Due to incomplete contracts, efficiency of an organization depends on willingness of individuals to take non-selfish actions, e.g., cooperate when there is no incentive to do so, or punish inefficient actions by others. Organizations also constitute a social boundary, or group. We investigate whether this social aspect of organizations has an important benefit, fostering unselfish cooperation and norm enforcement within the group, but whether there is also a dark side, in the form of hostility between groups. Our experiment provides the first evidence without the confounding effect of self-selection into groups. Individuals are randomly assigned to different platoons during a four-week portion of officer training in the Swiss Army. We conduct choice experiments - simultaneous prisoner’s dilemma games, with and without third-party punishment - in week three. Random assignment significantly increases willingness to cooperate with fellow platoon members. Assignment does not lead to hostility, in the sense of vindictive punishment of outsiders, but does affect norm enforcement, enhancing willingness to enforce a norm of cooperation towards fellow platoon members. This suggests that the social aspect of organizations motivates efficient behavior even when ordinary incentives fail, and helps explain practices designed to foster social ties or group identification within an organization.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
2020.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996.
"Trust in Large Organizations,"
NBER Working Papers
5864, National Bureau of Economic Research, Inc.
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