The effect of production technology on trust and reciprocity in principal-agent relationships with team production

We introduce differently sized teams, rather than a single worker, and three production technologies to an otherwise standard gift-exchange environment to study experimentally whether, and to what extent, ‘trust and reciprocity’ is affected. Moving to a team of workers introduces new motivations, such as free riding and coordination burden, that are likely to intensify with team size and the technology used by the firm. We find that the positive relationship between wages and effort, although affected, still holds; workers reduce their efforts when coordination for efficiency is more difficult using a particular production technology. Results also suggest that for any given technology, firms react to their relevant outcome (profitability) and not just to workers’ efforts.