CeDEx workshop - Ro'i Zultan (UCL)

Information Chains and Reciprocity in Teams

Contributions to a team project can be influenced by the production technology and by the information structure. This paper studies the interaction between technology and information in inducing cooperation. We show that when the technology induces positive externalities between agents, a rich information structure can incentivize more agents to contribute in equilibrium. However, in such a setup indirect transparency is as efficient as full transparency, namely it is enough that each agent observes only her immediate predecessor. We report on an experiment comparing different information structures to show that indirect transparency is at least as efficient as full transparency in facilitating cooperation, as predicted by theory. Furthermore, we test whether intrinsic taste for reciprocity is enough to give rise to the same structure as when reciprocal strategies are supported by the monetary incentives. We find significant evidence for reciprocal strategies; however these are not strong enough to support a beneficial effect of transparency. More specifically, we find that increased transparency within the team has two opposite effects. Early movers are more likely to contribute when they are observed, whereas late movers are more likely to defect in response to observing defection in the past. Thus, partial, or indirect, transparency is most efficient in inducing contributions, as it benefits from positive reciprocity while not being significantly harmed by negative reciprocity. Our results have implications for designing labor environments as well as for the study of social dilemmas.