Curriculum Vitae

Montmarquette, C., Rullière, J.L., Villeval M.C., Zeiliger, R. (2004). « Redesigning Teams and Incentives in a Merger : An Experiment with Managers and Students », Management Science, 50(10), 1379-89.

After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real task experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven while students are more cost driven.

Keser, C., Rullière, J.L., Villeval M.C. (2004). « Le paradoxe de l’adhésion syndicale: une approche en termes de biens publics - The Paradox of Union Membership: A Public Good Game Approach”, Economie et Prévision, 164-165 (3-4), 81-92

When collective agreements apply to all employees, whether unionized or not, what is the rationale behind joining a union? The paper reports the results of an experiment on a two-stage game. In the first stage, the decision to join a union is modeled as a voluntary contribution to a public good. In the second stage, the unionized employees bargain with the employer over wages. The experimental evidence reveals that: i) union density is higher than predicted by theory but declining over time, ii) the size of the union increases the employees' bargaining power but not as much as predicted.

Tournadre, F., Villeval, M.C. (2004). « Learning from Strikes », Labour Economics, 11, 243-264.

This paper reports on an experimental study of the respective influences of asymmetric information and emotional concerns on strike occurrence. It develops and tests Kuhn and Gu’s (1999) model of learning in sequential wage negotiations, by means of two Ultimatum Bargaining Games with uncertainty on the proposer’s side. Evidence shows that information spillovers decrease the risk of conflict, but unions do not revise their demands sufficiently to reach a point where Pareto-improved bargaining outcomes are guaranteed. Social comparisons, such as envy among unions and the inequity aversion of firms, increase the occurrence of conflicts.

Masclet, D., Noussair, C., Tucker, S., Villeval, M.C. (2003). “Monetary and Non-Monetary Punishment in the Voluntary Contributions Mechanism”, American Economic Review, 93 (1), 366-380.

In this paper we replicate and extend the experiment of Fehr and Gaechter (2000) that analyzes the effect of an opportunity to punish others on the level contributions in the Voluntary Contributions Mechanism. The punishment is costly for both the players distributing and those receiving the punishment. Like Fehr and Gaechter, we find that agents often engage in non-credible costly punishment behavior in order to reduce earnings of others who contribute low amounts to the public good. The availability of punishment increases average contributions sharply. Here, we also introduce a second treatment, identical to the first treatment, except that the “punishment” is non-monetary. The assignment of “non-monetary” punishment points does not reduce the payoff of any agent, but it can be used to register disapproval of others’ contribution levels. We find that the existence of the possibility of “non-monetary” punishment alone increases the average level of contributions and earnings, though by less than the monetary punishment. This suggests that the increase in cooperation observed by Fehr and Gaechter is not only due to the possibility of monetary penalties, but also from the opportunity of others to express their disapproval of free riding behavior.

Rullière, J.L., Villeval, M.C. (2003). «Personnel Economics: Theoretical Perspectives and Empirical Evidence», International Journal of Manpower 24 (7).

Meidinger, C., Rullière, J.L., Villeval M.C. (2003). “Does Team-Based Compensation Give Rise to Problems when Agents Vary in their Ability?”, Experimental Economics 6, 253-272.

This paper reports the results of an experiment on how team heterogeneity in terms of productivity influences both the revenue sharing proposed by the principal to the team and the employees’ performance. Experimental evidence shows that when the team is heterogeneous, the principal does not try to motivate the agents through her sharing offer. Regardless of the level of team-based compensation, a large amount of free riding occurs since each agent is mainly influenced by his teammate’s behavior. In contrast, when the team is homogeneous, agents are better able to cooperate, reciprocating the principal’s offer.

Recent Working Papers

Charness, G., Villeval, M.C. (2007). Cooperation, Competition, and Risk Attitudes: An Intergenerational Field and Laboratory Experiment.

The population of most developed societies is ‘graying’. As life expectancy increases and the large baby-boom generation approaches retirement age, this has critical consequences for maintaining a high standard of living and the sustainability of pension systems. In the light of these labor-force and social concerns, we consider experimentally the comparative behavior of juniors (under 30) and seniors (over 50) in both experiments conducted onsite with the employees of two large firms and in a conventional laboratory environment with students and retirees.

Our results are compelling. First, seniors are not more risk-averse, as opposed to the conventional stereotype. Second, both juniors and seniors react to the competitiveness of the environment and there is no significant difference in performance in the real-effort task across the generations when they are competing. Third, seniors are typically more cooperative than juniors in a team-production game. Cooperation is highest in groups in which there is a mix of juniors and seniors, suggesting that there are indeed benefits in maintaining a work force with diversity in age. Overall, the implication is that it is beneficial to define additional short-term incentives near the end of the workers’ career to motivate and to retain older workers. A secondary, but important, issue is the external validity of conventional laboratory experiments. In general we do not find strong differences in behavior between workers and non-workers, indicating that laboratory experiments may not be such a bad approximation for the field environment.

