Essays in Behavioral Economics

In chapter one, I propose a model consolidating the norm- and preferences-based approaches to explain laboratory bargaining outcomes. Social norms are identified by the axioms of cooperative bargaining theory, and other-regarding preferences are captured using Fehr and Schmidt's inequity aversion utility function. The model applies to bargaining situations where other-regarding agents abide by social norms in their decision-making. Preferences and norms interact to determine bargaining outcomes, and their interaction undermines the recoverability of the other-regarding preference parameters based on observations from the lab.

In chapter two, I employ a lab experiment to study whether men receive lucrative tasks more often than equally capable women so that a gender pay gap arises due to the difference in the earnings potential. Subjects allocate a standard task and a lucrative task between two workers, knowing their past performance, task preference, and sex. I find that men receive the lucrative task more often than women, but past performance and a gender difference in task preference account for the difference. Many workers shy away from the challenging yet lucrative task, suggesting that a psychic cost may arise when the tasks are challenging. Managers choose the efficient task allocation less often when the workers' preferences go against rather than with their money-incentive. The result suggests that managers show concern for the subjective utilities of the workers.