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Experimental Departures from Self-Interest when Competing Partnerships Share Output

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  • Cherry, Josh
  • Salant, Stephen
  • Uler, Neslihan

Abstract

When every individual's effort imposes negative externalities, self-interested behavior leads to socially excessive effort. To curb these excesses when effort cannot be monitored, competing output-sharing partnerships can form. With the right-sized groups, aggregate effort falls to the socially optimal level. We investigate this theory experimentally and find it makes correct qualitative predictions but there are systematic quantitative deviations, always in the direction of the socially optimal investment. By using data on subjects' conjectures of each other's behavior we show that deviations are consistent with both altruism and conformity (but not extremeness aversion).

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-13-07.

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Date of creation: 14 Mar 2013
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Handle: RePEc:rff:dpaper:dp-13-07

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Keywords: output-sharing; partnership solution; laboratory experiment; altruism; conformity;

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Cited by:
  1. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2013. "Endogenous group formation in experimental contests," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 419, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2013. "Endogenous group formation in experimental contests," Discussion Papers, Research Unit: Economics of Change SP II 2013-301, Social Science Research Center Berlin (WZB).

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