Affordable Access

Access to the full text

Solving coordination failure with “all-or-none” group-level incentives

Authors
  • Hamman, John
  • Rick, Scott
  • Weber, Roberto A.
Type
Published Article
Journal
Experimental Economics
Publisher
Springer US
Publication Date
Aug 09, 2007
Volume
10
Issue
3
Pages
285–303
Identifiers
DOI: 10.1007/s10683-007-9179-8
Source
Springer Nature
Keywords
License
Yellow

Abstract

Coordinating activity among members is an important problem faced by organizations. When firms, or units within firms, are stuck in bad equilibria, managers may turn to the temporary use of simple incentives—flat punishments or rewards—in an attempt to transition the firm or unit to a more efficient equilibrium. We investigate the use of incentives in the context of the “minimum-effort,” or “weak-link,” coordination game. We allow groups to reach the inefficient equilibrium and then implement temporary, flat, “all-or-none” incentives to encourage coordination on more efficient equilibria. We vary whether incentives are positive (rewards) or negative (penalties), whether they have substantial or nominal monetary value, and whether they are targeted to a specific outcome (the efficient equilibrium) or untargeted (apply to more than one outcome). Overall, incentives of all kinds are effective at improving coordination while they are in place, but there is little long-term persistent benefit of incentives—once incentives are removed, groups tend to return to the inefficient outcome. We find some differences between different kinds of incentives. Finally, we contrast our results to other recent work demonstrating greater long-term effectiveness of temporary incentives.

Report this publication

Statistics

Seen <100 times