lecture 8 leadership, status and other loose ends

LECTURE 8

LEADERSHIP,

STATUS,OBEDIENCE,RESPONSIBILITY & OTHER LOOSE ENDS

309ECN Dr. Alexandros Karakostas

Intended Learning Outcomes

Examine how status may affect the economic behaviour

of an individual

of those around him

How the behaviour of leaders may affect employees behaviour

How other factors commonly ignored in economics may affect economic behaviour within organisations

responsibility towards others

Singling out / Ostracism

Show that sometimes is sufficient to have sufficient authority. Incentives don´t matter!

The Effect of Status on Charitable

Giving (Kumur and Vesterlund, 2010)

Fundraisers often start their campaigns by soliciting

the wealthier, more recognized and respected

individuals in a community.

Purpose of the study is to examine whether the

success of this solicitation ordering in part can be

attributed to the fact that it enables individuals to

select organizations that have a high-status donor

base

Experimental Design

Two stages

Stage 1: Participant where divided into low-status & high-status depending on how well they did on a general knowledge quiz.

Stage 2: 2-player Voluntary contribution game.

Two options: A & B

Option A: participant receives $1

Option B: Both participants receives £0.75

In treatment 1 the high status player plays first

In treatment 2 the low status player plays first

Results

If a leader contributes he increases the probability

that a follower contributes by 39 percent in the

Star-First treatment and by 25 percent in the Star-

Second treatment.

Do the leaders and followers anticipate this?

YES!!

However who earns more?

Cooperation and status in

organizations (Eckel et al. 2010)

Social status plays a complex role in human interaction

Purpose of the study is to study whether social status serves as a useful mechanism for solving public goods problems.

Status can act as a coordinating device with higher-status individuals more likely to be mimicked.

Or in a setting with costly punishment, social status may enhance the effectiveness of punishment and reduce antisocial punishment, enhancing overall efficiency.

A network!

4-Player Public good game using a star network!

Note that Player 1 observes everyone and everyone observes only player 1!

The experiment follows a 2x2 design.

That is High, Low status and With and Without Punishment

Status was determined by a quiz- in high status the

student with the highest score was assigned as the central

player (and vece versa)

In treatments with Punishment Player 1 can punish

everyone and every other player can only punish Player

1.

Average Punishment

Cooperation and status in

organizations (Eckel et al. 2010)

Status matters.

The decisions of a central, commonly observed

player affect the decisions of peripheral players:

central players serve a leadership role.

peripheral players are more likely to mimic the

behavior of high-status central players

High-status central players punish more and are

punished less.

The Social Costs of Responsibility

(Humphrey and Renner, 2011)

Would the choices you make be affected by whether or

not you have responsibility for the welfare of others?

Would you continue to smoke whilst pregnant or drive your

car at the same speed when your children are passengers?

As a parent would you donate more or less of your money

to charity, more or less of your time to volunteering?

Household decisions are often taken by the head of the

household but affect all family members.

Managers frequently take decisions as representatives of

firms that affect themselves as well as other employees.



3 Treatments

Baseline: A standard 4-player Public Good Game

Strangers treatment: Each player is responsible for the

earnings of a stranger. Whatever the player makes

the same amount is paid to the stranger.

Friends treatment: Each player is responsible for the

earnings of a stranger. Whatever the player makes

the same amount is paid to the stranger.



Results

Contributions in the Friends treatment were lower than

in the baseline (Mann-Whitney, p=0.087)

Contributions in the Strangers treatment were not

statistically significant different from the baseline

(Mann-Whitney, p=0.67)

Contributions in the Friends treatment were lower than

in the Strangers (Mann-Whitney, p=0.037)

Social ties are essential for responsibility to affect

behaviour!

Trust and Trustworthiness with Singleton

Groups (Galeotti and Zizzo, 2012)

Galeotti and Zizzo where interested on what happen

if you artificially single out an individual out of a

group.

How would this affect the behaviour of the singled out

individual but also of those who have to liase with him.

Singling out can have negative connotations (i.e black

sheep) or positive (gold sheep).

Prof. Daniel Zizzo

(Inspiring supervisor!)

Fabio Galeotti

(Best friend!)



Initial questionnaire

Gender;

Age;

University status;

Country;

Field of studies (Economics/not Economics related);

Relationship status;

Smoker;

Facebook user.

Instructions for first task (trust game)

Ranking Phase

Baseline Treatment

TRUST GAME (Berg et al., 1995)

truster trustee

48

point

s

48 –

T

3

3T48 – T + Y 3T – Y

The BS treatment

*

Who is the least preferred match?

