Observability and Overcoming Coordination Failure in Organizations

Jordi Brandts and David Cooper ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: Many organizations suffer poor performance because its members fail to coordinate on efficient patterns of behavior. In previous research, we have shown that financial incentives can be used to find a way out of such performance traps. Here we examine the sensitivity of this result to the ability of people to observe others' choices. Our experiments are set in a corporate environment where subjects' payoffs depend on coordinating at high effort levels; the underlying game being played repeatedly by the employees of an experimental firm is a weak-link game. Treatments vary along two dimensions. First, subjects either start with low financial incentives for coordination, which typically leads to coordination failure, and then are switched to higher incentives or start with high incentives, which typically yield effective coordination, and are switched to low incentives. Second, as the key treatment variable, subjects either observe the effort levels chosen by all employees in their experimenta

Keywords: Incentives; Coordination; Observation; Experiments; Organizations (search for similar items in EconPapers)
JEL-codes: C92 D23 J31 L23 M52 (search for similar items in EconPapers)
Pages: 32
Date: 2004-10-01
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:630.04

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