Experimental Design
The experimental design consists of five treatments: the Baseline No Moving Treatment, the Affirmative Action No Moving Treatment, the Baseline Moving Treatment, the Affirmative Action Moving Treatment, and the Endogenous Payment System treatment. All five treatments involve a real-effort task. The task consists of adding five two-digit numbers for three minutes.
Baseline no moving treatment (BNMT). Upon arrival to the lab, subjects will be randomly allocated to a group and randomly assigned the role as a firm or a worker. Each group is composed of three firms and twelve workers (six male workers and six female workers). Workers will be randomly paired with a firm and will perform a real effort task. We make use of a standard task in the literature: adding five two-digit numbers (Niederle and Vesterlund, 2007) for three minutes. Workers’ payment will depend on the firm they work for. Workers working for Firm A will be paid on a piece rate basis, depending on their performance. In particular, they will be paid 10 tokens per correct answer. Workers working for Firms B and C will be paid on a tournament basis: workers will be randomly matched within the firm, the worker who performs better will earn 15 tokens per correct answer; the worker who perform worse will earn 5 tokens. All firms will be paid depending on workers’ performance. The firm will make 4.5 tokens per correct answer provided by all the workers. The firm will have to pay 8 tokens per worker.
The task will be repeated for 15 periods of three minutes each. Each firm will be matched with the same four workers (two male and two female workers) for the duration of the experiment. At the end of each period, workers will receive information about: i) their own payoffs, ii) their performance, iii) whether they are first (winner) or second (loser) in the tournament (only for workers in Firms B and C), and iv) partial information about the performance of the competitor of the worker in the tournament. This information will be provided to the workers in the form of intervals like [0-10] [11-20]. All workers will also be informed about the payment system of all firms.
Affirmative Action no moving treatment (AANMT): This treatment will be the same as Baseline, with the only difference that, in each period, for workers in Firm C, five extra correct answers will be added to the total performance of female participants when they do the adding task. No extra correct answer would be added for male participants. This rule will be common knowledge to all participants.
Baseline moving treatment (BMT): It will be exactly the same as BNMT with the only different that, at the end of each period, after the workers have completed the real effort task, they will participate in a moving stage. This moving stage will work as follows. After the real effort task is finished and workers have received the corresponding information (same as in BNMT), they will decide whether they want to stay working for the same firm or if they prefer to move to another firm.
Firms have no choice over the workers that work for them. They cannot accept or reject workers that apply to work under their payment system. That is, workers can move freely within the different payment systems available and there is no unemployment.
Affirmative Action moving treatment (AAMT): This treatment will be the same as AANMT with the only difference that participants will enter into a moving stage similar to that in BMT.
Endogenous Payment System treatment (EPST): This treatment will have a similar structure to AAMT, with the difference that firms will have the option to decide under which payment system they want to operate. Firms’ decision will be as follows. Every 3 periods, before the moving stage, firms will choose the payment system they want to implement. The payment systems they can choose from are: i) Piece Rate, ii) Tournament without AA, and iii) Tournament with AA. After the firms choose the payment system, workers will receive the updated information and they will decide whether to move from their current group.
The information that firms will receive when choosing the payment system is: i) payment scheme in the other firms in the previous period, and ii) number of workers in the other firms in the previous period, and iii) the range of production level of the other two firms. Similarly to the information provided to the workers, the production level of the other firms will be provided in the form of intervals like [0-10] [11-20]