Rent-seeking versus Productive Activities in a Multi-task Experiment

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Rent-seeking versus Productive Activities in a Multi-task Experiment

Author Info

Hessel Oosterbeek () (Universiteit van Amsterdam)
Randolph Sloof () (Universiteit van Amsterdam)
Joep Sonnemans () (Universiteit van Amsterdam)

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Abstract

Incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent-seeking incentives they provide. Standard theory predicts that a given instrument becomes less attractive when the effectiveness of rent-seeking activities increases. More recent theories that emphasize the importance of reciprocity, however, suggest that this relationship may go the other way around. In this paper we test these predictions by means of a laboratory experiment. By and large our findings confirm standard theory. Incentive instruments typically become less attractive when the scope for rent-seeking activities increases. However, reciprocity motivations do seem to mitigate the adverse effects of rent-seeking opportunities to a considerable extent.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-083/1.

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Date of creation: 28 Sep 2006
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Handle: RePEc:dgr:uvatin:20060083

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Find related papers by JEL classification:
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-2006-11-18 (All new papers)
NEP-EXP-2006-11-18 (Experimental Economics)

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