Transparency, asymmetric information and cooperation
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Transparency, asymmetric information and cooperation Gianna Lotito1 · Matteo Migheli1,2 · Guido Ortona3 Accepted: 17 September 2020 / Published online: 16 October 2020 © The Author(s) 2020
Abstract We inquire experimentally whether asymmetric information in competitive settings and competition per se influence individual social behaviour. Participants perform a task and are remunerated according to two schemes, a non-competitive and a competitive one, then they play a standard public goods game. In the first scheme participants earn a flat remuneration, in the other they are ranked according to their performance and remunerated accordingly. Information about ranking and income before the game is played varies across three different treatments. We find that competition per se does not affect the amount of contribution. The time spent to choose how much to contribute is negatively correlated with the decision of cooperating fully. The main result is that full information about the relative performance in the competitive environment enhances the cooperation, while partial information reduces it. Keywords Incomplete contracts · Asymmetric information · Competition · Cooperation · Public goods · Experiments JEL Classification C91 · D80 · H41
1 Introduction Asymmetric information is a central topic of the economics literature (Hillier 1997) and is strictly related to the theory of incomplete contracts (Grossman and Hart 1986). Full information and contractual completeness is indeed one of the Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1065 7-020-09669-z) contains supplementary material, which is available to authorized users. * Matteo Migheli [email protected] 1
Department of Economics and Statistics “Cognetti de Martiis”, Università di Torino, Lungo Dora Siena 100, 10153 Turin, Italy
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Turin Centre on Emerging Economies, Piazza Arbarello, 8, 10123 Turin, Italy
3
DiGSPES, Università del Piemonte Orientale, via Cavour, 15100 Alessandria, Italy
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European Journal of Law and Economics (2020) 50:267–294
fundamental hypotheses on which the theory of perfect competition rests: indeed full and perfect information is assumed during all the performance of a contract, since when it is signed until all the obligations are completed. Competitive markets with incomplete contracts are therefore imperfect, and, indeed, economic theory considers asymmetric information within the category of the failures of perfectly competitive markets. Such an incompleteness stands for the absence of some pieces of information about what would happen if some circumstances, which are not explicitly mentioned in the contract, occurred. In this context, Spier (1992) shows that asymmetric information on the quality of the parties of a contract may also lead to contractual incompleteness, which, however, signalling may solve. Indeed, in presence of performance incentives, agents are induced to signal their ability through effort. Such an issue is of partic
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