Randolph Sloof

University of Amsterdam | UVA · Department of Economics

Starting a business requires investing both money and time in the hope of future financial benefits. Because investments and potential gains happen over time, the way in which individuals value the future relative to the present—that is, their temporal preferences—may be an important driver behind the decision to become an entrepreneur. Whereas exi...

We study public Bayesian persuasion in elections with binary outcomes, like referendums. One or multiple senders attempt to influence the election outcome by manipulating public information about a payoff-relevant state. We allow for a rich class of sender preferences, ranging from pure self-interest to a broad set of social welfare functions. Our...

The Verifiability Approach is a lie detection method based on the insight that truth-tellers provide precise details whereas liars sometimes remain vague to avoid being exposed. We provide a game-theoretic foundation for the strategic effect that underlies this approach. We consider a speaker who wants to be acquitted and an investigator who prefer...

This paper develops a theory of fiscal transparency aimed at highlighting the potential contribution of independent fiscal councils to fiscal responsibility. In a political economy model with electoral competition, voters care about the candidates’ competence to supply valuable public goods and about their congruence (subjective sense of proximity)...

We study public persuasion in elections, in which a monopolistic designer or competing designers attempt to influence the election outcome by manipulating public information about a payoff relevant state. In contrast to most existing works in the literature, we allow for a wide class of designer’s objective functions, ranging from pure self-interes...

We construct an election game to study the electoral impacts of biased candidate endorsements. We derive a set of testable predictions. We test these in a laboratory experiment and find that observed election outcomes and vote shares are well predicted. We find no support, however, for our prediction that the relationship between election outcome a...

We study the electoral impact of biased endorsements in large Poisson elections with two candidates. Under fairly general conditions, we derive analytical approximations for the asymptotic voting equilibria. We show that, when the electorate is sufficiently polarized, manipulating public information about candidates' qualities can hardly affect the...

We construct an election game to study the electoral impacts of biased candidate endorsements. We derive a set of testable predictions. We test these in a laboratory experiment and find that observed election outcomes and vote shares are well predicted. We find no support, however, for our prediction that the relationship between election outcome a...

Verbal and mathematical reasoning are key cognitive skills which individuals use throughout their lives to create economic value. We argue that individuals undertaking entrepreneurial tasks also draw on these skills, and we study how best these skills should be combined in entrepreneurial teams. To that purpose we conduct a randomized field experim...

We test whether anchoring affects people’s elicited valuations for a bottle of wine in individual decision-making and in markets. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects’ Willingness-To-Accept for the bottle before and after the market. Subject...

We conduct a framed field experiment at a Dutch university to compare student effort provision and exam performance under the two most prevalent evaluation practices: absolute (criterion-referenced) and relative (norm-referenced) grading. We hypothesize that the rank-order tournament created by relative grading will increase effort provision and pe...

The Verifiability Approach is a lie detection method based on the insight that truth-tellers provide precise details whereas liars sometimes remain vague to avoid being exposed. We provide a game-theoretic foundation for the strategic effect that underlies this approach. We consider a speaker who wants to be acquitted and an investigator who prefer...

In a large survey (n = 1928), we examine whether entrepreneurs differ in their decision-making style from managers and employees. Besides two self-reported measures taken from psychology, we build on Rubinstein (Quarterly Journal of Economics 131: 859–890, 2016) by including two behavioral measures derived from response times and the nature of the...

We experimentally investigate whether delegation can be an effective leadership behavior to motivate followers. In particular, we study how the allocation and exercise of power – the right to choose projects – by leaders affects the subsequent implementation of the chosen projects by followers. To isolate the pure motivational effect of delegation,...

One acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team. We extend a standard weakest link experiment with a manager who can decide to replace some workers at a cost. We address two main questions: (i) Does the fear of exclusion need to be a permanent...

In an experiment we identify a crucial factor that determines whether employers engage in statistical discrimination of ex ante equal groups. In the standard no-competition setup of Coate and Loury (), we do not find systematic evidence for statistical discrimination. When we introduce competition between workers of different groups for the same jo...

We consider the possibility that cooperation in a prisoner's dilemma is fostered by people's voluntary enhancement of their own vulnerability. The vulnerability of a player determines the effectiveness of possible punishment by the other. In the “Gradual” mechanism, players may condition their incremental enhancements of their vulnerability on the...

This study investigates how children respond to different treatments aimed to fostersustainable behavior in a productive (firm like) setting. We conduct a field experiment using teams of children (aged 11 or 12) that are participating in an entrepreneurship education program in the last grade of primary school in the Netherlands. Schools participat...

