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Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India's Manufactur

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  • Dhillon, Amrita
  • Afridi, Farzana
  • Li, Sherry Xin
  • Sharma, Swati

Abstract

Production processes are often organized in teams, yet there is limited evidence on whether and how social connections and financial incentives affect productivity in tasks that require coordination among workers. We simulate assembly line production in a lab-in-the-field experiment in which workers exert real effort in a minimum-effort game in teams whose members are either socially connected or unconnected and are paid according to the group output. We find that group output increases by 18%, and coordination improves by 30-39% when workers are socially connected with their co-workers. These findings can plausibly be explained by the higher levels of pro-social motivation between co-workers in socially connected teams.

Suggested Citation

  • Dhillon, Amrita & Afridi, Farzana & Li, Sherry Xin & Sharma, Swati, 2020. "Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India's Manufactur," CEPR Discussion Papers 14356, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14356
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    References listed on IDEAS

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    1. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 2001. "Minimum-Effort Coordination Games: Stochastic Potential and Logit Equilibrium," Games and Economic Behavior, Elsevier, vol. 34(2), pages 177-199, February.
    2. Roy Chen & Yan Chen, 2011. "The Potential of Social Identity for Equilibrium Selection," American Economic Review, American Economic Association, vol. 101(6), pages 2562-2589, October.
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    Cited by:

    1. Angelovski, Andrej & Brandts, Jordi & Solà, Carles, 2021. "Equal and unequal profit sharing in highly interdependent work groups: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 232-252.
    2. Sonia Bhalotra & Irma Clots-Figueras & Lakshmi Iyer & Joseph Vecci, 2023. "Leader Identity and Coordination," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 175-189, January.
    3. Dhillon, Amrita & Afridi, Farzana & Sharma, Swati, 2020. "The Ties That Bind Us: Social Networks and Productivity in the Factory," CEPR Discussion Papers 14687, C.E.P.R. Discussion Papers.
    4. Nikita Sangwan & Swati Sharma, 2022. "Labor Market Shocks, Social Protection And Women’s Work," IEG Working Papers 453, Institute of Economic Growth.
    5. Mukherjee, Anirban & Sen, Shankhajit, 2022. "Social fragmentation and productivity in colonial India," SocArXiv zmfjn, Center for Open Science.

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    More about this item

    Keywords

    Caste-based networks; Social incentives; Financial incentives; Minimum effort game; Output; Coordination;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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