The interaction between explicit and relational incentives: An experiment

Randolph Sloof and Joep Sonnemans ()

Games and Economic Behavior, 2011, vol. 73, issue 2, 573-594

Abstract: We consider repeated trust game experiments to study the interplay between explicit and relational incentives. After having gained experience with two payoff variations of the trust game, subjects in the final part explicitly choose which of these two variants to play. Theory predicts that subjects will choose the payoff dominated game (representing a bad explicit contract), because this game better sustains (implicit) relational incentives backed by either reputational or reciprocity considerations. Our main findings are that cooperation is indeed more likely in the payoff dominated game. Moreover, indefinite repetition increases both cooperation rates and the likelihood with which the payoff dominated game is chosen. Overall we conclude that available explicit incentives indeed do affect relational contracting and, anticipating this, agents may choose weak explicit incentives to facilitate implicit agreements.

Keywords: Relational contracts; Explicit incentives; Crowding out; Experiments (search for similar items in EconPapers)
JEL-codes: C91 J41 M52 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: The Interaction between Explicit and Relational Incentives: An Experiment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:73:y:2011:i:2:p:573-594

DOI: 10.1016/j.geb.2011.03.006

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