The Hidden Advantage of Promises: Pareto Improvements in a Gift-Exchange Game
Last registered on November 07, 2018

Pre-Trial

Trial Information
General Information
Title
The Hidden Advantage of Promises: Pareto Improvements in a Gift-Exchange Game
RCT ID
AEARCTR-0003533
Initial registration date
November 06, 2018
Last updated
November 07, 2018 12:06 AM EST
Location(s)
Primary Investigator
Affiliation
Texas A&M University
Other Primary Investigator(s)
PI Affiliation
Texas A&M University
Additional Trial Information
Status
In development
Start date
2018-11-06
End date
2018-11-09
Secondary IDs
Abstract
In this paper, we conduct a lab experiment to test the effects of using non-binding promises to boost efficiency in contract design. By allowing the employee to decide whether to make a non-binding “claim and promise” or not before the employer chooses the wage level in a gift exchange game, we add more (sequential) interactions between the employee and employer in the procedure of transaction. We ask if these interactions can bring a Pareto improvement to the gift-exchange game? We will also use real effort in two of our treatments to see if the main results hold when employees must provide real effort. We will also use eye-tracking and facial expressions to explore the hidden guilt and emotions when employees break promises and review the wage levels set by employers.
External Link(s)
Registration Citation
Citation
Palma, Marco and Peilu Zhang. 2018. "The Hidden Advantage of Promises: Pareto Improvements in a Gift-Exchange Game." AEA RCT Registry. November 07. https://www.socialscienceregistry.org/trials/3533/history/36877
Experimental Details
Interventions
Intervention(s)
The interventions include "claim and promise" and "real effort".
Intervention Start Date
2018-11-07
Intervention End Date
2018-11-09
Primary Outcomes
Primary Outcomes (end points)
effort level, wage level, final payoff, the number of correct sums
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
In this experiment, we have one baseline and three treatments. The baseline is the basic gift-exchange game. The three treatments are "claim and promise", "real effort-baseline", "real effort-claim and promise"
Experimental Design Details
Treatment: C&P At the beginning of the experiment each subject is randomly assigned to a role (employer or employee). We only have one period in our experiment. Stage 1: The worker decides whether to make a “claim and promises” or not: “If the employer gives me the wage=_____, I will choose the effort level=___” This claim and promises is non-binding. Stage 2: a) After reviewing the worker’s decision, the firm chooses the wage level, w; b) The firm also announces a non-binding effort level, that he wants the worker to do. Stage 3: The worker has to choose his effort level, e, after he reviews the wage level set by the firm. Baseline: The only difference from C&P is that there is no stage 1, and the firm chooses the wage level directly. Treatment: Real Effort and C&P In this treatment, the difference from C&P is that subjects need to provide real effort, which consists of adding up sets of five two-digit numbers during two minutes. Before stage 1, there is a practice stage in this treatment. Each subject will receive $0.5 for each correct answer. Employees will be notified their performance and the median performance of the session before they start the experiment. Employers will only be notified the median performance of the session. The effort level becomes the number of correct answers to the additions, s. Thus, in stage 1, the “claim and promises” becomes “If the firm gives me the wage=_____, I will solve ___ correct sums”; and in stage 2, the employer announces a non-binding number of correct additions ; the payoff functions are: ΠF = (120 - w) * (s/10); ΠW = w - 20 Treatment: Real effort baseline This treatment is the same as the treatment "real effort C&P" except that there is no stage 1. Employers will directly choose the wage level after the practice stage.
Randomization Method
randomization by a computer
Randomization Unit
individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
264 subjects
Sample size: planned number of observations
264
Sample size (or number of clusters) by treatment arms
60 baselien, 60 real effort-baseline, 72 claim and promise, 72 real effort-cliam and promise
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
Texas A&M Institutional Review Board
IRB Approval Date
2018-06-12
IRB Approval Number
IRB2018-0622D
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers