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CeDEx Discussion Paper Series, The University of Nottingham >
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http://hdl.handle.net/10419/49675
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| Title: | | The roles of incentives and voluntary cooperation for contractual compliance  |
| Authors: | | Gächter, Simon Kessler, Esther Königstein, Manfred |
| Issue Date: | | 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 |
| Appears in Collections: | | CeDEx Discussion Paper Series, The University of Nottingham
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