Discretionary mechanisms and cooperation in hierarchies: An experimental study

This paper experimentally investigates the effects of managerial discretion over organizational inputs and –outputs on cooperation levels in a novel hierarchical public goods game. We observe treatment differences suggesting that while the introduction of hierarchy improves contribution levels vis-à-vis a baseline without hierarchy, certain combinations of discretionary contribution (the extent to which managers can contribute) and discretionary rewards (the type of share accruing to the manager) are significantly more efficacious than others. We further detect evidence in certain treatments of managers engaging in “strategic luring” i.e. nudging workers into contributing more by sacrificing their own returns in early rounds, only to expropriate the value of the public good in later stages of the game. Discretionary mechanisms may thereby constrain the scope of managerial opportunism.