We run an experiment in which two subjects play a two-round minimum effort game in
the presence of a third player (principal) who is the only one informed about past effort
choices and benefits from a higher minimum effort of the others. Sanctions introduced in the
second round by the experimenter lead to more optimistic beliefs and higher efforts. This is
not true when sanctions have been imposed by the principal. The possibility that the choice
of a sanction is a signal of low effort levels causes ...
We run an experiment in which two subjects play a two-round minimum effort game in
the presence of a third player (principal) who is the only one informed about past effort
choices and benefits from a higher minimum effort of the others. Sanctions introduced in the
second round by the experimenter lead to more optimistic beliefs and higher efforts. This is
not true when sanctions have been imposed by the principal. The possibility that the choice
of a sanction is a signal of low effort levels causes players who chose high effort in the first
round to be less optimistic.
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