Group Identification and Decision Disclosure Effects on Costly Decisions to Reduce Group Risk

Abstract

Our experiment investigates using group identification and decision disclosure to reduce partners' tendencies to risk partnership assets for personal gain. We manipulate group identity (weak, strong) and decision disclosure (yes, no) and ask participants to decide whether to protect partnership assets from their randomly-determined bad outcomes. We find that (1) strong group-identity participants are more likely to protect their group than weak group-identity participants; (2) weak group-identity participants are more likely to protect their group when protection decisions will be disclosed; and (3) the strong group identity advantage declines when protection decisions will be disclosed. These findings are important to decentralized professional partnerships hoping to reduce reputational risk without restructuring compensation and to researchers studying incentive effects in professional settings.

Keywords: Public Goods, Reputations, Group Identity, Decision Disclosure, Firm Risk, Professional partnerships

JEL Classification: H41, L20, M49