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Observability and overcoming coordination failure in organizations: An experimental study

  • Jordi Brandts

    ()

  • David Cooper

    ()

Motivated by problems of coordination failure in organizations, we examine how overcoming coordination failure and maintaining coordination depend on the ability of individuals to observe others’ choices. Subjects’ payoffs depend on coordinating at high effort levels in a weak-link game. Treatments vary along two dimensions. First, subjects either start with low financial incentives for coordination, which typically leads to coordination failure, and then are switched to higher incentives or start with high incentives, which usually yield effective coordination, and are switched to low incentives. Second, as the key treatment variable, subjects either observe the effort levels chosen by all individuals in their experimental group (full feedback) or observe only the minimum effort (limited feedback). We find three primary results: (1) When starting from coordination failure the use of full feedback improves subjects’ ability to overcome coordination failure, (2) When starting with good coordination the use of full feedback has no effect on subjects’ ability to avoid slipping into coordination failure, and (3) History-dependence, defined as dependence of current effort levels on past incentives, is strengthened by the use of full feedback. Copyright Economic Science Association 2006

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File URL: http://hdl.handle.net/10.1007/s10683-006-7056-5
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Article provided by Springer in its journal Experimental Economics.

Volume (Year): 9 (2006)
Issue (Month): 4 (December)
Pages: 407-423

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Handle: RePEc:kap:expeco:v:9:y:2006:i:4:p:407-423
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  1. Antoni Bosch-Domènech & Nicolaas J. Vriend, 1998. "Imitation of succesful behavior in Cournot markets," Economics Working Papers 269, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  2. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  3. C.Mónica Capra & Tomomi Tanaka & ColinF. Camerer & Lauren Feiler & Veronica Sovero & CharlesN. Noussair, 2009. "The Impact of Simple Institutions in Experimental Economies with Poverty Traps," Economic Journal, Royal Economic Society, vol. 119(539), pages 977-1009, 07.
  4. Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," Industrial Organization 9803004, EconWPA.
  5. Jordi Brandts & David J. Cooper, 2004. "A Change Would Do You Good . . . An Experimental Study on How to Overcome Coordination Failure in Organizations," UFAE and IAE Working Papers 606.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Offerman, Theo & Potters, Jan & Sonnemans, Joep, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 973-97, October.
  7. repec:ner:tilbur:urn:nbn:nl:ui:12-91663 is not listed on IDEAS
  8. John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
  9. Roberto Weber & Colin Camerer & Marc Knez, 2004. "Timing and Virtual Observability in Ultimatum Bargaining and “Weak Link†Coordination Games," Experimental Economics, Springer, vol. 7(1), pages 25-48, February.
  10. Cooper, David J. & Kagel, John H., 2003. "The impact of meaningful context on strategic play in signaling games," Journal of Economic Behavior & Organization, Elsevier, vol. 50(3), pages 311-337, March.
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