A Study of Human Decision-Making in Economic Games

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Virginia Tech

This dissertation contains three essays on the impact of other-regarding behavior on human decision-making. Chapter II uses experimental methods to analyze the relative performance of a variety of compensation contracts. This study creates an environment in which individuals are paid via common payment mechanisms employed in the dual-principal agent relationships (Piece Rate, Flat Rate, Salary, Bonus and Socialization) and examines the effect that different incentive structures have on agent behavior. In Chapter III I explore the potential outcomes of blended payment structures in a dual-principal agent environment. I draw from the previously conducted experimental study in Chapter II and simulate agent behavior induced by blended payment mechanisms. In Chapter IV, I move away from studying payment mechanisms to investigate the impact of intentionality and responsibility on an individual's decision-making process. I explore the effects of direct and indirect responsibility as well as selfish and kind intentions using experimental methodology. Each of these essays provides further evidence that other-regarding behavior has a significant impact on the outcome of an economic situation; therefore, emphasizing the need to address such behavior in theoretical designs.

Principal-agent theory, moral hazard, contract enforcement, reciprocity, altruism, other-regarding behavior, responsibility, intentionality