asymmetric tournaments, equal opportunity laws and affirmative action - some experimental results
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Asymmetric Tournaments, Equal Opportunity Laws and Affirmative Action - Some Experimental ResultsBehavioral Economics PresentationTRANSCRIPT
Asymmetric Tournaments, Equal
Opportunity Laws and Affirmative
Action: Some Experimental Results
Andrew Schotter and Keith Weigelt (1992)
Diana Pușcaș | 22.01.2015
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 2
Contents:
• Paper Summary
• Types of Tournaments
• Theoretical Model
• Experimental Design
• Results
• Conclusions
• Questions and discussion
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 3
Paper Summary
Ways of dealing with inequity on the labour market:
• Equal opportunity laws: policies which prevent discrimination
of employee groups
• Affirmative action programs: hiring and promotion policies
which favour historically disadvantaged minorities (females,
ethnic minorities, etc.); a form of positive discrimination
Main research questions :
• How do these initiatives influence effort levels and overall firm performance?
• Is there a trade-off between equity and efficiency?
The researchers model these laws as rank order tournaments andstudy them through lab experiments.
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 4
Types of Tournaments
• Symmetrical – agents are identical and treated equally by the
tournament rules
• Asymmetrical:
• Uneven – agents have different ability levels (i.e. different effort cost
functions) – targeted by affirmative action programs
• Unfair – agents are identical, but the tournament rules favour one of
them (the performance of the disadvantaged agent must exceed the
performance of the other by a k>0 in order to win) – targeted by
equal opportunity laws
Equal opportunity laws remove unfair rules symmetrical tournaments
Affirmative action programs induce an unfair tournament; in order to
compensate the disadvantaged agent for their higher cost of effort, they
bend the rules in their favour uneven and unfair tournaments
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Theoretical Model
Utility functions for agents i and j:
Generated output:
Payment to agent i:
General equilibrium:
Symmetric tournament equilibrium:
Unfair tournament equilibrium:
Uneven tournament equilibrium:
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Experimental Design
Subjects – economics students of New York University
• Each randomly chooses 20 envelopes out of 1000 - random numbers (from a uniform distribution over [-60, 60], corresponding to the shocks to productivity)
• Pairs of two subjects are formed randomly (physical identity hidden)
• Written instructions, payoff sheets and cost of effort functions are provided (all parameters are common knowledge)
• Subjects pick a number between 0 and 100 („decision number“ equivalent to effort)
• Afterwards, they open an envelope and add that number to their decision number to get their „total number“ for the round
• After each round they are informed who had the biggest total number and receive their respective payments (prize-cost of number chosen)
• After 20 identical rounds, the subjects received their final cumulative payoff (between $7 and $24)
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 7
Experimental Design
• In the case of the unfair tournament, one subject had to realise anoutput k units higher in order to win. K was known to both.
• For uneven tournaments, there was an α > 1 for one subject, butknown to both.
• Attention to language: „higher number subject“ instead of„winner“; M and m were called „fixed payments“ instead of„prizes“
• Reason: to deemphasize the game-like nature of the experiement anddraw attention to payoffs only, not to the satisfaction of being the„winner“
• Each subject participated in only one treatment
• 20 rounds instead of a one-shot experiment to allow for learningcurves since the task was complex. Results of the last 10 rounds areconsidered.
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 8
Experimental Design
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 9
Symmetric Tournaments
Behavior is consistent
with the predictions.
Predicted effort: 73.75
Observed effort
(rounds 11-20): 77.91
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Unfair Tournaments
Experiment 2 Experiment 3
Advantaged Disadvantaged Advantaged Disadvantaged
Predicted effort 58.39 58.39 46.09 46.09
Observed effort 74.5 58.65 48.65 59.29
Predicted prob. of winning 0.687 0.805
Observed prob. of winning 0.898 0.827
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Uneven Tournaments
Experiment 4 Experiment 5
Advantaged Disadvantaged Advantaged Disadvantaged
Predicted effort 74.51 37.26 76.06 19.02
Observed effort 78.83 37.06 77.33 18.47
Predicted prob. of winning 0.762 0.805
Observed prob. of winning 0.788 0.827
Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015Seite 12
Dropping Out vs. Oversupply of Effort
More than half of
the disadvantaged
subjects in
experiment 5
dropped out (chose
effort levels < 6). By
contrast, those who
didn’t drop out
chose levels above
those predicted
(30.2 vs. 18.5)
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Equal Opportunity Laws
Equal opportunity laws
increase the probability
of winning and the
payoff of disadvantaged
subjects.
They also increase total
tournament output and
therefore the firm’s
profit.
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Affirmative Action
Low ability (effort cost)
difference: effort levels
fall for advantaged
subjects and stay the
same for the
disadvantaged. Total
output is lower. Probability
of winning and expected
payoff of the discriminated
group go up.
High ability (effort cost)
difference :
Dropout behavior is
eliminated, effort levels
and total tournament
output go up.
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Conclusions
Main findings:
• Both affirmative action and equal opportunity laws benefit disadvantaged groups by increasing their probability of winning the big prize and by raising their total payoff.
• Equal opportunity laws increase the effort levels of all agents, generating higher profits for the firm.
• Affirmative action programs increase effort levels and firm profits only in cases of severe initial cost disadvantages of one agent. If the cost diferences are small, these programs might create efficiency losses for the firm.
• Behaviour is generally consistent with the theoretical prediction, except for the oversupply of effort => possible topic for further research.
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Questions / Discussion
Question:
Why are affirmative action programs especially effective in the
cases where there is a severe cost disadvantage of one
group/agent?
Thank you for your attention!
Answer:
When an agent is significantly cost disadvantaged, they will have
a strong incentive to drop out and not supply any effort at all. In
this case, the intervention of affirmative action levels the playing
field and prevents the drop out behavior, thus greatly increasing
effort and output. When there is only a minor degree of cost
asymmetry, drop out behavior is rare and the benefit of
affirmative action is much smaller.