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Compliance in Teams -- Implications of Joint Decisions and Shared Consequences

11 April 2019 at 12:00 PM - 2:00 PM

Room 101, Campus on Viale Romania 32

Speaker: Tim Lohse, Berlin School of Economics and Law

Abstract: In today's business environment, team work is omnipresent. However, the recent prevalence of corporate delinquencies gives rise to the fear that teams might be more prone toward dishonesty. The imminent negative consequences of uncovering non-compliance seem to lose their bite for teams. In our laboratory experiment, we investigate the determinants of teams' compliance behavior. In particular, we disentangle the effect of deciding jointly as a team from sharing the economic consequences among team members. Our findings provide evidence that teams are substantially less compliant than individuals are. This drop in compliance is driven by the shared, rather than the individual, liability of team members. In contrast, whether subjects make their decisions alone or as a team does not influence the overall compliance rate. Team decision-making is characterized by behavioral spillovers between team members, and teams predominately discuss the risk of an audit when coordinating their compliance decision. Holding each team member fully liable is therefore a promising means to deter them from going astray.

Paper link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3184169