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Employee Types and Endogenous Organizational Design

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Author Info
Antoni Cunyat (University of Valencia)
Randolph Sloof () (University of Amsterdam)

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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 monitoring. This paper reports the results from a laboratory experiment designed to test whether organizations make full effective use of the available preference types within their work force when drafting their organizational design. Our main finding is that they do not do so; although the importance of social preferences is recognized by those choosing the organizational mode, the significant impact managers' preferences have on the behavior of workers in the organization seems to be overlooked.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-019/1.

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Date of creation: 20 Feb 2008
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Handle: RePEc:dgr:uvatin:20080019

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Related research
Keywords: Organizational design; social preference types; experiments;

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General

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  1. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, 01. [Downloadable!] (restricted)
    Other versions:
    • Ernst Fehr & Alexander Klein & Klaus M. Schmidt, 2005. "Fairness and Contract Design," Discussion Papers 67, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  2. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2008. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," IZA Discussion Papers 3917, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May. [Downloadable!] (restricted)
    Other versions:
  4. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  5. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  6. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2007. "Incentives for Managers and Inequality Among Workers: Evidence From a Firm-Level Experiment," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 729-773, 05. [Downloadable!] (restricted)
    Other versions:
  7. Ernst Fehr & John A. List, 2004. "The Hidden Costs and Returns of Incentives - Trust and Trustworthiness among CEOs," Artefactual Field Experiments 0039, The Field Experiments Website. [Downloadable!]
    Other versions:
  8. Marie-Claire Villeval & David Dickinson, 2004. "Does Monitoring Decrease Work Effort ? The Complementarity Between Agency and Crowding-Out Theories," Working Papers 0409, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
    Other versions:
  9. Johnson, Eric J. & Camerer, Colin & Sen, Sankar & Rymon, Talia, 1998. "Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining," Working Papers 1040, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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    Other versions:
  11. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
  12. Johnson, Eric J. & Camerer, Colin & Sen, Sankar & Rymon, Talia, 2002. "Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining," Journal of Economic Theory, Elsevier, vol. 104(1), pages 16-47, May. [Downloadable!] (restricted)
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