Experimental Departures from Self-Interest When Competing Partnerships Share Output

Resources for the Future Discussion Paper No. 13-07

40 Pages Posted: 27 Mar 2013

See all articles by Josh Cherry

Josh Cherry

University of Michigan at Ann Arbor - Department of Economics

Stephen W. Salant

University of Michigan; Resources for the Future

Neslihan Uler

University of Michigan at Ann Arbor

Date Written: March 11, 2013

Abstract

When every individual's effort imposes negative externalities, self-interested behavior leads to socially excessive effort. To curb these excesses when effort cannot be monitored, competing output-sharing partnerships can form. With the right-sized groups, aggregate effort falls to the socially optimal level. We investigate this theory experimentally and find it makes correct qualitative predictions but there are systematic quantitative deviations, always in the direction of the socially optimal investment. By using data on subjects' conjectures of each other's behavior we show that deviations are consistent with both altruism and conformity (but not extremeness aversion).

Keywords: output-sharing, partnership solution, laboratory experiment, altruism, conformity

JEL Classification: L23, Q20, Q22, O13

Suggested Citation

Cherry, Josh and Salant, Stephen W. and Uler, Neslihan, Experimental Departures from Self-Interest When Competing Partnerships Share Output (March 11, 2013). Resources for the Future Discussion Paper No. 13-07, Available at SSRN: https://ssrn.com/abstract=2239883 or http://dx.doi.org/10.2139/ssrn.2239883

Josh Cherry

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Stephen W. Salant (Contact Author)

University of Michigan ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
313-764-2370 (Phone)
313-764-2769 (Fax)

Resources for the Future ( email )

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Neslihan Uler

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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