1/31/2017

The GS treatment

Who is the most preferred match?

*

The RS treatment

*

The computer will now randomly select a participant from the experiment

The PIBS and PIGS treatments

Who is the least/most preferred match?

The ABS treatment

Who is the least preferred match?

*

Giving rate

to singled

out subjects

Giving rate

to non-

singled out

subjects

• Result 1: non-singled out subjects gave less on average to

singled out than non-singled out subjects (Wilcoxon p = 0.011),

a result driven by RS (Wilcoxon p = 0.036).

0.1

.2.3

.4.5

B BS GS RS PIBS PIGS ABS

Figure 1: Giving rates



Return rate

to singled

out subjects

Return rate

to non-

singled out

subjects

• Result 2: when subjects not responsible of the distinct

status of the singled out individual, less trustworthy towards

him or her (Wilcoxon p = 0.038); when responsible, no

difference (Wilcoxon p > 0.1).

0.0

5.1

.15

.2.2

5


Figure 2: Return rates



• Result 3: in aggregate, singled out subjects trust others less

than non-singled out subjects (Wilcoxon p = 0.040).

Giving rate

from singled

out subjects

Giving rate

from non-

singled out

subjects Giving rate

from

authorities

0.1

.2.3

.4.5


Figure 3: Giving rates



Return rate

from singled

out subjects

Return rate

from non-

singled out

subjects Return rate

from

authorities

• Result 5: Authorities return less than non-singled out

subjects (Wilcoxon p = 0.030) and baseline subjects (Mann-

Whitney p = 0.045);

• Result 4: Least preferred singled out subjects return

less than non-singled out subjects (Wilcoxon p = 0.003)

and baseline subjects (Mann-Whitney p = 0.004);

0.0

5.1

.15

.2.2

5


Figure 4: Return rates



1/31/2017

• Result 6: Most preferred singled out subjects behave bimodally,

with either high or low return rates (Siegel-Tukey p = 0.007).

02

46

8D

ensity

0 .5 1

Baseline

02

46

8D

ensity

0 .5 1

BS

02

46

8D

ensity

0 .5 1

RS

02

46

8D

ensity

0 .5 1

PIBS

02

46

8D

ensity

0 .5 1

ABS



Endogenous Leadership: Selection and

Influence (Arbak & Villeval, 2008)

Arbak and Villeval (2007) were interested in voluntary

leadership.

Leading a team is hard work!

If leading is costly, why are some people willing to do it?

What influences the decision to lead and what effect do

the leader’s choice has on the ‘followers’?



Experimental Design

Two stage Public good game

Participants can choose between contributing in the first stage (as leaders) or in the second stage (as followers)

The key difference is that if you contribute in the second stage you are informed of how much the leader has contributed.

When there are more than one volunteers to lead one is selected at random.

However, all volunteers are asked how much they would have contributed as leaders (you can then compare how they would behave as followers or leaders!)

In the end of the experiment subjects also completed a personality test



Experimental Design

3 Treatments

Benchmark – participants can choose in which stage they

want to participate (as explained in previous slide)

Attribute – Benchamark + subjects are also informed

about gender a measure of social orientation

A yellow circle next to the name of above average

contributions to a charity from their initial endowment

Control –1 subject is randomly allocated to the first stage.



Key Results

A quarter of subjects are wiling to lead despite it usually

entails of earning 25% less than followers!

Leaders contributions decrease over time slower than the

contributions of followers! – The leaders influence

potentially vanishes!

Eliminated leaders contribute more than three times more

than self-selected followers

Who makes a good leader? Social preferences

and leading-by-example (Gachter et al., 2008)

Examine the effects of social preferences and beliefs about the social preferences of others in a 2-player leader-follower voluntary contributions game.

Both players allocated 5 tokens

For each token contributed to the joint account each player receives £1. Each token kept yields a £1 return to the player.

Game is sequential.

Subjects had to also complete a Prediction task, and a Machiavellian instrument/questionnaire

S= selfish WR=Weak Reciprocators SR= Strong Reciprocators

After controlling for

beliefs (Degree of

optimisim) SR and WR

still is statistically

significant.

Reciprocators still

contribute more even

after controlling for

beliefs!

The dos and don’ts of leadership in sequential

public goods experiments (Rivas & Sutter, 2008)

Experimental Design

6 Treatments

Control – A standard 4 player PGG

Reward – A leader is randomly allocated; leader contributes first; then rewards one member with a 10ECU bonus to at the cost of 2ECU to everyone else.

Exclusion – As Reward but instead of rewards the leader can exclude one member of the group.

