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TILEC Work in Progress: Yadi Yang

Delegation in social dilemmas: An experimental study
10:45-11:45, T50A


In a two-stage social dilemma game with delegation, where the profit-maximizing principals first set incentive schemes for the agents as a weighted sum of his own principal's profit and the rival principal's profit and then the agents compete in strategic complements or strategic substitutes, the principals may choose different incentive schemes for their agents at their own best interest, depending on the strategic feature of the game. We present a model predicting that when decision variables are strategic substitutes, principals set more competitive incentives, while they set more cooperative incentives with strategic complements. A lab experiment finds competitive incentives in the treatment with strategic substitutes, while principals do not set cooperative incentive schemes in the treatment with strategic complements. Agents behave more cooperatively in the complement treatment than what their incentives induce them to do, which makes it rational for the principals to also set competitive incentive schemes in the case with strategic complements.

When: 10 January 2018 10:45

End date: 10 January 2018 11:45