IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Gift-exchange, incentives, and heterogeneous workers

  • Non, Arjan

By incorporating reciprocity in an otherwise standard principal–agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some, but not all, workers care more for their principal when they are convinced that the principal cares for them. The principal can be egoistic or altruistic. Absent worker heterogeneity, an altruistic principal signals his altruism by offering relatively weak incentives and a relatively high expected total compensation. However, the latter is not always required to credibly signal altruism. Furthermore, since some workers do not reciprocate the principalʼs altruism, the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types. Such a contract is characterised by excessively strong incentives and a relatively high expected total compensation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 1 ()
Pages: 319-336

in new window

Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:319-336
Contact details of provider: Web page:

References listed on IDEAS
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.:

as in new window
  1. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  2. Gächter, Simon & Thöni, Christian, 2010. "Social comparison and performance: Experimental evidence on the fair wage-effort hypothesis," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 531-543, December.
  3. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
  4. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, vol. 100(1), pages 541-56, March.
  5. Armin Falk & Michael Kosfeld, . "The Hidden Costs of Control," IEW - Working Papers 250, Institute for Empirical Research in Economics - University of Zurich.
  6. Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
  7. Robert Dur, 2009. "Gift Exchange in The Workplace: Money or Attention?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 550-560, 04-05.
  8. Michael Kosfeld & Ferdinand von Siemens, 2007. "Competition, Cooperation, and Corporate Culture," IEW - Working Papers 328, Institute for Empirical Research in Economics - University of Zurich.
  9. Emrah Arbak & Laurence Kranich, 2005. "Can Wages Signal Kindness?," Post-Print halshs-00180032, HAL.
    • Emrah Arbak & Laurence Kranich, 2005. "Can Wages Signal Kindness?," Working Papers 0511, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  10. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  11. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  12. Dur, Robert & Non, Arjan & Roelfsema, Hein, 2010. "Reciprocity and Incentive Pay in the Workplace," IZA Discussion Papers 4782, Institute for the Study of Labor (IZA).
  13. Robert Dur & Joeri Sol, 2008. "Social Interaction, Co-Worker Altruism, and Incentives," Tinbergen Institute Discussion Papers 08-094/1, Tinbergen Institute, revised 03 Aug 2009.
  14. Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  15. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May.
  16. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
  17. Sliwka, Dirk, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA).
  18. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper 1998-37, Tilburg University, Center for Economic Research.
  19. Ernst Fehr & John A. List, 2004. "THE HIDDEN COSTS AND RETURNS OF INCENTIVES — TRUST AND TRUSTWORTHINESS AMONG CEOs," Labor and Demography 0409012, EconWPA.
  20. Florian Englmaier & Stephen Leider, 2012. "Contractual and Organizational Structure with Reciprocal Agents," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 146-83, May.
  21. Eduardo Ley, 1996. "Optimal Provision of Public Goods with Altruistic Individuals," Public Economics 9607001, EconWPA, revised 06 Oct 2001.
  22. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  23. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Working Papers 287, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  24. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  25. Kosfeld, Michael & von Siemens, Ferdinand, 2008. "Worker Self-Selection and the Profits from Cooperation," IZA Discussion Papers 3881, Institute for the Study of Labor (IZA).
  26. Gary Charness & David I. Levine, 2007. "Intention and Stochastic Outcomes: An Experimental study," Economic Journal, Royal Economic Society, vol. 117(522), pages 1051-1072, 07.
  27. Charles Bellemare & Bruce Shearer, 2009. "On the Relevance and Composition of Gifts within the Firm: Evidence from Field Experiments," Cahiers de recherche 0932, CIRPEE.
  28. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
  29. repec:dgr:uvatin:2010055 is not listed on IDEAS
  30. Bernheim, B Douglas & Stark, Oded, 1988. "Altruism within the Family Reconsidered: Do Nice Guys Finish Last?," American Economic Review, American Economic Association, vol. 78(5), pages 1034-45, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:319-336. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.