We measure participants’ willingness to pay for transparently useless authority—the right to make a completely uninformed task decision. We further elicit participants’ beliefs about receiving their preferred outcome if they make the decision themselves, and if another participant makes the decision for them. We find that participants pay more to m...

Theory predicts that entrepreneurs have distinct attitudes toward risk and uncertainty, but empirical evidence is mixed. To better understand the unique behavioral characteristics of entrepreneurs and the causes of these mixed results, we perform a large “lab-in-the-field” experiment comparing entrepreneurs to managers (a suitable comparison group)...

Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based performance measures —such as Economic Value Added (EVA)— is...

One acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team (Alchian and Demsetz, 1972). We extend a standard weakest link experiment with a manager that can decide to replace some of her team members at a cost. The amount of contractual commitment (‘term...

Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for top managers. In this lab-in-the-field experiment we directly compare the scores of entrepreneurs, managers and employees on a comprehensive set of measures of optimism and overconfidence (n = 2,...

Organizations must not only take the right decisions, they must also ensure that these decisions are effectively implemented. Fama & Jensen (1983) argue that the same members of many organization are often responsible for both decision initiation and implementation. If these have social preferences, they might thus sabotage both project choices and...

The aim of this study is to analyze the effectiveness of early entrepreneurship education. To this end, we conduct a randomized field experiment to evaluate a leading entrepreneurship education program that is taught worldwide in the final grade of primary school. We focus on pupils' development of relevant skill sets for entrepreneurial activity,...

Previous empirical studies have shown that solo entrepreneurs benefit from having balanced skills: Jacks of All Trades (JATs) are better entrepreneurs than specialists are. Nowadays however, the majority of entrepreneurs start up and run ventures together in teams. In this paper we test whether the effect of more balanced skills is also positive in...

The provision of non-pecuniary incentives in education is a topic that has received much scholarly attention lately. Our paper contributes to this discussion by investigating the effectiveness of grade incentives in increasing student performance. We perform a direct comparison of the two most commonly used grading practices: the absolute (i.e., cr...

We consider the possibility that cooperation in a prisoner's dilemma is fostered by people's voluntarily enhancement of their own vulnerability. The vulnerability of a player determines the effectiveness of possible punishment by the other. In the 'Gradual' mechanism, players may condition their incremental enhancements of their vulnerability on th...

The aim of this study is to analyze the effectiveness of early entrepreneurship education. To this end, we conduct a randomized field experiment to evaluate a leading entrepreneurship education program that is taught worldwide in the final grade of primary school. We focus on pupils' development of relevant skill sets for entrepreneurial activity,...

In the labor market, statistical discrimination occurs when employers' beliefs about workers' behavior induce different groups of workers to invest at different rates in their education. Thus, even though groups may be identical ex-ante, the beliefs of the employers are self-fulfilling. Theoretically and in an experiment, we investigate under what...

We introduce noise in the signaling technology of an otherwise standard wasteful signaling model (Spence, 1973). We theoretically derive the properties of the equilibria under different levels of noise and we experimentally test how behavior changes with noise. We obtain three main insights. First, if the amount of noise increases, high types aimin...

We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used for communication purposes. Theoretically a large number of equilibria exist side by side, in which senders either use costless messages, money, or a combination of the two. We find that senders prefer to communicate through co...

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is large. Subjects exert significantly more effort in the...

In this laboratory experiment we study the use of strategic ignorance to delegate real authority within a firm. A worker can gather information on investment projects, while a manager makes the implementation decision. The manager can monitor the worker. This allows her to better exploit the information gathered by the worker, but also reduces the...

When managers are sufficiently guided by social preferences, incentive provision through an organizational mode based on informal implicit contracts may provide a cost-effective alternative to a more formal mode based on explicit contracts and monitoring. This paper reports the results from a laboratory experiment designed to test whether organizat...

This study explores the ways in which information about other individual's action affects one's own behavior in a dictator game. The experimental design discriminates behaviorally between three possible effects of recipient's within-game reputation on the dictator's decision: Reputation causing indirect reciprocity, social influence, and identifica...

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be measured. Courty and Marschke (2007) have recently develo...

Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effect...

This paper investigates the extent of the holdup problem in a buyer-seller relationship in which the seller has private information about his alternative opportunities. Theory predicts that, compared to a situation in which outside options are publicly observed, the seller obtains an informational rent whereas the buyer bears an informational loss....

