IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v160y2019icp202-213.html
   My bibliography  Save this article

Group identity and partnership

Author

Listed:
  • Jiang, Jiang
  • Li, Sherry Xin

Abstract

We design a laboratory experiment to investigate how group identity influences decisions in a principal-agent framework with hidden actions and a revenue-sharing payment scheme. Group identity is induced by randomly assigning participants to groups and is further enhanced using a collective puzzle-solving task. We find that the principal makes a more generous revenue-sharing offer to the ingroup agent than to the outgroup agent. While an ingroup agent is less tolerant of a low offer from the principal, she exerts a greater effort in response to a more generous offer than does an outgroup agent. Our findings shed important light on the interplay of monetary incentives and group identity in tackling the principal-agent problem.

Suggested Citation

  • Jiang, Jiang & Li, Sherry Xin, 2019. "Group identity and partnership," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 202-213.
  • Handle: RePEc:eee:jeborg:v:160:y:2019:i:c:p:202-213
    DOI: 10.1016/j.jebo.2019.03.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268119300642
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Englmaier, Florian & Muehlheusser, Gerd & Roider, Andreas, 2010. "Optimal Incentive Contracts under Moral Hazard When the Agent is Free to Leave," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 329, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Chmura, Thorsten & Goerg, Sebastian J. & Weiss, Pia, 2016. "Natural groups and economic characteristics as driving forces of wage discrimination," European Economic Review, Elsevier, vol. 90(C), pages 178-200.
    3. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination in a Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 351-377.
    4. Hideshi Itoh, 2004. "Moral Hazard and Other‐Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45, March.
    5. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    6. Afridi, Farzana & Li, Sherry Xin & Ren, Yufei, 2015. "Social identity and inequality: The impact of China's hukou system," Journal of Public Economics, Elsevier, vol. 123(C), pages 17-29.
    7. Brandts, Jordi & Solà, Carles, 2010. "Personal relations and their effect on behavior in an organizational setting: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 246-253, February.
    8. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    9. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    10. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    11. Cooper, Russell & DeJong, Douglas V. & Forsythe, Robert & Ross, Thomas W., 1996. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Games and Economic Behavior, Elsevier, vol. 12(2), pages 187-218, February.
    12. Masella, Paolo & Meier, Stephan & Zahn, Philipp, 2014. "Incentives and group identity," Games and Economic Behavior, Elsevier, vol. 86(C), pages 12-25.
    13. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    14. Lorenz Goette & David Huffman & Stephan Meier, 2006. "The Impact of Group Membership on Cooperation and Norm Enforcement: Evidence Using Random Assignment to Real Social Groups," American Economic Review, American Economic Association, vol. 96(2), pages 212-216, May.
    15. Roland Bénabou & Jean Tirole, 2011. "Identity, Morals, and Taboos: Beliefs as Assets," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 805-855.
    16. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    17. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
    18. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
    19. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2009. "Social Connections and Incentives in the Workplace: Evidence From Personnel Data," Econometrica, Econometric Society, vol. 77(4), pages 1047-1094, July.
    20. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    21. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
    22. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, January.
    23. Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
    24. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
    25. Hoff, Karla & Pandey, Priyanka, 2014. "Making up people—The effect of identity on performance in a modernizing society," Journal of Development Economics, Elsevier, vol. 106(C), pages 118-131.
    26. Mobius, Markus & Rosenblat, Tanya & Wang, Qiqi, 2016. "Ethnic discrimination: Evidence from China," European Economic Review, Elsevier, vol. 90(C), pages 165-177.
    27. Bouckaert, Jan & Dhaene, Geert, 2004. "Inter-ethnic trust and reciprocity: results of an experiment with small businessmen," European Journal of Political Economy, Elsevier, vol. 20(4), pages 869-886, November.
    28. David Gill & Victoria Prowse, 2012. "A Structural Analysis of Disappointment Aversion in a Real Effort Competition," American Economic Review, American Economic Association, vol. 102(1), pages 469-503, February.
    29. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
    30. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    31. Helmut M. Dietl & Martin Grossmann & Markus Lang, 2011. "Competitive Balance and Revenue Sharing in Sports Leagues With Utility-Maximizing Teams," Journal of Sports Economics, , vol. 12(3), pages 284-308, June.
    32. Mathewson, G Frank & Winter, Ralph A, 1985. "The Economics of Franchise Contracts," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 503-526, October.
    33. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
    34. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    35. Daniel J. Benjamin & James J. Choi & Geoffrey Fisher, 2016. "Religious Identity and Economic Behavior," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 617-637, October.
