ESA (Vic) 2014 Professional Development Seminar #6 Lata Gangadharan "Selection, Tournaments and Dishonesty"

The topic

What is the extent of morality in competitive markets? This is impossible to measure in actual markets so in new work, Lata Gangadharan, Marco Faravelli and Lana Friesen use experimental methods to examine this question. Specfically, in their paper a real effort experiment is conducted in which performance is not monitored and participants are paid according to their reported performance. Participants are paid according to a piece rate and a winner-take-all tournament and then select between the two schemes before performing the task one more time. Competition increases dishonesty and lowers output when the payment scheme is exogenously determined. Participants with a higher propensity to be dishonest are more likely to select into competition. However after selection, they find no output difference between piece rate and tournament. This is attributable to a handful of honest individuals who select competition.

This talk provides a stimulating example of how experimental methods can illuminate aspects of how markets operate that until recently could only be considered by introspection and anecdotes.

The speaker

Lata Gangadharan is a Professor of Economics at Monash University in Australia. She is an experimental economist and her research encompasses both experiments in markets and auction design and experiments on social preferences. Her research in the area of environmental economics has had direct impact on policies relating to conservation and the environment. Her research on transferring money to others provides intuition for public policies of redistribution such as taxes and transfer payments. Her work on corruption, dishonesty, microfinance, measuring trust and trustworthiness has also received significant attention. Her recent work has been published in prestigious journals such as the American Economic Review, Science, Journal of Public Economics, Journal of Environmental Economics and Management and American Journal of Agricultural Economics.