Arbak, E., Villeval, M.C. (2006). Endogenous Leadership - Selection and Influence.

In a social dilemma game, why would some people be willing to bear the cost of being a leader? To answer this question, we designed a public good experiment with endogenous timing. In an additional treatment, we provide information about group members’ attributes. In a last treatment, the leader is chosen randomly in the group. We observe a high proportion of leader candidates. We show evidence of various leading behaviors and we suggest that a fraction of the first movers have a concern for the team outcome whereas another fraction is more self-oriented. Some attributes of the group members influence the decision to lead, probably because they are interpreted as a signal of the attitude towards cooperation. Voluntary leaders improve efficiency but are not more influential than imposed leaders because of a sorting effect.

Cabrales, A., Charness, G., Villeval, M.C. (2006). Competition, Adverse Selection and Efficiency. GATE WP 06-05 and IZA Discussion Paper 2296, Bonn.

We devise an experiment to explore the effect of different degrees of competition on optimal contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a third treatment an agent may choose between the contract menus offered by two principals. We first show theoretically how these different degrees of competition affect outcomes and efficiency. Informational asymmetries generate inefficiency. In an environment where principals compete against each other to hire agents, these inefficiencies remain. In contrast, when agents compete to be hired, efficiency improves dramatically, and it increases in the relative number of agents because competition reduces the agents’ informational monopoly power. However, this environment also generates a high inequality level and is characterized by multiple equilibria. In general, there is a fairly high degree of correspondence between the theoretical predictions and the contract menus actually chosen in each treatment. There is, however, a tendency to choose more ‘generous’ (and more efficient) contract menus over time. We find that competition leads to a substantially higher probability of trade, and that, overall, competition between agents generates the most efficient outcomes.

Clark, A., Masclet, D., Villeval, M.C. (2006). Effort and Comparison Income. Experimental and Survey Evidence. GATE WP 06-01 and IZA Discussion Paper 2179, Bonn.

This paper considers the effect of status or relative income on work effort combining experimental evidence from a gift-exchange game with ISSP survey data. We find a consistent negative effect of others’ incomes on individual effort in both datasets. The individual’s rank in the income distribution is a stronger determinant of effort than others’ average income, suggesting that comparisons are more ordinal than cardinal. We then show that effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income.

Masclet, D., Villeval, M.C. (2006). Punishment and Inequality. IZA Discussion Paper 2119, Bonn.

This paper reports the results of an experiment that investigates the relationship between inequality and punishment. In particular, we analyze how inter-personal comparisons affect altruistic punishment behavior. In addition, we examine how punishment affects inequality over time. We compare two treatments of a two-stage public good game, one in which costly punishment reduces the immediate payoff inequality between the punisher and the target, and one in which it does not affect the current level of inequality. Our results indicate that subjects punish even when they cannot alter the current distribution of payoffs. We find however that in both treatments, the intensity of punishment increases in the level of inequality. Finally, we show that punishment improves welfare in association with a decrease in the level of inequality over time.

Datta Gupta, N., Poulsen, A., Villeval, M.C. (2005). Male and Female Competitive Behavior. GATE WP 05-12 and IZA Discussion Paper 1833, Bonn.

Male and female choices differ in many economic situations, e.g., on the labor market. This paper considers whether such differences are driven by different attitudes towards competition. In our experiment subjects choose between a tournament and a piece-rate pay scheme before performing a real task. Men choose the tournament significantly more often than women. Women are mainly influenced by their degree of risk aversion, but men are not. Men compete more against men than against women, but compete against women who are thought to compete. The behavior of men seems primarily to be influenced by social norms whose nature and origin we discuss.

Eriksson, T., Teyssier, S., Villeval, M.C. (2005). Does Self-Selection Improve the Efficiency of Tournaments ?, .

Rank-order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance (Bull, Schotter and Weigelt, 1987). As emphasized by Lazear (1986, 2000) the efficiency of performance-related pay is attributable both to its incentive effect and to its sorting effect among employees. However, we know very little about the ex ante sorting effect of tournaments. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes helps in reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Sorting is efficiency-enhancing since it increases the homogeneity of the contestants. Our results suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay.

Eriksson, T., Villeval, M.C. (2004). « Other-Regarding Preferences and Performance Pay. An Experiment on Incentives and Sorting”. WP GATE, IZA Discussion Paper 1191, Bonn.

