Behavioral consequences of corporate incentives and long-term bonuses: an experimental study
Article Abstract:
A laboratory experiment was conducted to examine if managerial behavior in resource allocation is affected by long-term bonus schemes. Specifically, the study focused on the difference between managers and shareholders in their valuation of extant and expected profits, with managers tending to discount future profits at a higher rate. This divergence in discount rates between the two groups was studied using business students who were asked to decide on allocation issues typically encountered by managers. The study found that the compensation scheme that most effective in aligning divergent time preferences between managers and shareholders is one that encourages managers to behave in such a way that is consistent with lower discount rates, thereby maximizing the preferences of shareholders.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1992
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Task complexity, equilibrium selection, and learning: an experimental study
Article Abstract:
The influence of equilibrium task complexity on its selection for multi-stage games is investigated. Three task complexity measures are considered, namely, cardinality of choice space, level of iterative knowledge of rationality and level of iterative knowledge of strategies. The metrics are used to proxy for the degree of cognitive effort needed to play a game. Coordination games with multiple equilibria each being a different division of a fixed pie are analyzed. Results show that subjects consider disparity, although not as importantly as task complexity. Subject choices are also path-dependent. The three task complexity metrics prove to be effective in predicting choice behavior.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1996
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Information mirages in experimental asset markets
Article Abstract:
An investigation of the occurrence of information mirages in experimental asset markets is presented. Information mirages are known to be created when traders overreact to uninformative trades and infer erroneous price paths. These mirages are considered a possible explanation for the apparent volatility of stock prices. The results of the study show that mirages always occur early in an experimental trading session, but appear only temporarily in later trading periods as traders shift their attention to other nonprice information such as speed of trading.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1991
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