3 Relevance of a Corp. Culture

Question 1

Experimental Economics: Methods

Answer 1

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Empirical studies
Field data
 Resultsm and measures in real companies examined with economic methods
 Unfortunately, there are only a few data sets of companies available for research
Experiments
 Extremely simplified abstract model of real situation
 Exact test of a theory possible as there are many controllable factors
Casestudies
 Only descriptive
 Usually only a single case
 However: develops a better understanding of the situation

Question 2

Do we measure a causal effect of training?

Answer 2

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Self-selection:
 Motivated unemployed rather take part in training
 Those would have got a job anyway probably
 Critical: Control group comparable to treatment group?
 If so: Difference of the proportions can be traced back to the training –> causal effect
 If not: The “true“ effect of the training is biased
 Economists say: Training not “exogenous“ but “endogenous“
 Solution: Attempt to approach through certain econometric methods  but rarely convincing solution
 Furthermore: No control of other behavior of the people during that year

Question 3

Control through randomization

Answer 3

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Random assignment of participants to treatment groups and control
groups
no self-selection possible
 Treatment and Control group equal in all aspects (big samples)
 Causal effect can now be determined
 Idea: “Change one variable (treatment variable) and keep everything else
constant (c.p.)“
Differences in the behavior can now be traced back to that single variable.
This is called “Treatment effect“

Question 4

Control in experiments

Answer 4

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Equal conditions for all participants (c.p.)
 Experimenter, instructions, computer, room, time, temperature, etc.
 Control of preferences via monetary incentives
 Monetary preferences shall uncover the “real decision behavior“
 Assumption: The individuals‘ utility increases with every additional unit of money
 Costs and utility of decisions are the same for everyone

Constant procedureReplicability possible
 Control of the participants‘ degree of information
 Control and design of the language (Instructions)Framing
 Control / Measurement of the actual decisions

Question 5

Real-effort task

Answer 5

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Real-effort task:
 Participants receive 16 different pictures of offices (see photos)
 Pictures must be verbally described (by “manager“) such that teammate (“worker“) can identify them as fast as possible
 Participants receive wage depending on speed

Question 6

The Merger

Answer 6

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• each group has two participants –> manger and employee
• manager describes the picture to the employee who has to identify the picture
• after the merger: one manager stays and describes the picture to the two employees in the new firm

After 20 rounds all students have to state a “belief“ about how fast the
task will be fulfilled after the merger.
 Questionnaire for all before and after merger regarding estimates on
 the competence of the teammates
 the complexity of the task for each player

Question 7

opportunities corp. culture

Answer 7

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Question 8

threats corp. culture

Answer 8

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• hires takes more time
• inflexible (mergers) –> adaption
• values/norms are not in line with performance goals