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The Interaction between Explicit and Relational Incentives: An Experiment

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Author Info
Randolph Sloof () (University of Amsterdam)
Joep Sonnemans () (University of Amsterdam)

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Abstract

We consider repeated trust game experiments to study the interplay between explicit and relational incentives. After having gained experience with two payoff variations of the trust game, subjects in the final part explicitly choose which of these two variants to play. Theory predicts that subjects will choose the payoff dominated game (representing a bad explicit contract), because this game better sustains (implicit) relational incentives backed by either reputational or reciprocity considerations. We also explicitly test how game choice is affected by the length of the repeated game.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-030/1.

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Date of creation: 14 Apr 2009
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Handle: RePEc:dgr:uvatin:20090030

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Related research
Keywords: relational contracts; explicit incentives; crowding out; experiments;

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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
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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