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

Alexia Gaudeul, Paolo Crosetto and Gerhard Riener

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

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.

Keywords: BREAKUP; COLLABORATION; COOPERATION; EXIT; IMPERFECT PUBLIC MONITORING; MORAL HAZARD; PARTNERSHIP; PUNISHMENT; PUBLIC GOOD; REPEATED GAME; SOCIAL RISK; TEAM (search for similar items in EconPapers)
JEL-codes: C23 C92 H41 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-cta, nep-exp, nep-gth, nep-hpe and nep-ppm
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https://gael.univ-grenoble-alpes.fr/sites/default/ ... 2014/gael2014-02.pdf (application/pdf)

Related works:
Working Paper: Of the stability of partnerships when individuals have outside options, or why allowing exit is inefficient (2015)
Working Paper: Fear of being left alone drives inefficient exit from partnerships. An experiment (2014)
Working Paper: Partnerships, Imperfect Monitoring and Outside Options: Theory and Experimental Evidence (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:gbl:wpaper:2014-02

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