The Moral Costs of Production Externalities: An Experimental Analysis in a Workplace Setup

Last registered on March 18, 2021

Pre-Trial

Trial Information

General Information

Title
The Moral Costs of Production Externalities: An Experimental Analysis in a Workplace Setup
RCT ID
AEARCTR-0006443
Initial registration date
October 14, 2020

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 15, 2020, 12:35 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
March 18, 2021, 3:54 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Region

Primary Investigator

Affiliation
Halle Institute for Economic Research

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2021-07-31
End date
2021-09-30
Secondary IDs
Abstract
Recent findings show that people care about the negative consequences their choices unfold on others. They often incur moral costs as they trade-off selfish motives against ethical concerns. However, these intrinsic costs are far from being steadfast and people often exploit moral wiggle room to justify selfish behavior in morally questionable situations. In this paper, we want to examine how employees react to the introduction of unethical but payoff-beneficial production externalities across different workplace settings. In our lab experiment, participants have the possibility to generate personal income for themselves by decoding letters in a simple real effort task. The explicit task compensation depends on the implemented production type. They either work under a high wage or under a low wage scheme. Working under the high wage, however, adversely affects the income of a passive third party. In particular, we are interested in whether employees justify selfish behavior (maximizing personal income under the production externality) across different workplace scenarios using a 2x2-treatment design.
External Link(s)

Registration Citation

Citation
Waibel, Joschka. 2021. "The Moral Costs of Production Externalities: An Experimental Analysis in a Workplace Setup." AEA RCT Registry. March 18. https://doi.org/10.1257/rct.6443
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2021-07-31
Intervention End Date
2021-09-30

Primary Outcomes

Primary Outcomes (end points)
Our main dependent variable is the level of exerted effort (=number of encoded letters) by the employees under the high wage production (including the production externality)
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
In our lab experiment participants are randomly allocated into working groups of three - while each group consists of a randomly chosen manager and two regular employees. In the experiment, participants have the possibility to generate personal income by decoding letters in a simple real effort task (Erkral et al., 2011). The explicit compensation for each group member depends on the implemented production type. Production type “A” promises a high piece rate, while production type “B” offers a low piece rate. However, production under high compensation simultaneously creates a negative externality for a third passive party. Therefore, each participant who works under the high compensation is confronted with the internal conflict of balancing selfish motives (earning money) against ethical concerns (hurting the passive party). Starting from this basic group setup, we manipulate the underlying workplace scenario across two dimensions (2x2 treatment design). Our workplace variations allow us to study whether employees exploit moral wiggle room to justify selfish behavior (maximizing income). Consequently, our primary focus will lie on employees’ effort (absolute number of encoded letters) under production type “A” across our four workplace settings.
Experimental Design Details
The entire experiment consists of three stages. In stage 1, participants answer a short questionnaire regarding the attractiveness of multiple (hypothetical) employment opportunities in urban and rural areas. This short survey study is unrelated to the subsequent stages and part of a separate research project. For the completion of stage 1, participants receive a fixed payment of 2 €.

In Stage 2, participants play a modified version of the “rule-following game” by Kimbrough and Vostriknutov (2018). Each participant is asked to allocate 30 balls between a blue and a yellow basket. For each ball that is placed into the blue basket, the individual chance of winning an additional payment of 2 € increases by 1%. For each ball allocated to the yellow basket, the chance of receiving the payment increases by 2%. However, the instructions further introduce a trivial but costly rule to all subjects, which asks them to put all 30 balls into the blue (unprofitable) basket. The lottery draw (based on the individual ball allocation) is conducted by the computer program at the end of the experiment. This task allows us to measure participants general inclination towards rule-following, which has been shown to be a good predictor for pro-social (norm consistent) behavior in individual decision-making (dictator games). We want study the predictive power of rule-following, in regard to pro-social behavior, in a more complex hierarchical workplace setting.
At the beginning of stage 3, subjects are allocated into work groups of three: one subject is randomly chosen to act as the group manager and while the two remaining individuals take the roles of regular employees. Each work group is entrusted with a donation of 10 €, which is going to be transferred to a randomly chosen children’s hospice in Germany. We ensure that the donation procedure is verifiable to all participants. Participants have the possibility to generate personal income for themselves by decoding letters in a simple real effort task (Erkral et al., 2011) for 10 minutes. We ensure a thorough understanding of the task by introducing a 1-minute trial round. It will be stressed that own effort translates directly into own income. The explicit task compensation will be determined at the group level by the implemented production type. Production type “A” promises a high piece rate of 8 (7) Cents for the manager (employees), while production type “B” offers a low piece rate of 6 (5) Cents. However, production under “A” adversely affects the allocated group donation. For each letter that is encoded by one of the group members, the group donation decreases by a fixed amount of 2 Cents. Therefore, each individual who works under the high wage production scheme A – the one including the negative externality - is confronted with the internal conflict of balancing selfish motives (generating personal income) against ethical concerns (reducing the donation for children and families in need).

