Splitting leagues: Promotion and demotion in contribution-based regrouping experiments

Cabrera, S., Fatas, Enrique, Lagos, F. and Lacomba, J.A. (2013) Splitting leagues: Promotion and demotion in contribution-based regrouping experiments. Experimental Economics, 16 (3). pp. 426-441.

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Abstract

The paper reports an experimental study on a promotion-demotion mechanism to mitigate the free-rider problem in a voluntary contribution setting. The mechanism hierarchically splits a group in two; we refer to one subgroup as the Major league and to the other as the minor league. The most cooperative subject of the minor league is switched with the least cooperative subject in the Major league. The results reveal a significant increase of cooperation levels in both leagues relative to the standard voluntary contribution mechanism. We argue that a lack of sequentially-rational beliefs about continuation payoffs in Major and minor leagues leads to higher equilibrium contributions. The data suggest beyond that, the promotion-demotion mechanism regroups subjects deliberately according to their cooperativeness.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
University of East Anglia > Faculty of Social Sciences > Research Groups > Applied and Financial Economics
University of East Anglia > Faculty of Social Sciences > Research Groups > Experimental Economics
University of East Anglia > Faculty of Social Sciences > Research Groups > Industrial Economics
University of East Anglia > Faculty of Social Sciences > Research Groups > Behavioural and Experimental Economics
Depositing User: Julie Frith
Date Deposited: 16 Jan 2013 15:10
Last Modified: 29 Aug 2018 10:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/40782
DOI: 10.1007/s10683-012-9346-4

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