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Rent-seeking versus productive activities in a multi-task experiment

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  • Oosterbeek, Hessel
  • Sloof, Randolph
  • Sonnemans, Joep

Abstract

Incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent-seeking incentives they provide. Standard theory predicts that these instruments become less attractive when the effectiveness of rent-seeking activities increases. In contrast, theories that emphasize the importance of reciprocity suggest that this relationship may go the other way around. In this paper we test these predictions by means of a laboratory experiment. By and large our findings confirm standard theory. Incentive instruments typically become less attractive when the scope for rent-seeking activities increases. However, reciprocity motivations do seem to mitigate the adverse effects of rent-seeking opportunities to a considerable extent.

Suggested Citation

  • Oosterbeek, Hessel & Sloof, Randolph & Sonnemans, Joep, 2011. "Rent-seeking versus productive activities in a multi-task experiment," European Economic Review, Elsevier, vol. 55(5), pages 630-643, June.
  • Handle: RePEc:eee:eecrev:v:55:y:2011:i:5:p:630-643
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    3. Hodaka Morita & Maroš Servátka, 2018. "Investment in Outside Options as Opportunistic Behavior: An Experimental Investigation," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 457-484, October.

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    More about this item

    Keywords

    Multi-task experiment Rent-seeking Reciprocity;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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