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The Interaction between Explicit and Relational Incentives: An Experiment

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  • Randolph Sloof

    (University of Amsterdam)

  • Joep Sonnemans

    (University of Amsterdam)

Abstract

This discussion paper resulted in a publication in 'Games and Economic Behavior' , 73(2), 573-94. 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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Bibliographic 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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Web page: http://www.tinbergen.nl

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

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References

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Citations

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Cited by:
  1. Diathesopoulos, Michael, 2010. "Relational contract theory and management contracts: A paradigm for the application of the Theory of the Norms," MPRA Paper 24028, University Library of Munich, Germany.
  2. David A. Miller & Joel Watson, 2013. "A Theory of Disagreement in Repeated Games With Bargaining," Econometrica, Econometric Society, vol. 81(6), pages 2303-2350, November.
  3. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.

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