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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).

Suggested Citation

  • Cherry, Josh & Salant, Stephen & Uler, Neslihan, 2013. "Experimental Departures from Self-Interest when Competing Partnerships Share Output," Discussion Papers dp-13-07, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-13-07
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    References listed on IDEAS

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    Cited by:

    1. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2015. "Endogenous group formation in experimental contests," European Economic Review, Elsevier, vol. 74(C), pages 163-189.
    2. Fenig, Guidon & Gallipoli, Giovanni & Halevy, Yoram, 2015. "Complementarity in the Private Provision of Public Goods by Homo Pecuniarius and Homo Behavioralis," Microeconomics.ca working papers yoram_halevy-2015-21, Vancouver School of Economics, revised 02 May 2016.

    More about this item

    Keywords

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

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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