summary

Fehr, E., Kirchsteiger, G., & Riedl, A. (1993). Does fairness prevent market clearing? An experimental investigation. The quarterly journal of economics, 108(2), 437-459.

Experimental Design

Actually this research project was supported financially by the Austrian Science Foundation. It is given to make the analysis of the decisional behavior in market level. The aim of this experiment is to let the researchers designed to give a two staged game to examine the availability of the hypothesis of the relationship between wage and effort from laborers. At the end of the experiment, earnings of the participators would be stacked up and given to the participants by cash. The 1st stage of the experiment is an auction but orally and has only one side. They let employers, also the buyers acted as bidders which six people in total and nine of the participants acted as workers, also the sellers. Additionally, this 1st stage experiment took approximately three minutes. For the 2nd stage, the price of the traded goods would be decided by the sellers. In the trade, the price of the goods were the same. The sellers could choose their customers as who they want and buyers could select any sellers as they like. However, when the buyers asked price of the goods, they need to negotiate the information (including prices, the willingness to buy the products and etc.) by the phone instead of meeting each other directly. Researchers denoted p as price in the paper. Furthermore, all the employers and employees were located into two different rooms. In each room, there were two supervisors who exchanged the messages for sellers and buyers by telephone. The participants did not know the identifications of each other. The information about price and choice made by participants were written down in public.

In the 1st stage, workers could receive the wage which researchers denoted as p in this paper. If workers could not admit the previous offer, it means the offer that they wanted to accept should be higher than the one that they rejected it. For the seller and buyers who traded unsuccessfully in the 1st stage would earn no profit. For the 2nd stage, sellers could pick up their working contracts in a nameless way. The combination of the 1st stage and the 2nd stage called one period and there were 12 periods in summary. The effort level that participants made in this experiment denoted as e in this research.

In the hypothesis part, researchers set up three hypothesizes. The 1st hypothesis is in terms of the wage, the level of the effort is rising. In addition, the content of the hypothesis two is average wages in the experiment are considerably greater than the market-clearing wage which is c+tau (Fehr, E., Kirchsteiger, G., & Riedl, A.,1993). Tau here was marked as the the attempt of effective involvement of participation. One step further, when researchers combine the 1st and the 2nd hypothesis together, it came out the 3rd hypothesis which stated that if the game was played, in each period, the mean effectiveness level does not converge to e minimum and this is different from it did beyond e minimum.

To test these three hypothesizes, researchers had three regression models which are 1) e= alpha + beta* p + mu (mu is the white noise). 2) 3)

Experimental Results

Firstly, the relationship between the wage and the effort is positively related. Here is a table shows the result (insert table 2 and figure1) in figure 1, the line is upward sloping and so as the plots. Also, they are positive related with each other.

Secondly, now more information about the 1st regression model, hypothesis 1 could not be rejected when beta is obviously larger than zero. In the table that can get the beta-coefficient is positively and highly significant in all regressions models.

Thirdly, move to the 2nd regression model, In Table IV, the adjusted R^2S are about two times of the R^2S of Table III showed above. Moreover, another result that researchers found that intercept of the effort-wage relation differed across workers. Authors inserted a dummy variable in the regression which is d for workers.

Fourthly, pay attention on the 3rd regression model, the coefficient of beta is significantly positive, but the R^2s are lower than 3rd regression. The hypothesized that all thetas are equal to alpha cannot be rejected. This shows that workers do not perform significantly different in diverse periods. (i.e. Theta equals to alpha)

In summary, tables III-V show the effort decision of the workers depends positively on the wage, and on their fairness but not on the time.

Eventually, r also gave some information of this experiments. r is the evolution of the average relative overpayment per period over time (Fehr, E., Kirchsteiger, G., & Riedl, A.,1993). From Figure II, r is greater than zero in all periods in whole sessions of experiments. r was decreasing in the eleventh and twelfth periods so as in the periods of number 4 and 6. In session 2, r was almost the same in the last periods. In session 3, there is a sharp decline in the ninth and tenth periods. Then, except for session 1, r in the last period is greater its value in the 1st five periods.

Blinder, Alan S., and Don H. Choi, "A Shred of Evidence on Theories of Wage Stickiness," Quarterly journal of economics, CV (1990), 1003-16.

Experimental Design (please summarize “ Findings on economic Theories of Sticky Wages” part.page 1005-p1008. There are three questions, please summarize questions one by one and follow the structures that I show you below)

Question #1: One theory on why wages do not fall states that workers do not like unpredictable changes in income. Therefore, workers and employers negotiate a stable wage that does not tend to fall during recessions or rise during booms. This steady wage acts as a type of wage insurance for the worker. How plausible or relevant does this seem as one reason why wages do not fall?

(summarize the two paragraphs below this question in the paper please)

Question #2: One theory on why wages do not fall states that workers are concerned with how their wages compare to those of other types of workers. Workers want to maintain a hierarchy of wages for different types of workers, and resist wage reductions because, unless they are across the board, they will destroy traditional wage differentials. How plausible or relevant does this seem as a reason why wages do not fall?

(summarize the three paragraphs below this question in the paper please)

Question #3: There are two workers who are being considered for the same job. As far as you can tell, based on interviews, experience, education, and so forth, both workers are equally well qualified. One of the workers agrees to work for the wage you offer him. The other one says he needs more money to work for you. Based on this difference, do you think one of these workers is likely to be an inherently more productive workers?

(summarize the four paragraphs below this question in the paper please)

Experimental Results

(Please summarize next part called “fairness and wage stickiness” page 1008-p1010)

Bertrand, M., & Mullainathan, S. (2004). Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination. American economic review, 94(4), 991-1013.

Experimental Design (please summarize part called “experimental design” page 994-p997 )

A. Creating a bank of resumes (please summarize the paragraphs belongs to this part)

B. Identities of Fictitious Applicants (please summarize the paragraphs belongs to this part)

C. Responding to ads (please summarize the paragraphs belongs to this part)

D. Measuring Responses (please summarize the paragraphs belongs to this part)

E. Weaknesses of the experiment (please summarize the paragraphs belongs to this part)

Experimental Results (please summarize a part called “Results” in this article page 997-p1006)

(follow the A, B, C and D questions to summarize)

A. Is There a Racial Gap in Callback

B. Do African-AmericansReceive Different Returnsto Resume Quality?

C. Applicants'Address

D. Job and EmployerCharacteristic