Discussion Papers 745
7 Conclusion
This is in keeping with the results by Ernst Fehr and his coauthors (e.g., Gachter and Fehr
1999, Fehr and Gachter 2000b). They provide experimental evidence that compared to com-
plete labor contracts, incomplete contracts have an advantage in that they leave room for
cooperation between the employer and the employee.
In our experiment there is room to “overdo” one’s effort by going beyond the individual effort
level that would be joint profit maximizing. We observe that participants often overdo effort
in the voluntary symmetric treatment but not in the enforced symmetric treatment. Thus, sim-
ple error making cannot be the sole explanation for choosing effort levels above the joint
profit-maximizing level. Another explanation could be that participants are signaling that they
are interested in cooperation. A participant who expects the other to make a very low effort
and who wants to send a very strong signal could have an interest in making an effort above
the joint profit-maximizing level. In the bulk of experiments on voluntary contributions to
finance a public good this is excluded by design.
In asymmetric experiments, where it is not so clear where cooperation should take place, the
effort increase by voluntary teaming is not very significant. This is probably due to the rela-
tively small number of independent observations. The effect shows more clearly in that the
voluntary team effort levels are much more contained around and between the subgame per-
fect equilibrium and the joint profit-maximizing solution than in the case of enforced teaming,
where effort levels are spread out over the entire strategy space. Obviously, voluntary teaming
helps participants to better coordinate than enforced teaming. Once they have agreed on team
remuneration, participants have already made some investment by giving up on their higher
private remuneration rate. Similar evidence has been found by Cachon and Camerer (1996),
who observe that a fixed entry fee for subjects participating in a coordination game improves
coordination significantly. In our experiments, considering the game-theoretical solution, it is
in particular the low-cost players who signal a commitment to attempt cooperation by their
choice of team remuneration. Having made that choice, they are willing to make a somewhat
higher effort than in enforced teaming (34.51 rather than 31.14). The difference is not statisti-
cally significant, probably due to the relatively low number of independent observations. But,
while the enforced team effort is significantly lower than the joint profit-maximizing effort,
we observe no significant difference between the voluntary team effort and the joint profit-
maximizing effort.
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