The Individual-Team Discontinuity Effect on Institutional Choices: Experimental Evidence in Voluntary Public Goods Provision

<p><span>A laboratory experiment finds that teams acting as a decision-making unit through communication behave more efficiently than individuals. Decision-making units vote on formal and informal sanctions in a repeated public goods dilemma. When a formal scheme is selected, teams vote for deterrent sanction rates more frequently than individuals. When an informal scheme is selected, teams inflict costly punishment more frequently towards low contributors. As such, teams sustain cooperation more efficaciously than individuals. The results underscore the effectiveness of utilizing teams as a decision-making unit in organizations in combating moral hazard, such as free riding.</span></p>