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Fear of being left alone drives inefficient exit from partnerships. An experiment

Author

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  • Alexia Gaudeul

    (DFG RTG 1411, Friedrich-Schiller-Universität Jena)

  • Paolo Crosetto

    (UMR GAEL INRA, Universite Pierre Mendes France, Grenoble)

  • Gerhard Riener

    (DICE, Heinrich-Heine-Universität Düsseldorf)

Abstract

We explore in an experiment what leads to the breakdown of partnerships. Subjects are assigned a partner and participate in a repeated public good game with stochastic outcomes. They can choose each period between staying in the public project or working on their own. There is excessive exit as subjects overestimate the likelihood their partner will leave. High barriers to exit thus improve welfare. We observe that exit is driven by failure within the common project but also by pay-off comparisons across options and beliefs about being exploited. Those considerations increasingly matter as we lower exit costs across treatments.

Suggested Citation

  • Alexia Gaudeul & Paolo Crosetto & Gerhard Riener, 2014. "Fear of being left alone drives inefficient exit from partnerships. An experiment," Jena Economic Research Papers 2014-012, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2014-012
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    More about this item

    Keywords

    breakup; collaboration; cooperation; exit; imperfect public monitoring; moral hazard; partnerships; punishment; public good; repeated game; social risk; teams;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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