Observability and overcoming coordination failure in organizations: An experimental study |
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Authors: | Jordi Brandts David J Cooper |
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Institution: | (1) Institut d’Anàlisi Econòmica (CSIC), Campus UAB, 08193 Barcelona (Bellaterra), Spain;(2) Department of Economics, Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, OH 44106-7206, USA |
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Abstract: | Motivated by problems of coordination failure in organizations, we examine how overcoming coordination failure and maintaining
coordination depend on the ability of individuals to observe others’ choices. Subjects’ payoffs depend on coordinating at
high effort levels in a weak-link game. Treatments vary along two dimensions. First, subjects either start with low financial
incentives for coordination, which typically leads to coordination failure, and then are switched to higher incentives or
start with high incentives, which usually yield effective coordination, and are switched to low incentives. Second, as the
key treatment variable, subjects either observe the effort levels chosen by all individuals in their experimental group (full
feedback) or observe only the minimum effort (limited feedback). We find three primary results: (1) When starting from coordination
failure the use of full feedback improves subjects’ ability to overcome coordination failure, (2) When starting with good
coordination the use of full feedback has no effect on subjects’ ability to avoid slipping into coordination failure, and
(3) History-dependence, defined as dependence of current effort levels on past incentives, is strengthened by the use of full
feedback.
Electronic Supplementary Material Supplementary material is available in the online version of this article at
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JEL Classification C92, D23, J31, L23, M52 |
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Keywords: | Incentives Coordination Observation Experiments Organizations |
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