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is large. Subjects exert significantly more effort in the...

This paper studies the implications for inflation dynamics of introducing non-price competition into a New Keynesian model featuring both nominal rigidities, which are in the form of staggered prices, and real rigidities, which are in the form of strategic complementarities in price setting. Under very general assumptions, we show that the presence...

One of the main findings of a large body of gift exchange experiments is that a considerable fraction of workers reward higher wages with higher effort. These results are observed for simple one-employer–one-worker relationships. In this article we investigate whether they generalise to the more realistic situation in which the employer employs sev...

Introduction When a newly hired employee enters a firm there are typically many skills he has to acquire before becoming fully productive. A blue-collar worker, for example, needs to get acquainted with the machines and tools with which he is going to work, while white-collar workers usually have to become familiar with, for example, the particular...

We study experimentally whether employers or workers should invest in specific training. Workers have an alternative trading opportunity that takes the form of either an outside option or a threat point. Theory predicts that with outside options, employers have (weakly) better investment incentives than workers do and should therefore be the invest...

Theory predicts that default breach remedies are immaterial whenever contracting costs are negligible. Some experimental studies, however, suggest that in practice default rules do matter, as they may affect parties' preferences over contract terms. This paper presents results from an experiment designed to address the importance of default breach...

Standard economic theory identifies a trade-off between up-or-stay and up-or-out promotion rules. Up-or-stay never wastes the skills of those not promoted but may provide insufficient incentives to invest in skills. Up-or-out can always induce investment in skill acquisition but may waste the skills of those not promoted. The paper reports an exper...

One of the main findings of a large body of gift exchange experiments is that a considerable fraction of workers reward higher wages with higher effort. These results are observed for simple one-employer-one-worker relationships. In this article we investigate whether they generalise to the more realistic situation in which the employer employs sev...

"Standard theory predicts that holdup can be alleviated by making specific investments unobservable; private information creates an informational rent that boosts investment incentives. Empirical findings, however, indicate that holdup is attenuated by fairness and reciprocity motivations. Private information may interfere with these, as it becomes...

Incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent-seeking incentives they provide. Standard theory predicts that a given instrument becomes less attractive when the effectiveness of rent-seeking activities increases. More recent theories that emphasize the im...

Numerous gift exchange experiments have found a positive relationship between employers' wage offers and workers' effort levels. In (almost) all these experiments the employer both owns and controls the firm. Yet in reality many firms are characterized by the separation of ownership and control. In this paper we explore to what extent this affects...

Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for pre-emptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and pre-emptive biddi...

Standard economic theory predicts that firms will not invest in general training and will underinvest in specific training. Empirical evidence, however, indicates that firms do invest in general training of their workers. Evidence from laboratory experiments points to less underinvestment in specific training than theory predicts. We propose a simp...

We characterize equilibrium behavior in a finite horizon multiple-pie alternating offer bargaining game in which both agents have outside options and threat points. In contrast to the infinite horizon case the strength of the threat to delay agreement is non-stationary and decreases over time. Typically the delay threat determines equilibrium propo...

Theory predicts that in alternating-offer bargaining the threat to delay agreement is effectively empty when the proposer can also opt out after a rejection (high-tech market), while this is not the case when only the responder can do so (bazaar). First proposers therefore have much more bargaining power in the former and get significantly more in...

Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding...

This paper reports the findings of a meta-analysis of 37 papers with 75 results from ultimatum game experiments. We find that on average the proposer offers 40% of the pie to the responder. This share is smaller for larger pie sizes and larger when a strategy method is used or when subjects are inexperienced. On average 16% of the offers is rejecte...

This paper investigates the extent of the holdup underinvestment problem in a buyer-seller relationship in which the seller has private information about his alternative trading opportunities. Theory predicts that, compared with a situation in which outside options are publicly observed, the seller obtains an informational rent while the buyer bear...

Multi-license ascending auctions have been criticized because they allow bidders to reduce their demand and split the market at low prices. At the same time, it has been argued that the ascending auction is a suitable format for a seller who wants to exploit preemptive motives. Incumbent firms may bid above their use values in a coordinated attempt...

Breach remedies serve an important role in protecting relationship-specific investments. Theory predicts that some common remedies protect too well and induce overinvestment, either though complete insurance against potential separation or the possibility that breach is prevented by increasing the damage payment due through the investment made. In...

Breach remedies serve an important role in protecting relationship-specific investments. Theory predicts that some common remedies protect too well and induce overinvestment, either though complete insurance against potential separation or the possibility that breach is prevented by increasing the damage payment due through the investment made. In...

