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Intergroup competition with an endogenously determined prize level

Yi-Yi Chen

Journal of Economic Behavior & Organization, 2020, vol. 178, issue C, 759-776

Abstract: To mitigate free-rider problems in teamwork, this paper uses laboratory experiments to test a mechanism in which a firm creates a competitive environment for its two teams by awarding a prize based on the aggregate output produced by these two teams. The experimental results support the prediction that the proposed mechanism encourages a greater number of team members to make costly contributions. In the experimental protocol with random matching of team members across decision periods, team members are found to over-contribute relative to the theoretical prediction. This result is linked to team members’ beliefs that their team has lower contributions than the competing team. In contrast, with a fixed matching protocol, team members’ over-contributing is linked to conditional cooperation, based on their beliefs about the contributions of other team members.

Keywords: Public goods provision; Intergroup competition; Intergroup comparison; Conditional cooperation; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C92 H41 L22 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jebo.2020.07.034

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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Handle: RePEc:eee:jeborg:v:178:y:2020:i:c:p:759-776