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Social Exchange and Common Agency in Organizations

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Author Info
Robert Dur ()
Hein Roelfsema ()

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Abstract

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate to a manager's attention with higher effort. To this end, we develop a common agency model with two-sided moral hazard. We show that when effort is contractible and attention is not, the first-best can be achieved through bonus pay for both managers and employees. When neither effort nor attention are contractible, an `attention race' arises, as each manager tries to sway the employee's effort his way. While this may result in too much social exchange, the attention race may also be a blessing because it alleviates managers' moral-hazard problem in attention provision. Lastly, we derive the implications of these contract imperfections for the optimal number of managers that share one employee.

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Paper provided by Utrecht School of Economics in its series Working Papers with number 06-11.

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Length: 24 pages
Date of creation: Nov 2006
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Handle: RePEc:use:tkiwps:0611

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Related research
Keywords: social exchange; reciprocity; incentive contracts; common agency; organizational design;

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Find related papers by JEL classification:
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General
M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Dur & Arjan Non & Hein Roelfsema, 2008. "Reciprocity and Incentive Pay in the Workplace," Tinbergen Institute Discussion Papers 08-080/1, Tinbergen Institute. [Downloadable!]
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