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Title: On the incentives of firms, workers and cheaters
Author: Blanco Jimenez, Celia
ISNI:       0000 0004 8500 5184
Awarding Body: Royal Holloway, University of London
Current Institution: Royal Holloway, University of London
Date of Award: 2018
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In this thesis I examine the incentives in three different fields: firms FDI relocation, dishonest behaviour, and workers productivity. Extrinsic incentives, contrary to the intrinsic ones, are the ones that come from outside, typically in the form of financial reward, but also in the form of status or others perceptions on the subject. When it comes to money, we tend to think that the more the merrier, but there are some other factors that affect our reaction to monetary incentives, which are not always predictable. This could be the case of risk aversion, social preferences, or physycally manipulating money. These factors are highly relevant, as I will show, for the design of incentives on the workplace, information disclosure and environmental policy. I examine these incentives in my three chapters. Chapter 1 examines the effects of risk incentives in the workplace. For that, we design an experiment in which we compare the performance of subjects participating in the slider game in a 5 period setting. Participants are allocated in groups of 5, but work individually. In the first treatment, subjects receive a bonus in the form of a piece rate for performing above a minimum. In the second treatment, subjects receive a bonus that is 5 times higher than in the piece rate, but will only be received with a probability of 1 in 5. Lastly, in the third treatment, we combine all the bonuses earned by the 5 players in the group in a single lottery prize, which is randomly allocated. Nonetheless, the probability of receiving the prize increases with relative performance. In all treatments subjects are anonymous and able to observe the productivity of the other members or the group. Although we do not obtain significant difference between the three treatments in the point estimates, the productivity growth in both lottery treatments is significantly higher trough the periods. We speculate that seeing someone earning a high prize incentivises subjects to exert more effort, although risk averseness and observing a high performance from their peers work as discouraging factors in the group lottery treatment. Chapter 2 examines the effects of a gain and a loss domain, combined with a setting with and without money manipulation in the dishonest behaviour of subjects. Subjects participate in the dice game, where they anonymously report the result from rolling a 10-sided dice. Since the design is anonymous, we can only observe cheating on average. We examine 2 dimensions: Gain and Loss, and Money-Manipulation and No-Manipulation. In the Loss treatment, subjects receive an initial endowment of 5 Euros in advance, while in the Gain treatment they can earn 5 pounds depending on the reported outcome. Gain and Loss then differ in the way we frame the gains: as amounts that subjects can earn or return from an initial endowment. We additionally implement a treatment where subjects are paid a flat fee regardless of the reported outcome. Both the gain and loss frames are carried out with and without money manipulation. In the money manipulation design, subjects receive a 5 Euro note before the loss frame, and take the money from an envelope in the gain frame. We observe that the effect of the gain and loss frame depends on whether subjects physically handle money or not, and we discuss the psychological effects of manipulating money on the moral cost of cheating. Chapter 3 examines the effects of the environmental regulation in a host country on a multinational firms incentives to engage in foreign direct investment (FDI). I develop a theoretical model of trade with 2-country setting (North and South), and focus on the Southern market. I demonstrate that the incentives for a firm to internationalise do not only depend on the environmental regulation of the recipient country but also in the mode of entry. This means that setting a new factory (Greenfield) and buying an existing one in the host country (Mergers and Acquisitions), have different sensitivity towards the strictness of the environmental regulation, and its effects are not always straightforward. I conclude that, in accord with the empirical findings in other studies, a more strict environmental regulation does not always deter FDI when we take into account the entry mode.
Supervisor: Rodriguez-Lara, Ismael ; Ezquerra, Lara ; Charness, Gary ; Scott, Neil Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: behavioural economics ; risky incentives ; bonus ; experimental economics ; lottery bonus