Starting from this basic group production setup, we vary the workplace setting across two dimensions (= 2x2 treatment design). First, we will manipulate the procedure on how the production type is implemented – either by a deliberate decision made by the group manager or through an impersonal draw conducted by the computer program. This manipulation allows us to see whether workers have a higher tendency to justify selfish behavior on the job, if they can shift the personal responsibility for the implementation of the production externality to an internal authority. The second dimension varies the information available to the employees. Under the full info condition, employees receive information on both production types. This contrasts the limited info scenario, under which workers only receive information about the production type that was ultimately implemented. We hypothesize that employees, who are fully aware of the payoff differential (about 33%) between both production types, are more likely to perceive the production externality as being less despicable, as its introduction serves a clear self-benefitting purpose.

Summary of the four treatment conditions:
In the Choice + Info Treatment, the manager can freely choose between production type A and B. The employees know that the manager implemented the production type deliberately. The employees receive information on both available production types.

In the Computer + Info Treatment, the manager cannot choose between production type A and B. The computer program implements the production type automatically. The employees know that the computer implemented the production type automatically. The employees receive information on both available production types.

In the Choice + No Info Treatment, the manager can freely choose between production type A and B. The employees know that the manager implemented the production type deliberately. The employees only receive information about the type that was implemented.

In the Computer + No Info Treatment, the manager cannot choose between production type A and B. The computer program implements the production type automatically. The employees know that the computer implemented the production type automatically. The employees only receive information about the type that was implemented.

To test our above-mentioned conjectures, our main analysis will compare employees’ effort level (number of encoded letters) under production type A across our four treatment settings (between subjects design).

After finalizing the production task, all participants receive information on all relevant monetary outcomes generated throughout the experiment. Subsequently, all individuals complete a short questionnaire that gathers information on socio-demographic characteristics, prosociality, risk aversion, reciprocal inclination, and the Big 5 personality traits. These personal characteristics allow us to derive a better understanding on how different types of workers may react to the introduction of negative production externalities and whether certain types are more prone to justify selfish behavior than others. Furthermore, participants are asked to evaluate the social appropriateness of implementing either production type A or B in a hypothetical workplace scenario similar to the “Choice + Info Treatment”, using the incentivized method by Krupka and Weber (2013). Finally, subjects have the opportunity to donate a fraction of their income to a charity organization of their choice (“German Red Cross”, “Médecins Sans Frontières (Ärzte ohne Grenzen)”, “UNICEF” or “Brot für die Welt”). Income is paid out in cash.
Randomization Method
computer (group allocation, role assignment, treatment) and manual extraction from an urn (assignment to computer station in the lab)
Randomization Unit
computer (group allocation, role assignment, treatment) and manual extraction from an urn (assignment to computer station in the lab)
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
- we plan to recruit 360 subjects from a student pool at a German university
- this leaves us with 120 managers and 240 employees


Sample size: planned number of observations
- we plan to recruit 360 subjects from a student pool at a German university - this leaves us with 120 managers and 240 employees
Sample size (or number of clusters) by treatment arms
We plan to have around 30 groups in each of the four treatment arms - 30 managers and 60 employees
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
German Association for Experimental Economic Research e.V.
IRB Approval Date
2020-10-13
IRB Approval Number
N/A

Post-Trial

Post Trial Information

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials