The Discontinuity Effect: The Interaction of Joint Decision-Making with Formal and Informal Sanction Mechanisms

Teams are an increasingly popular unit in economic decision making, yet
decisions made by teams are treated as synonymous to those made by
individuals in traditional economic theory. However, where individuals have
been documented to deviate from theoretical predictions both experimentally
and empirically, teams have been shown to be more cognitively able and to
behave more rationally, referred to as the 'discontinuity effect'. This
dissertation project is the first to explore this effect in its application to
institutional choices and self-organisation.
This will be achieved using three experimental projects which focus on
formal and informal mechanisms to correct non-cooperative behaviour in a
linear public goods game. In each setting the behaviour of the team as a
single decision making unit will be compared to that of the individual in the
areas including contribution levels and reward/sanction behaviour.
Furthermore, complimenting each of these projects will be a theoretical
analysis using behavioural models.
The first project will explore the ability of the team to design an effective
formal mechanism by voting on sanction and redistribution parameters. The
second project compares the use of formal and informal mechanisms,
including which is more preferable and under which higher contribution
levels are achieved. The final project will examine the use of exogenouslyimposed
and endogenously-adopted mechanisms, thus identifying whether
a 'democracy premium' exists, and whether it is more relevant to teams. It
is hypothesised that the unique features of group behaviour will allow for
more robust and sustainable mechanisms to be designed and implemented.