Breach penalties can be used to protect specific investments and are therefore a remedy against holdup. Not all breach remedies are, however , equally efficient. Some common types are predicted to protect too well thereby inducing overinvestment. Theoretically overinvest-ment is driven by two motives: the insurance motive and the separation prevent...

Breach penalties can be used to protect specific investments and are therefore a remedy against holdup. Not all breach remedies are, however, equally efficient. Some common types are predicted to protect too well thereby inducing overinvestment. Theoretically overinvestment is driven by two motives: the insurance motive and the separation preventio...

Experimental results are presented for a simplified version of Hart's (1995) theory of the firm. Theory predicts that investment levels remain constant when investors' no-trade pay-offs increase, if these pay-offs are threat points. While they may decrease when no-trade pay-offs are outside options. Our results support these predictions in a relati...

Theory predicts that in alternating-offer bargaining the threat to delay agreement is effectively empty when the proposer can also opt out after a rejection (high-tech market), while this is not the case when only the responder can do so (bazaar). First proposers therefore have much more bargaining power in the former and get significantly more in...

Abstract We study experimentally whether employers or workers should invest in firm specific training. Only workers are assumed to have an alter- native trading opportunity. Both the turnover costs case where this alternative takes the form of an outside option and the no-friction case where it serves as a threat point are considered. Theory predic...

In a signalling model of lobbying the politicians' decision whether to delegate policy authority and an interest group's choice between lobbying politicians or bureaucrats are investigated. Only bureaucrats are able to assess policy-relevant information coming from the interest group, but their interests may differ from those of politicians. In equ...

This paper investigates the choice of an interestgroup between lobbying (``words'') and pressure(``actions'') in order to influence a policymaker. Both lobbying and pressure are modeled asstrategic means of transmitting information that isrelevant to the policymaker. However, only pressure isdirectly costly to the policymaker. The interactionbetwee...

This paper investigates the choice of an interest group between lobbying ("words") and pressure ("actions") in order to influence a policymaker. Both lobbying and pressure are modeled as strategic means of transmitting information that is relevant to the policymaker. However, only pressure is directly costly to the policymaker. The interaction betw...

We report results from an experiment based on a simplified version of Hart's (1995) property rights theory of the firm. Only one manager invests and this investment is completely specific. In that case the theory predicts that the level of investment is not affected by the level of no-trade payoffs if these payoffs are modeled as threat points (as...

According to the outside option principle the holdup problem can be solved when the non-investor has a binding outside option. The investor then becomes residual claimant, creating efficient investment incentives. This paper reports about an experiment designed to test this. We find that when the outside option is binding investment levels fall sho...

. When workers' investments in firm-specific skills are non-contractible underinvestment may occur because of holdup. Up-or-out contracts can potentially solve this problem by limiting the firm's scope for opportunistic behavior. The downside of such contracts is that a worker who does not make the grade is dismissed even if his social value within...

In a signaling game model of costly political campaigning in which a candidate is dependent on a donor for campaign funds it is verified whether the electorate may benefit from campaign contributions being directly observed. By purely focusing on the informational role of campaign contributions the model seems somewhat biased against the potential...

In this chapter the topic of this book is introduced. Section 1. 1 provides a brief and rather general motivation for the scientific project undertaken here. Interest groups are a very popular object of scientific inquiry, and they received already considerable research attention from scholars in political science, as well as from researchers in ec...

The basic signaling game presented in the previous chapter provides a simple explanation for the empirical observation that campaign expenditures buy votes (cf. Morton and Cameron, 1992). The mere fact that a candidate spends a lot of money on political advertisements may indicate that he will implement a policy platform the electorate likes. In th...

In their survey of theoretical models of interest groups Potters and Van Winden (1996) distinguish four different approaches. One of these concerns a strand of literature that focuses on the influence of interest groups through the transmission of information (Austen-Smith, 1997, separates out the same class). The models discussed in subsequent cha...

In this final chapter a summary and evaluation of the monograph are given. Section 7.1 provides a brief, yet comprehensive survey of the main results obtained. Subsequently, Section 7.2 evaluates these results and the method(s) employed to derive them, and advances some ideas for future research.

In this chapter the existing literature on the political influence of interest groups will be reviewed and discussed. Section 2.1 provides a comprehensive overview of the empirical literature. This overview yields an elaborate assessment of the actual importance of interest groups for the formation of governmental policies. There appears to be ampl...