956 X.Wang/Journal of Economic Psychology 33(2012)951-962 3.Results 3.1.Summary and specification issues We focus our analyses on the effects of minimum wage policy first on firms'offers.workers'reservation wages,and then on settled wa tions and the 220 conditions compared with the UNINFORMED conditions and the 170 conditions. our analyses of the d ta in the fol nng sections,we need to consider a tew st,since observa d ed in t e analyses w ith nrms of as and v rs reservations.Becaus dom effects meth would be nce th the Thrd.the game for periods,they may e ential lagged dependent variable in the regression analysis.This,however.il lead to the probem not find any changes with the results of our estimates.Therefore.the reports below omit the results with time dummy 32.Introduction of the minimum wage This section examines the within-subject effect of introducing the minimum wage(MW condition)after agents have played the game in NO c ondition. before and after the introduction of the minimum with a standard de ion of 5.5.compar onalnen In th20 ed to the erage of199 in the N condition es in the MW condition Table 3 paid wa MW a dummy are all significantly positive in the 220 conditions. At this point.we not included the atme um wage o able INFORM in the ssions.this may hav e r nrms offers and pa MED arately.The esults indicate that the estimate for the MW dummy is significant sitive for firm offer in the 170 IN /with a minimum wage has a stron impact in the However,the impact of the MWdummy nd the levd f 70c0 We analyze themf 3.3.Knowledge about minimum wage policy and minimum wage leve evels are When the minimum wage is present, we ask the subjects what their view of fair wage is. If they switch their own role of worker or firm to the other side, what would be their offers or expected reservation wages? We will examine how these per￾ceptions differ in different minimum wage treatments. 3. Results 3.1. Summary and specification issues We focus our analyses on the effects of minimum wage policy first on firms’ offers, workers’ reservation wages, and then on settled wages, and employment. Table 2 reports the mean values of these variables in eight cells, including four between￾treatment conditions and two within-treatment conditions. Obviously, the wage values are higher in the INFORMED condi￾tions and the 220 conditions compared with the UNINFORMED conditions and the 170 conditions. In our analyses of the data in the following sections, we need to consider a few estimation issues. First, since observations within a session may be dependent on each other, in all our regressions, we report the robust standard errors that are clus￾tered on sessions. Second, to control for individual specific effects, the fixed effects method or random effects method may be considered in the analyses with firms’ offers and workers’ reservations. Because the explanatory variables in our analyses are all experimental treatment dummy variables that do not vary across periods, fixed effects method cannot be used. The ran￾dom effects method would be appropriate assuming that individual effects are uncorrelated with the error terms. Since the results we have obtained are almost the same for the random effects and pooled OLS method, we omit the random effects in the report. Third, since subjects play the game for multiple periods, they may experience some learning effects even though they are re-matched for different groups. This is especially possible for workers in the UNINFORMED conditions who are not informed about the minimum wage policy. There are two possible ways to mitigate this potential problem. First, we can include the lagged dependent variable in the regression analysis. This, however, will lead to the problem of endogeneity and inconsistent estimation of parameters when the sample size is small. The second solution is to include the time dummy variables in the regressions. We repeated our regressions for firm offers and workers reservations with the period dummy variables, and did not find any changes with the results of our estimates. Therefore, the reports below omit the results with time dummy variables. 3.2. Introduction of the minimum wage This section examines the within-subject effect of introducing the minimum wage (MW condition) after agents have played the game in NO condition. To compare our experiment with the results in Falk et al. (2006), we shown in Fig. 1 the histogram of contract wages before and after the introduction of the minimum wage in the 220 INFORMED treatment. The average wage in the 220 INFORMED MW condition is 232.7 with a standard deviation of 15.5, compared to the average of 199 in the NO condition with a standard deviation 23.7. While most wages in the NO condition are below the 220 level with a median of 200, most wages in the MW condition are higher than 220 with a median of 228. Only 10% of the wages in the MW condition are ex￾actly at the minimum level of 220. To test the significance of introducing the minimum wage policy, Table 3 reports regression results with firm offers, work￾ers’ reservation wages, paid wages, and employment as the dependent variables. The regressions are run separately for the 170 conditions and the 220 condition. The estimates for the MW dummy are all significantly positive in the 220 conditions, but not significant for firm offers and paid wages in the 170 conditions. At this point, we have not included the treatment variable INFORM in the regressions, this may have resulted in the insig￾nificant effect of the minimum wage on firms’ offers and paid wages in the 170 conditions with INFORMED and UNIN￾FORMED pooled together. We next run the above regressions for 170 INFORMED and 170 UNINFORMED conditions separately. The results indicate that the estimate for the MW dummy is significantly positive for firm offers in the 170 IN￾FORMED condition (7.2667 with a p-value 0.0405), but not significant in the 170 UNINFORED condition (2.030 with a p-value 0.8314). The difference between the INFORMED and UNINFORMED conditions is consistent with our Hypothesis 3 that the minimum wage has a stronger impact in the INFORMED condition. However, the impact of the MW dummy is stronger in the 220 conditions than in the 170 conditions, which is consistent with our Hypothesis 2. We analyze the impacts of information and the level of minimum wage in more detail in the next section. 3.3. Knowledge about minimum wage policy and minimum wage levels The next result concerns how workers’ knowledge about the minimum wage and minimum wage level affects the wages and employment results. We test the hypotheses that wages are positively affected by the binding minimum wage level and workers’ full knowledge about the minimum wage policy. We first examine the pattern of firm offers. Figs. 2 and 3 indicate that firm offers that are higher than the MW levels are more frequent under INFORMED MW conditions than under UNINFORMED MW conditions. In the INFORMED MW cases, only 10–20% of the offers are exactly at the minimum level in the 170 condition or the 220 condition. In the UNINFORMED 956 X. Wang / Journal of Economic Psychology 33 (2012) 951–962