Incentive Design and Trust: Comparing the Effects of Tournament and Team-Based Incentives on Trust

Robert J. Oxoby () and Colette Friedrich ()
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Colette Friedrich: MIT

No 3424, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We explore the extent to which the structure of incentives affects trust. We hypothesize that the degree to which different incentive mechanisms emphasize competition (via the perceived intentions of others) and entitlements (via the perceived property rights) will affect individuals’ subsequent behavior. In our experiment, bargaining pairs earned endowments through either tournaments or team-based incentives. Participants engaged in a subsequent trust game in which the sender had access to the total endowment generated by the pair. We find that the structure of the incentive mechanisms has asymmetric effects on observed trust in which participants’ relative performance framed trusting behavior.

Keywords: trust; incentives; experiments; tournaments (search for similar items in EconPapers)
JEL-codes: J31 J33 C92 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp and nep-soc
Date: 2008-03
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Working Paper: Incentive Design and Trust: Comparing the Effects of Tournament and Team-Based Incentives on Trust (2008)
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