Omar Al-Ubaydli, Steffen Andersen, Uri Gneezy, John A List
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Constructing compensation schemes for effort in multi-dimensional tasks is complex, particularly when some dimensions are not easily observable. When incentive schemes contractually reward workers for easily observed measures, such as quantity produced, the standard model predicts that unrewarded dimensions, such as quality, will be neglected. Yet, there remains mixed empirical evidence in favor of this standard principal-agent model prediction. This paper reconciles the literature by using both theory and empirical evidence. The theory outlines conditions under which principals can use a piece rate scheme to induce higher quantity and quality levels than analogous fixed wage schemes. Making use of a series of complementary laboratory and field experiments we show that this effect occurs because the agent is uncertain about the principal's monitoring ability and the principal's choice of a piece rate signals to the agent that she is efficient at monitoring.
Omar Al-Ubaydli, John A List
Cited by*: 0 Downloads*: 60

A commonly held view is that laboratory experiments provide researchers with more "control" than natural field experiments, and that this advantage is to be balanced against the disadvantage that laboratory experiments are less generalizable. This paper presents a simple model that explores circumstances under which natural field experiments provide researchers with more control than laboratory experiments afford. This stems from the covertness of natural field experiments: laboratory experiments provide researchers with a high degree of control in the environment which participants agree to be experimental subjects. When participants systematically opt out of laboratory experiments, the researcher's ability to manipulate certain variables is limited. In contrast, natural field experiments bypass the participation decision altogether and allow for a potentially more diverse participant pool within the market of interest. We show one particular case where such selection is invaluable: when treatment effects interact with participant characteristics.
Omar Al-Ubaydli, John A List
Cited by*: 5 Downloads*: 89

A commonly held view is that laboratory experiments provide researchers with more "control" than natural field experiments, and that this advantage is to be balanced against the disadvantage that laboratory experiments are less generalizable. This paper presents a simple model that explores circumstances under which natural field experiments provide researchers with more control than laboratory experiments afford. This stems from the covertness of natural field experiments: laboratory experiments provide researchers with a high degree of control in the environment which participants agree to be experimental subjects. When participants systematically opt out of laboratory experiments, the researcher's ability to manipulate certain variables is limited. In contrast, natural field experiments bypass the participation decision altogether and allow for a potentially more diverse participant pool within the market of interest. We show one particular case where such selection is invaluable: when treatment effects interact with participant characteristics.
Omar Al-Ubaydli, John A List
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This is a review of the literature of field experimental studies of markets. The main results covered by the review are as follows: (1) Generally speaking, markets organize the efficient exchange of commodities; (2) There are some behavioral anomalies that impede efficient exchange; (3) Many behavioral anomalies disappear when traders are experienced.
Omar Al-Ubaydli, John A List
Cited by*: 2 Downloads*: 88

This is a review of the literature of field experimental studies of markets. The main results covered by the review are as follows: (1) Generally speaking, markets organize the efficient exchange of commodities; (2) There are some behavioral anomalies that impede efficient exchange; (3) Many behavioral anomalies disappear when traders are experienced.
Omar Al-Ubaydli, John A List, Claire Mackevicius, Min Sok Lee, Dana L Suskind
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Policymakers are increasingly turning to insights gained from the experimental method as a means to inform large scale public policies. Critics view this increased usage as premature, pointing to the fact that many experimentally-tested programs fail to deliver their promise at scale. Under this view, the experimental approach drives too much public policy. Yet, if policymakers could be more confident that the original research findings would be delivered at scale, even the staunchest critics would carve out a larger role for experiments to inform policy. Leveraging the economic framework of Al-Ubaydli et al. (2019), we put forward 12 simple proposals, spanning researchers, policymakers, funders, and stakeholders, which together tackle the most vexing scalability threats. The framework highlights that only after we deepen our understanding of the scale up problem will we be on solid ground to argue that scientific experiments should hold a more prominent place in the policymaker's quiver.
Omar Al-Ubaydli, John A List
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Natural field experiments investigating key labour market phenomena such as unemployment have only been used since the early 2000s. This paper reviews the literature and draws three primary conclusions that deepen our understanding of unemployment. First, the inability to monitor workers perfectly in many occupations complicates the hiring decision in a way that contributes to unemployment. Second, the inability to determine a worker's attributes precisely at the time of hiring leads to discrimination on the basis of factors such as race, gender, age and ethnicity. This can lead to systematically high and persistent levels of unemployment for groups that face discrimination. Third, the importance of social and personal dynamics in the workplace can lead to short-term unemployment. Much of the knowledge necessary for these conclusions could only be obtained using natural field experiments due to their ability to combine randomized control with an absence of experimenter demand effects.
Omar Al-Ubaydli, Peter Boettke
Cited by*: 2 Downloads*: 21

The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the "Hayek hypothesis:" equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek's theories.
Omar Al-Ubaydli, John A List
Cited by*: 2 Downloads*: 4

Economists are increasingly turning to the experimental method as a means to estimate causal effects. By using randomization to identify key treatment effects, theories previously viewed as untestable are now scrutinized, efficacy of public policies are now more easily verified, and stakeholders can swiftly add empirical evidence to aid their decision-making. This study provides an overview of experimental methods in economics, with a special focus on developing an economic theory of generalizability. Given that field experiments are in their infancy, our secondary focus pertains to a discussion of the various parameters that they identify, and how they add to scientific knowledge. We conclude that until we conduct more field experiments that build a bridge between the lab and the naturally-occurring settings of interest we cannot begin to make strong conclusions empirically on the crucial question of generalizability from the lab to the field.
Omar Al-Ubaydli, John A List
Cited by*: 2 Downloads*: 1

Economists are increasingly turning to the experimental method as a means to estimate causal effects. By using randomization to identify key treatment effects, theories previously viewed as untestable are now scrutinized, efficacy of public policies are now more easily verified, and stakeholders can swiftly add empirical evidence to aid their decision-making. This study provides an overview of experimental methods in economics, with a special focus on developing an economic theory of generalizability. Given that field experiments are in their infancy, our secondary focus pertains to a discussion of the various parameters that they identify, and how they add to scientific knowledge. We conclude that until we conduct more field experiments that build a bridge between the lab and the naturally-occurring settings of interest we cannot begin to make strong conclusions empirically on the crucial question of generalizability from the lab to the field.