Endogenous group formation in experimental contests

Abstract

We study endogenous group formation in tournaments employing experimental three-player contests. We …nd that players in endogenously formed alliances cope better with the moral hazard problem in groups than players who are forced into an alliance. Also, players who are committed to expending e¤ort above average choose to stand alone. If these players are forced to play in an alliance, they invest even more, whereas their co-players choose lower e¤ort. Anticipation of this exploitation may explain their preference to stand alone.JEL codes: D72, D74

Team formation with complementary skills

“…Self‐organization has the potential to further amplify this benefit of teams—provided that agents are able to successfully partner with those individuals whose skills best complement their own. Both laboratory and field studies, along with anecdotal evidence, indicate that enabling workers to voluntarily join teams can have a positive impact on overall productivity (Hamilton, Nickerson, & Owan, ; Herbst, Konrad, & Morath, ). However, this study has thus far focused on how much effort teammates exert, rather than how they allocate effort across distinct tasks or whether endogenous team formation can enable agents to form teams that exploit skill complementarities.…”

“…Herbst et al () study endogenous group formation in contests, in which three players can compete independently against each other or two players can form an alliance against the third. The participants, therefore, face the question of whether to form a team, but cannot choose with whom to align.…”

“…Despite this, alliances that are formed voluntarily produce significantly more effort than those formed randomly. As less applicable to the current study, a recent review of the alliance formation literature is provided in Herbst et al ().…”

To Deter or to Moderate? Alliance Formation in Contests With Incomplete Information

“…They find that stronger players are more likely to abstain from alliance formation and to stand alone. Herbst, Konrad, and Morath (), in a different experimental setup, also study the role of self‐selection in endogenous alliances. Their study is motivated by the example of Wilhelm Tell.…”

“…The experiment by Herbst, Konrad, and Morath () also offers a theoretical analysis of the Tullock () lottery contest that corresponds to their experimental setup, assuming, however, that all decisions are made under perfect and complete information.…”