Discussion Papers 745
6 Regression analysis
team partner. In the symmetric cost situation, the partner’s minimum required effort is 28.13
In the asymmetric cost situation, the low-cost player requires from his partner a minimum
effort of 20, while the high-cost player requires a minimum effort of 17.14 The latter require-
ment is likely to be satisfied as the low-cost player’s dominant strategy in team remuneration
is 20 and thus above the required minimum.
We do not expect participants to be able to compute exactly those numbers and therefore
create the following two binary variables. “Partner’s effort above a strategic level” takes a
value of “1” if the last time that team remuneration was realized the partner chose an effort
larger or equal to 6 units above the required effort as determined above, or “0” otherwise.
“Partner’s effort below a strategic level” takes a value of “1” if the last time that team remu-
neration was realized the partner chose an effort smaller or equal to six units below the requi-
red effort as determined above, or “0” otherwise. The choice of six units around the required
minimum is arbitrary. However, analyses with other numbers around 6 have not substantially
changed the results.
The random effects probit regression results are presented in Table 2. In both the VOLUNTA-
RY SYM and the VOLUNTARY ASYM treatment and for both cost types, we observe that
“partner’s effort above a strategic level” significantly increases the probability of choosing
team remuneration. The coefficient of “partner’s effort below a strategic level,” however, is
not statistically significant. These results indicate some kind of reciprocity, which shows in
the participants’ choice of the remuneration mode.
In the VOLUNTARY SYM treatment, we observe a negative end-game effect: in the final peri-
ods of the game, participants are more likely than before to choose private remuneration.
In the VOLUNTARY ASYM treatment, we observe a significant negative first period effect in
one specification for the low-cost player, while the variable “1st period” is insignificant for the
high-cost players. The latter is not surprising as the high-cost players have, according to the
game-theoretical solution, an interest in team remuneration that is independent of the other
13 The participant’s dominant strategy in the case of team remuneration is 25. We solve the following equation to
determine the partner’s effort X that makes the participant indifferent to team and private remuneration: 203 =
10(25 + X)/2 - (252/10), where 203 is the (rounded) maximum profit in private remuneration.
14 The following equations are solved for X, respectively: (1) 123 = 8(20 + X)/2 - (202/10), where 123 is the low-
cost player’s (rounded) maximum profit in private remuneration and 20 his dominant strategy in team remunera-
tion. (2) 98 = 8(16 + X)/2 - (162/8), where 98 is the high-cost player’s maximum profit in private remuneration and
16 his dominant strategy in team remuneration.
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