ESSAYS IN MANAGERIAL ECONOMICS
thesisposted on 26.07.2021, 18:56 authored by Chen WeiChen Wei
My dissertation consists of three chapters in the field of managerial economics and experimental economics. The first chapter studies the ratchet effect and the possible ways to mitigate it. Specifically, I conduct a controlled experiment to test the effectiveness of job rotation in eliminating the ratchet effect. Additionally, I compare effort provision between the situation where agents are rotated exogenously and the situation where the principal rotates agents endogenously. The experiment shows that the ratchet effect is effectively reduced both when workers are informed that they will be rotated in the future and when a principal has a costly option of rotating agents.
The second and third chapter are based on joint work with Prof. Yaroslav Rosokha. In the second chapter, we study a single-queue system in which human servers have discretion over the effort with which to process orders that arrive stochastically. We show theoretically that the efficient outcome in the form of high effort can be sustained in the subgame perfect equilibrium if the interactions are long term (even when each server has a short-term incentive to free ride). In addition, we show that queue visibility plays an important role in the type of strategies that can sustain high-effort equilibrium. In particular, we show that limiting feedback about the current state of the queue is beneficial if servers are patient enough. We conduct a controlled lab experiment to test the theoretical predictions and find that when the queue is visible, human subjects cooperate if the queue is long, but defect if the queue is short. We also find that cooperation is hard to achieve when the queue is not visible.
In the third chapter, we report another lab experiment to test the theory developed in the second chapter. In the new experiment, we provide a more natural queueing frame for the subjects rather than the neutral language used in the second chapter. We also increase the number of matches in each treatment. We find that effort increases with the expected duration of the interaction. We also find that visibility has a strong impact on the strategies that human subjects use to provide effort. As a result, providing less visibility makes servers more willing to provide high effort if they are patient enough.