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An experimental analysis of moral hazard in team

  • Costa, Francisco
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    This paper reports 5 laboratory sessions that analyze the effects of group sizes in the voluntary contribution mechanism, when contribution level is either complementary or substitute. The theorical argument is that each production function provides different incentives for the agent along scale changes. When contribution levels are substitutes, bigger groups provide more incentives for free-riders, thus reducing the contribution level, because of decreasing marginal contribution - the 1/N problem -, Kandel and Lazear (1992). On the other hand, if marginal contribution is independent of the group size, as the case where contributions are complementary, the public good provision may increase together with the group size, as in Adams (2002). Our experiment results show that for both production functions bigger groups reduce contribution level and that, when efforts are substitutes, the contribution level is significantly higher. (JEL: H41 J33 C92)

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    File URL: http://mpra.ub.uni-muenchen.de/2958/1/MPRA_paper_2958.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2958.

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    Date of creation: Dec 2005
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    Handle: RePEc:pra:mprapa:2958
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    1. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
    2. Isaac, R Mark & Walker, James M, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 179-99, February.
    3. Jeffery Carpenter & Samuel Bowles & Herbert Gintis, 2006. "Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity," Middlebury College Working Paper Series 0608, Middlebury College, Department of Economics.
    4. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
    5. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
    6. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
    7. Nalbantian, Haig & Schotter, Andrew, 1994. "Productivity Under Group Incentives: An Experimental Study," Working Papers 94-04, C.V. Starr Center for Applied Economics, New York University.
    8. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
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