Topics in Political Economics (Bachelor)

Participation will be limited to 12 students.

We expect from you a strong interest for experimental economics, active participation and self-dependence as well as the will to use your creativity, enthusiasm and curiosity in order to develop your own research idea. Prior knowledge about experimental economics is very helpful (e.g. successful completion of the lecture “Economics and Behavior” at our chair).

In many companies relative reward schemes are used whereby employees earn a bonus if they perform better than their colleagues. Moreover, hierarchical structures mean that in many organizations, employees find themselves in constant competition for promotions. This is meant to provide incentives for higher performance. However, competitive remuneration schemes could also have detrimental effects such that individual workers may view their colleagues as direct competitors generating more selfish and/or less helpful behavior in the workplace. Furthermore, age, gender and culture seem to have impacts on willingness to compete. For example, in western cultures, adult men sometimes enter competition even though their performance level is way too low for success, i.e., they harm themselves by over-competitiveness. In contrast, adult females sometimes compete less than they could do successfully.

Another challenge in contest design, e.g. in sports, is that when competition takes place among workers with mixed abilities it may lead to a discouragement effect, which establishes that lower ability individuals often reduce effort competing against an individual they do not feel up to (e.g. it has been found that average golf players performed significantly worse when competing against a superstar like Tiger Woods). One solution suggested by the economic literature is to level the playing field between advantaged and disadvantaged individuals by favoring weaker individuals through bid-caps, asymmetric tie-breaking rules, or advances. In sports, asymmetric tie-breaking is already common, for instance, in the
Champions League soccer playoffs “away goals” become the decisive factor in determining the winning team in case of a tie.

Contests are not only a well-established mechanism for incentivizing workers but also for encouraging innovation and advancing R&D. Elements of research and innovation contests can be found in the procurement of various goods and services. For instance, the construction of new buildings, proposals in a venture capital firm or TV shows for entertainment companies all flow through a similar innovation process that involves the solicitation of bids from multiple potential suppliers and the preparation of a pilot or a proposal. In other cases, e.g., in lobbying contests, it is often discussed whether investments are beneficial or not. Some authors have argued that investments into lobbying should be capped in order to soften competition among asymmetrically strong interest groups (e.g. the lobbying industry versus consumers’ interest groups). Of course, then the question arises whether such caps achieve the respective design goal or not.

In this seminar, we discuss questions like: How can we design workplaces and labor contracts to increase motivation and productivity? How can contests be used to foster innovation? Which role should social preferences play and how could they inspire specific contest designs? How should sport contests be engineered depending on the respective goals? How should we design lobbying contests?

Also related topics are very welcome!

Charness, G., Kuhn, P. (2011) Lab labor: What can labor economists learn from the lab? Handbook of labor economics, 4, 229-330.

Cassar, A., Friedman, D. (2004) Economics lab: an intensive course in experimental economics. Routledge.

Croson, R., Gneezy, U. (2009). Gender differences in preferences. Journal of Economic literature, 47(2), 448-474.

Dechenaux, Emmanuel, Dan Kovenock, and Roman M. Sheremeta. "A survey of experimental research on contests, all-pay auctions and tournaments." Experimental Economics 18.4 (2015): 609-669.

Students will work in groups of two or three.

Please note that no topics will be handed out by the seminar facilitators. Instead participants will develop their own research question in the field of Working Cultures, Competition and Incentives.

None.

For further questions, please contact Patrick Maus (Patrick.Maus@kit.edu).

With the support at our chair, students develop their own ideas for the design of an economic experiment or field study on the topic.

About 90 hours

Bachelorstudents of the fields Industrial Engineering and Management, Information Engineering and Management, Economics Engineering or Economathematics.

During the seminar, students develop their own research idea about or including aspects of Working Cultures, Competition and Incentives. Using their own creative abilities, students design an economic experimental or field study that answers their research question.

Important: We do not assign or provide pre-developed topics in this seminar! Finding a topic and your own research idea is substantial to this seminar.