement
Hoff, Karla, Kshetramade, Mayuresh, Fehr, Ernst
Well-functioning groups enforce social norms that restrain opportunism, but the social structure of a society may encourage or inhibit norm enforcement. This paper studies how the exogenous...
On Inequity Aversion A Reply to Binmore and Shaked
In this paper we reply to Binmore and Shaked’s criticism of the Fehr-Schmidt model of inequity aversion. We put the theory and their arguments into perspective and show that their criticism is not...