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Partnership, Reciprocity and Team Design

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Abstract

This paper studies the impact of intention-based reciprocity preferences on the free-riding problem arising in partnerships. Our results suggest a tendency of efficient partnerships to consist of members whose sensitivity to reciprocity is -- individually or jointly -- sufficiently high. Sufficient conditions for the implementation of the efficient strategy profile require a reciprocity based sharing rule such that each partner gets a fraction of the output that is a percentage of his own reciprocity with respect to the overall reciprocity in the team. Finally, we introduce the concept of psychological strong Nash equilibrium and show that it allows for the unique and collusion-proof implementation of the efficient strategy profile.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 257.

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Date of creation: 31 Jul 2010
Date of revision: 24 Mar 2011
Publication status: Forthcoming in Research in Economics
Handle: RePEc:sef:csefwp:257

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Keywords: Reciprocity; partnership; psychological games;

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References

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  1. Georg Kirchsteiger & Martin Dufwenberg, 2000. "Reciprocity and wage undercutting," ULB Institutional Repository 2013/5905, ULB -- Universite Libre de Bruxelles.
  2. Legros, Patrick & Matsushima, Hitoshi, 1991. "Efficiency in partnerships," Journal of Economic Theory, Elsevier, vol. 55(2), pages 296-322, December.
  3. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
  4. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. De Marco Giuseppe & Immordino Giovanni, 2014. "Reciprocity in the Principal–Multiple Agent Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 38, January.
  6. Pedro Rey-Biel, 2007. "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
  7. Florian Englmaier & Stephen G. Leider, 2008. "Contractual and Organizational Structurewith Reciprocal Agents," CESifo Working Paper Series 2415, CESifo Group Munich.
  8. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  9. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  10. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Working Papers 287, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  11. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  12. Nick Netzer & Armin Schmutzler, 2009. "Rotten Kids With Bad Intentions," SOI - Working Papers 0919, Socioeconomic Institute - University of Zurich, revised Nov 2011.
  13. Björn Bartling & Ferdinand A. von Siemens, 2010. "Equal Sharing Rules in Partnerships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 299-320, June.
  14. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
  16. Jianpei Li, 2009. "Team production with inequity-averse agents," Portuguese Economic Journal, Springer, vol. 8(2), pages 119-136, August.
  17. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
  18. David Rahman & Ichiro Obara, 2010. "Mediated Partnerships," Econometrica, Econometric Society, vol. 78(1), pages 285-308, 01.
  19. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 43-57, January.
  20. Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1997. "Reciprocity as a contract enforcement device: experimental evidence," ULB Institutional Repository 2013/5911, ULB -- Universite Libre de Bruxelles.
  21. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
  22. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  23. Dilip Mookherjee, 1982. "Optimal Incentive Schemes in Multiagent Situations (Now published in Review of Economic Studies, (1984).)," STICERD - Theoretical Economics Paper Series 57, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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Cited by:
  1. Matteo Bassi & Marco Pagnozzi & Salvatore Piccolo, 2013. "Optimal Contracting with Altruism and Reciprocity," CSEF Working Papers 342, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Giuseppe De Marco & Giovanni Immordino, 2012. "Reciprocity in the Principal Multiple Agent Model," CSEF Working Papers 314, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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