Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49675
Authors: 
Gächter, Simon
Kessler, Esther
Königstein, Manfred
Year of Publication: 
2011
Series/Report no.: 
CeDEx discussion paper series 2011-06
Abstract: 
Efficiency under contractual incompleteness often requires voluntary cooperation in situations where self-regarding incentives for contractual compliance are present as well. Here we provide a comprehensive experimental analysis based on the gift-exchange game of how explicit and implicit incentives affect cooperation. We first show that there is substantial cooperation under non-incentive compatible contracts. Incentive-compatible contracts induce best-reply effort and crowd out any voluntary cooperation. Further experiments show that this result is robust to two important variables: experiencing Trust contracts without any incentives and implicit incentives coming from repeated interaction. Implicit incentives have a strong positive effect on effort only under non-incentive compatible contracts.
Subjects: 
principal-agent games
gift-exchange experiments
incomplete contracts, explicit incentives
implicit incentives
repeated games
separability
experiments
JEL: 
C70
C90
Document Type: 
Working Paper

Files in This Item:
File
Size
1.28 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.