Facilitating efficient coordination in large groups: small incentive payments in nested groups
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Facilitating efficient coordination in large groups: small incentive payments in nested groups Yohei Mitani1 · Kohei Suzuki1 Received: 18 October 2019 / Revised: 11 August 2020 / Accepted: 18 August 2020 © Economic Science Association 2020
Abstract Most large real-world organizations contain multiple smaller groups, such as working groups within firms. However, can this sort of nested groups be used to alleviate coordination failures in the larger group? We report on a multi-player Stag Hunt experiment wherein we hierarchically structure a large group into mutually exclusive small groups. We offer varying incentive payments if efficient coordination is achieved at a large or small group level. The novelty of our design is that we hold the total payment size constant between treatments. In our nested incentive treatment, we reduce the reward for achieving large-group coordination by a small amount and reallocate the same amount to successful small-group coordination. The results reveal that incentive reallocations privileging small groups facilitate efficient large-group coordination in the nested group structure. Keywords Experiments · Large-group coordination · Nested groups · Coordination games JEL Classification C92 · C91 · M52 · D02 · C72
1 Introduction Tacit coordination on the payoff-dominant equilibrium is extremely challenging to achieve for large groups in laboratory experiments (Devetag and Ortmann 2007). To overcome large-group coordination failures, previous studies using a minimum effort game have proposed mechanisms that benefit from efficient coordination Electronic supplementary material The online version of this article (https://doi.org/10.1007/s4088 1-020-00093-2) contains supplementary material, which is available to authorized users. * Yohei Mitani mitani.yohei.7w@kyoto‑u.ac.jp; [email protected] 1
Division of Natural Resource Economics, Graduate School of Agriculture, Kyoto University, Kyoto 606‑8502, Japan
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Fig. 1 Group composition with three local and one global group
initially achieved in very small groups. Weber (2006) shows that large groups can coordinate when groups start small and more players are gradually added. Riedl et al. (2016) find that giving players in large groups the freedom to choose neighbors resolves coordination failures. While these studies provide significant insights into better understanding how large groups can possibly achieve efficient coordination, they do not address the question of how to take advantage of the group structures that exist in many real-world organizations. Our starting point is the observation that most real-world groups or organizations contain multiple smaller groups (e.g. work units within firms, departments within universities, assembly lines in factories, core units within football teams). For example, a large firm like Continental Airlines comprises multiple work groups of employees. The firm-wide performance depends on coordinated efforts among all employees in the firm, whil
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