Endogenous – Subjects can become leaders by being the first who contribute in the PGG

Exogenous – A further control

Last – AS Reward and Exclusion but leader contributes last

The do’s and don’ts of leadership in sequential


The dos and don’ts of leadership in sequential


Obedience (Karakostas and Zizzo, 2012)

Organizational settings

Tough choices

Possibly unpleasant

Just following orders

The Manager

Experimental Design: Replication

Joy of destruction mini-game (AH, 2011, paper and

pencil)

Open:

o 2 players with10 guilders each

o Both decide simultaneously whether or not to destroy 5

guilders at a cost of 1 guilder

Obedience (Karakostas and Zizzo, 2012)

“most organizations would cease to operate efficiently if

deference to authority were not one of the prevailing

norms.” (Cialdini and Goldstein, 2004:596)

How much are people willing to destroy if told to do so?

o Does there have to be a reason?

o Does aggression depend on expectation of aggression of

others?

How far can demand effects ‘go’?

Experimental Design

Justified1 sided

Constant

10 times

Peaked

Pressure

Experimental Results

7.5%

15.0%17.5%

58.9%

70.7%

60.0%

42.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

O H R RO ROJ RO1 ROC

Avera

ge D

est

ruct

ion R

ate

Treatment

Qualitative picture of O

and H as in AH (2011)

R does not induce greater

destruction than in H

No statistically significant

difference among O, H

and R


7.5%

15.0%17.5%

58.9%

70.7%

60.0%

42.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%


Avera

ge D

est

ruct

ion R

ate

Treatment

However, about 60% of subjects do what they are told

Higher than in R (p < 0.01)

No reason provided

even if it means to destroy 50% of the partner’s endowment


7.5%

15.0%17.5%

58.9%

70.7%

60.0%

42.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%


Avera

ge D

est

ruct

ion R

ate

Treatment

Does providing a

justification make

a difference?

Not statistically

significantly so


7.5%

15.0%17.5%

58.9%

70.7%

60.0%

42.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%


Avera

ge D

est

ruct

ion R

ate

Treatment

Do subjects

retaliate out

of fear of

obedience

of others?

No

7.5%

15.0%17.5%

58.9%

70.7%

60.0%

42.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%


Avera

ge D

est

ruct

ion R

ate

Treatment

Does having peak pressure points raise obedience?

Possibly yes (p = 0.06)

...though still more destruction than in R (p = 0.04)

Kumru, Cagri S., and Lise Vesterlund. "The effect of status on

charitable giving." Journal of Public Economic Theory 12.4 (2010):

709-735.

Eckel, Catherine C., Enrique Fatas, and Rick Wilson. "Cooperation

and status in organizations." Journal of Public Economic

Theory 12.4 (2010): 737-762.

Arbak, Emrah, and Marie-Claire Villeval. Endogenous leadership:

selection and influence. No. 2732. IZA Discussion Papers, 2007.

Gürerk, Özgür, Bernd Irlenbusch, and Bettina Rockenbach.

"Motivating teammates: The leader’s choice between positive and

negative incentives."Journal of Economic Psychology 30.4 (2009):

591-607.

Expected reading

Expected reading

Humphrey, Steven J., and Elke Renner. The social costs of

responsibility. No. 2011-02. CeDEx discussion paper series, 2011.

Karakostas and Zizzo (2013) “Obedience” Working paper

available at:

http://164.15.27.46/ecaresdocuments/seminars1213/zizzo.pdf

Galeotti, Fabio, and Daniel John Zizzo. "Trust and trustworthiness

with singleton groups." University of East Anglia Centre for

Behavioural and Experimental Social Science Working Paper (2012):

12-03.

Eckel, Catherine C., Enrique Fatas, and Rick Wilson. "Cooperation

and status in organizations." Journal of Public Economic Theory 12.4

(2010): 737-762.

http://164.15.27.46/ecaresdocuments/seminars1213/zizzo.pdf

Expected reading

Rivas, Maria Fernanda, and Matthias Sutter. The dos and don'ts of

leadership in sequential public goods experiments. No. 2008-25.

Working Papers in Economics and Statistics, 2008.

Hong, Kessely, and Iris Bohnet. "Status and distrust: The relevance

of inequality and betrayal aversion." Journal of Economic

Psychology 28.2 (2007): 197-213.

Andreoni, James, and Justin M. Rao. "The power of asking: How

communication affects selfishness, empathy, and altruism." Journal

of Public Economics 95.7 (2011): 513-520.

lecture 8 leadership, status and other loose ends

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