Three Experiments on Institutions

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Thesis type
(Thesis) Ph.D.
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Institutions are an ubiquitous presence in our lives. The focus in this Thesis is on norm compliance, analyzed as an important component of the institutional framework within which decisions are made. The first paper of this Thesis (Chapter 2) evaluates how norms of symmetry and centricity affect the functioning of two ways to allocate resources described in the economic anthropology literature, namely reciprocity and redistribution. The main conclusion of the experimental inquiry is that reciprocity and redistribution can seldom allocate resources efficiently in the absence of norms of symmetry and centricity in the experimental design. By symmetry we mean a common acknowledgement that certain features are shared in the group. By centricity we mean a common acknowledgement that a degree of differentiation in roles is acceptable in the group. The second paper of this Thesis (Chapter 3) presents an experimental investigation of a well-known repeated network formation game. Heterogeneity and perceived similarity are found not to influence networking choices. Players do not frequently engage in naive best responses when transitioning from one round of play to the next in the repeated game. Although Nash networks are rare in this environment, subjects come often close to achieving an equilibrium network. Reciprocity is found to discourage naive best responses. The third paper of this thesis (Chapter 4) discusses two instruments through which corporate law attempts to promote trust and trustworthiness in business organizations: (i) monitoring of the manager by a principal, as in the agency approach; (ii) moral suasion, as in the approach according to which managers are held to a standard of trustworthiness. A laboratory experiment shows that the "fiduciaries" language increases the investors' trust. Monitoring also increases the investors' trust, but only when the manager is not aware of the experimental identity of the principal. The manager is trustworthy up to a certain degree, regardless of the governance structure of the organization and of the accuracy with which he/she observes each investor's entrustment.
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Thesis advisor: Arifovic, Jasmina
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