We provide experimental evidence that subjects blame others based on events they are not responsible for. In our experiment an agent chooses between a lottery and a safe asset; payment from the chosen option goes to a principal who then decides how much to allocate between the agent and a third party. We observe widespread blame: regardless of their choice, agents are blamed by principals for the outcome of the lottery, an event they are not responsible for. We provide an (...) explanation of this apparently irrational behavior with a delegated-expertise principal-agent model, the subjects’ salient perturbation of the environment. (shrink)

Performance-contingent compensation by means of stock options may induce risk-taking in agents that is excessive from the point of view of the company or the shareholders. We test whether increasing shareholder control may be an effective checking mechanism to rein in such excessive risk-taking. We thus tell one group of experimental CEOs that they may have to justify their decision-making processes in front of their shareholders. This indeed reduces risk-taking and increases the performance of the companies they manage. Implications are (...) discussed. (shrink)

How do people respond to others' accidental behaviors? Reward and punishment for accidents might be depend on the actor's intentions, or instead on the unintended outcomes she brings about. Yet, existing paradigms in experimental economics do not include the possibility of accidental monetary allocations. We explore the balance of outcomes and intentions in a two-player economic game where monetary allocations are made with a "trembling hand": that is, intentions and outcomes are sometimes mismatched. Player 1 allocates $10 between herself and (...) Player 2 by rolling one of three dice. One die has a high probability of a selfish outcome, another has a high probability of a fair outcome, and the third has a high probability of a generous outcome. Based on Player 1's choice of die, Player 2 can infer her intentions. However, any of the three die can yield any of the three possible outcomes. Player 2 is given the opportunity to respond to Player 1's allocation by adding to or subtracting from Player 1's payoff. We find that Player 2's responses are influenced substantially by the accidental outcome of Player 1's roll of the die. Comparison to control conditions suggests that in contexts where the allocation is at least partially under the control of Player 1, Player 2 will punish Player 1 accountable for unintentional negative outcomes. In addition, Player 2's responses are influenced by Player 1's intention. However, Player 2 tends to modulate his responses substantially more for selfish intentions than for generous intentions. This novel economic game provides new insight into the psychological mechanisms underlying social preferences for fairness and retribution. (shrink)

The ratio bias––according to which individuals prefer to bet on probabilities expressed as a ratio of large numbers to normatively equivalent or superior probabilities expressed as a ratio of small numbers––has recently gained momentum, with researchers especially in health economics emphasizing the policy importance of the phenomenon. Although the bias has been replicated several times, some doubts remain about its economic significance. Our two experiments show that the bias disappears once order effects are excluded, and once salient and dominant incentives (...) are provided. This holds true for both choice and valuation tasks. Also, adding context to the decision problem does not change this outcome. No ratio bias could be found in between-subject tests either, which leads us to the conclusion that the policy relevance of the phenomenon is doubtful at best. (shrink)