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Employee types and endogenous organizational design: An experiment

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  • Cunyat, Antoni
  • Sloof, Randolph

Abstract

When managers are sufficiently guided by social preferences, incentive provision through an organizational mode based on informal implicit contracts may provide a cost-effective alternative to a more formal mode based on explicit contracts and active monitoring. This paper reports the results from a stylized laboratory experiment designed to test whether subjects in the role of firm owner rely on the social preferences of other (‘employee’) subjects with whom they are matched when choosing which payoff version of a simple trust game these employee subjects should play (‘the organizational mode’). Our main finding is that they do so, albeit in a different way than theory predicts. The importance of the first mover's social preferences for trusting behavior is recognized by the owner subjects, but the significant (first order) impact second movers’ social preferences have on trusting behavior of first movers seems to be overlooked.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 80 (2011)
Issue (Month): 3 ()
Pages: 553-573

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Handle: RePEc:eee:jeborg:v:80:y:2011:i:3:p:553-573

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Social preferences; Organizational design; Experiments; Implicit contracts;

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Cited by:
  1. Climent Quintana Domeque & Sonia Oreffice, 2010. "Anthropometry and socioeconomics in the couple: evidence from the PSID," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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