Experimental Economics

, Volume 16, Issue 3, pp 426–441 | Cite as

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

  • Susana Cabrera
  • Enrique Fatás
  • Juan A. Lacomba
  • Tibor Neugebauer
Article

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.

Keywords

Experiment Group incentives Organization design 

JEL Classification

C92 H41 J33 J4 

Supplementary material

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Copyright information

© Economic Science Association 2012

Authors and Affiliations

  • Susana Cabrera
    • 1
  • Enrique Fatás
    • 2
  • Juan A. Lacomba
    • 3
  • Tibor Neugebauer
    • 4
  1. 1.University of MálagaMálagaSpain
  2. 2.University of East AngliaNorwichUK
  3. 3.GLOBEUniversity of GranadaGranadaSpain
  4. 4.LSFUniversity of LuxembourgLuxembourgLuxembourg

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