The roles of incentives and voluntary cooperation for contractual compliance

Arbeitspapier

Efficiency under contractual incompleteness often requires voluntary cooperation in situations where self-regarding incentives for contractual compliance are present as well. Here we provide a comprehensive experimental analysis based on the gift-exchange game of how explicit and implicit incentives affect cooperation. We first show that there is substantial cooperation under non-incentive compatible contracts. Incentive-compatible contracts induce best-reply effort and crowd out any voluntary cooperation. Further experiments show that this result is robust to two important variables: experiencing Trust contracts without any incentives and implicit incentives coming from repeated interaction. Implicit incentives have a strong positive effect on effort only under non-incentive compatible contracts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CeDEx Discussion Paper Series ; No. 2011-06

Classification and Topics

• Classification: Wirtschaft ; Game Theory and Bargaining Theory: General ; Design of Experiments: General
• Subject: principal-agent games ; gift-exchange experiments ; incomplete contracts, explicit incentives ; implicit incentives ; repeated games ; separability ; experiments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gächter, Simon ; Kessler, Esther ; Königstein, Manfred
• Event: Veröffentlichung
• (who): The University of Nottingham, Centre for Decision Research and Experimental Economics (CeDEx)
• (where): Nottingham
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/49675
• Last update: 10.03.2025, 11:43 AM CET