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An Experimental Study of Incentive Reversal in Sequential and Simultaneous Games

Author

Listed:
  • Omolbanin Jalali

    (Faculty of Economics Management and Accounting, Yazd University, Yazd, Iran.)

  • Zahra Nasrollahi

    (Faculty of Economics Management and Accounting, Yazd University, Yazd, Iran.)

  • Madjid Hatefi Madjumerd

    (Faculty of Economics, University of Tehran, Tehran, Iran.)

Abstract

It is commonly held that increasing monetary rewards enhance work effort. This study, however, argues that this will not ineludibly occur in team activities. Incentive Reversal may occur in sequential team productions featuring positive external impacts on agents. This seemingly paradoxical event is explained through two experiments in this article. The first experiment involves a sample of 182 college students who were paired in groups each playing 12 games that led to 2,184 observations. The second experiment involves a sample of 210 college students who were grouped into teams of three that involved 420 observations. The results of both experiments confirmed the occurrence of incentive reversals despite increasing monetary rewards.

Suggested Citation

  • Omolbanin Jalali & Zahra Nasrollahi & Madjid Hatefi Madjumerd, 2019. "An Experimental Study of Incentive Reversal in Sequential and Simultaneous Games," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 23(3), pages 639-658, Summer.
    • Handle: RePEc:eut:journl:v:23:y:2019:i:3:p:639
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    References listed on IDEAS

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Eyal Winter, 2009. "Incentive Reversal," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 133-147, August.
    3. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
    4. Alex Gershkov & Eyal Winter, 2015. "Formal versus Informal Monitoring in Teams," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 27-44, May.
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