Gift Exchange and the Separation of Ownership and Control

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Gift Exchange and the Separation of Ownership and Control

Author Info

Sandra Maximiano () (Faculty of Economics and Econometrics, Universiteit van Amsterdam)
Randolph Sloof () (Faculty of Economics and Econometrics, Universiteit van Amsterdam)
Joep Sonnemans (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

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Abstract

Numerous gift exchange experiments have found a positive relationship between employers' wage offers and workers' effort levels. In (almost) all these experiments the employer both owns and controls the firm. Yet in reality many firms are characterized by the separation of ownership and control. In this paper we explore to what extent this affects the wage-effort relationship observed. We compare the standard bilateral gift exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage-effort relationship we observe is the same in all three situations. Most strikingly, workers still reward higher wages with higher effort levels, even when the manager responsible for choosing the wage does not share in the firm's profits at all. The results of a fourth treatment in which the wage is exogenously given suggest that workers feel reciprocal towards the firm as a whole; both ownership and control are important for the gift exchange relationship.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-037/1.

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Date of creation: 06 Apr 2006
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Handle: RePEc:dgr:uvatin:20060037

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Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-04-22 (All new papers)
NEP-EXP-2006-04-22 (Experimental Economics)
NEP-SOC-2006-04-22 (Social Norms & Social Capital)

References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Robert Dur & Hein Roelfsema, 2006. "Social Exchange and Common Agency in Organizations," Working Papers 06-11, Utrecht School of Economics. [Downloadable!]
Other versions:
- Robert Dur & Hein Roelfsema, 2007. "Social Exchange and Common Agency in Organizations," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
- Robert Dur & Hein Roelfsema, 2006. "Social Exchange and Common Agency in Organizations," Tinbergen Institute Discussion Papers 06-111/1, Tinbergen Institute, revised 02 Jul 2007. [Downloadable!]

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