Variable pay not only creates a link between pay and performance but may also help firms in attracting the more productive employees (Lazear 1986, 2000). However, due to lack of natural data, empirical analyses of the relative importance of the selection and incentive effects of pay schemes are so far thin on the ground. In addition, these effects may be influenced by the nature of the relationship between the firm and its employees. This paper reports results of a laboratory experiment that analyzes the influence of other-regarding preferences on sorting and incentives. Experimental evidence shows that (i) the opportunity to switch to piece-rate increases the average level of output and its variance; (ii) there is a concentration of high skill workers in performance pay firms; (iii) however, in repeated interactions, efficiency wages coupled with reciprocity and inequality aversion reduce the attraction of performance related pay. Other-regarding preferences influence both the provision of incentives and their sorting effect.

Dickinson, D., Villeval, M.C. (2004). “Does Monitoring Decrease Work Effort? The Complementarity between Agency and Crowding-Out Theories”, WP GATE, IZA Discussion Paper 1222, Bonn.

Agency theory assumes that tighter monitoring by the principal should motivate the agent to raise his effort level whereas the “crowding-out” literature suggests that it may reduce the overall work effort. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account (Frey, 1993). Based upon a real-task laboratory experiment, our results show that principals are not trustful enough to refrain from monitoring the agents, and most of the agents react to the disciplining effect of monitoring. However we find also some evidence that intrinsic motivation is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal/agent links and concerns for the distribution of output payoff are important for the emergence of this crowding out effect.

Fortin, B., Lacroix, G., Villeval, M.C. (2003). « Tax Evasion and Social Interactions. An Experimental Approach”, University Laval Quebec and GATE.

This paper first develops a theoretical framework for analyzing the impact of social interactions on tax evasion behavior. Using Manski’s (1993) nomenclature, our approach takes into account social conformity effects (expressing endogenous interactions) and fairness effects (expressing exogenous interactions). The latter reflect the taxpayer’s perception of how he is treated by the tax system relative to others. Our model also allows for individual unobservable attributes common across reference group members (expressing correlated effects). To test our model, we perform a tax evasion experiment involving 12 sessions of 15 participants. In each round of a session, participants are told the tax rate and the audit probability they face and those faced by the other participants (their reference group). In the second part of each session, the participants are given an additional information about the number of evaders and the mean reported income by the other participants in the previous period. Only information at convergence to an equilibrium is used in the econometric analysis. To estimate the model, we develop a two-limit simultaneous tobit with fixed group effects. Nonlinearities introduced by this approach allow to identify the model without any exclusion restrictions on exogenous interactions variables. Results indicate the presence of fairness effects but reject the presence of social conformity and correlated effects.

Meidinger, C., Villeval, M.C. (2002). Leadership in Teams : Signaling or Reciprocating ? WP GATE

How does leadership work in teams? Leadership is grounded on both the possession of a private information by the leader and by her ability to communicate credibly with followers in order to induce them to expand high efforts. This paper reports an experiment testing the efficiency of two costly communication devices introduced by Hermalin (1998). In leading-by-example, the leader’s effort is observable by the follower. Experimental evidence shows that leadership works more through reciprocity than through signaling. In leading-by-sacrifice, the leader can give up a part of her payoff. This sacrifice works as a truthful signaling device when it is lost for the follower but not when it is transferred to him.

Montmarquette, C., Rullière, J.L., Villeval, M.C., Zeiliger, R. (2002). Redesigning Teams and Incentives – A Real Effort Experiment with Managers of a Merged Company. WP GATE and IZA Discussion Paper, Bonn, published in Management Science

Meidinger, C., Rullière, J.L., Villeval M.C. (2001). Does Team-Based Compensation Give Rise to Problems when Agents Vary in their Ability? WP GATE, published in Experimental Economics

Masclet, D., Noussair, C., Tucker, S., Villeval, M.C (2001). Monetary and Non-Monetary Punishment in the Voluntary Contributions Mechanism. WP GATE, published in American Economic Review

Tournadre, F., Villeval, M.C. (2001). Learning from Strikes. WP GATE, published in Labour Economics

Meidinger, C., Rullière, J.L., Villeval, M.C. (2000). Fairness and Free-Riding in Principal – Multi-Agent Relationships : Experimental Evidence. WP GATE, published in Rivista Internazionale di Scienze Sociali

Other affiliations

q Member of the European Association of Labour Economists (member of its Executive Committee 1993-2001; treasurer 1998-2001; Chairperson of its Election Committee 2001-)

q Member of the Executive committee of the French Economic Association (AFSE)

q Member of the American Economic Association

q Member of the Economic Science Association

q Member of the European Economic Association

q Member of the European Society for Population Economics

q Member of the Association for Public Economic Theory