Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51963
Authors: 
Gächter, Simon
Kessler, Esther
Königstein, Manfred
Year of Publication: 
2011
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5774
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
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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