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A Gift-Exchange With Probabilistic Payoffs

Author

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  • Miguel Luzuriaga

    (HNU University of Applied Sciences Neu-Ulm, Neu-Ulm, Germany)

  • Oliver Kunze

    (HNU University of Applied Sciences Neu-Ulm, Neu-Ulm, Germany)

Abstract

This article describes how there exists ample experimental evidence demonstrating a positive wage-effort relationship in which the results from the employee's effort lead to deterministic firm payoffs. The authors thus investigate a reframed version of the gift-exchange game in which the firms' payoffs can take two values, one of them is randomly determined by an external process after the effort choice has been made. They find that effort levels are significantly lower when payoffs are probabilistic than when they are deterministic. As a consequence, high waging is profitable in the deterministic, but not in the probabilistic condition. Moreover, the treatment effect is strongest among firms which offer high wages.

Suggested Citation

  • Miguel Luzuriaga & Oliver Kunze, 2017. "A Gift-Exchange With Probabilistic Payoffs," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 6(4), pages 1-18, October.
    • Handle: RePEc:igg:jabe00:v:6:y:2017:i:4:p:1-18
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    File URL: http://services.igi-global.com/resolvedoi/resolve.aspx?doi=10.4018/IJABE.2017100101
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    Cited by:

    1. van den Akker, Olmo R. & van Assen, Marcel A.L.M. & van Vugt, Mark & Wicherts, Jelte M., 2020. "Sex differences in trust and trustworthiness: A meta-analysis of the trust game and the gift-exchange game," Journal of Economic Psychology, Elsevier, vol. 81(C).

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