    36. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2010. "Social Incentives in the Workplace," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 417-458.
    37. Daniel J. Benjamin & James J. Choi & A. Joshua Strickland, 2010. "Social Identity and Preferences," American Economic Review, American Economic Association, vol. 100(4), pages 1913-1928, September.
    38. Vital Anderhub & Simon Gächter & Manfred Königstein, 2002. "Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment," Experimental Economics, Springer;Economic Science Association, vol. 5(1), pages 5-27, June.
    39. Solow, John L. & Kirkwood, Nicole, 2002. "Group identity and gender in public goods experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 403-412, August.
    40. McLeish, Kendra N. & Oxoby, Robert J., 2011. "Social interactions and the salience of social identity," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 172-178, February.
    41. Canice Prendergast, 2007. "The Motivation and Bias of Bureaucrats," American Economic Review, American Economic Association, vol. 97(1), pages 180-196, March.
    42. Riener, Gerhard & Wiederhold, Simon, 2016. "Team building and hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 1-18.
    43. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    44. Alexandros Karakostas & Axel Sonntag & Daniel John Zizzo, 2017. "Contract Choice: Efficiency and Fairness in Revenue‐Sharing Contracts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 962-986, October.
    45. Stefan Szymanski & Stefan Késenne, 2004. "Competitive balance and gate revenue sharing in team sports," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 165-177, March.
    46. Helen Bernhard & Ernst Fehr & Urs Fischbacher, 2006. "Group Affiliation and Altruistic Norm Enforcement," American Economic Review, American Economic Association, vol. 96(2), pages 217-221, May.
    47. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    48. Felipe A. Araujo & Erin Carbone & Lynn Conell-Price & Marli W. Dunietz & Ania Jaroszewicz & Rachel Landsman & Diego Lamé & Lise Vesterlund & Stephanie W. Wang & Alistair J. Wilson, 2016. "The slider task: an example of restricted inference on incentive effects," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 2(1), pages 1-12, May.
    49. Charness, Gary & Cobo-Reyes, Ramón & Jiménez, Natalia, 2014. "Identities, selection, and contributions in a public-goods game," Games and Economic Behavior, Elsevier, vol. 87(C), pages 322-338.
    50. Gary Charness & Luca Rigotti & Aldo Rustichini, 2007. "Individual Behavior and Group Membership," American Economic Review, American Economic Association, vol. 97(4), pages 1340-1352, September.
    51. Fiedler, Marina & Haruvy, Ernan & Li, Sherry Xin, 2011. "Social distance in a virtual world experiment," Games and Economic Behavior, Elsevier, vol. 72(2), pages 400-426, June.
    52. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    53. Dana, James D, Jr & Spier, Kathryn E, 2001. "Revenue Sharing and Vertical Control in the Video Rental Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 223-245, September.
    54. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    55. Karla Hoff & Priyanka Pandey, 2006. "Discrimination, Social Identity, and Durable Inequalities," American Economic Review, American Economic Association, vol. 96(2), pages 206-211, May.
    56. Chisholm, Darlene C, 1997. "Profit-Sharing versus Fixed-Payment Contracts: Evidence from the Motion Pictures Industry," Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 169-201, April.
    57. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
    58. Eckel, Catherine C. & Grossman, Philip J., 2005. "Managing diversity by creating team identity," Journal of Economic Behavior & Organization, Elsevier, vol. 58(3), pages 371-392, November.
    59. Roy Chen & Yan Chen, 2011. "The Potential of Social Identity for Equilibrium Selection," American Economic Review, American Economic Association, vol. 101(6), pages 2562-2589, October.
    60. Basu, Kaushik, 2010. "The Moral Basis Of Prosperity And Oppression: Altruism, Other-Regarding Behaviour And Identity," Economics and Philosophy, Cambridge University Press, vol. 26(2), pages 189-216, July.
    61. Yan Chen & Sherry Xin Li, 2009. "Group Identity and Social Preferences," American Economic Review, American Economic Association, vol. 99(1), pages 431-457, March.
    62. Lane, Tom, 2016. "Discrimination in the laboratory: A meta-analysis of economics experiments," European Economic Review, Elsevier, vol. 90(C), pages 375-402.
    63. Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
    64. Ockenfels, Axel & Werner, Peter, 2014. "Beliefs and ingroup favoritism," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 453-462.
    65. Alston, Lee J. & Higgs, Robert, 1982. "Contractual Mix in Southern Agriculture since the Civil War: Facts, Hypotheses, and Tests," The Journal of Economic History, Cambridge University Press, vol. 42(2), pages 327-353, June.
    66. Allen, Douglas & Lueck, Dean, 1992. "Contract Choice in Modern Agriculture: Cash Rent versus Cropshare," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 397-426, October.
    67. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
    68. Lorenz Goette & David Huffman & Stephan Meier, 2012. "The Impact of Social Ties on Group Interactions: Evidence from Minimal Groups and Randomly Assigned Real Groups," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 101-115, February.
    69. Subhasish Dugar & Quazi Shahriar, 2012. "Group Identity and the Moral Hazard Problem: Experimental Evidence," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 1061-1081, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eugen Dimant & Kyle Hyndman, 2019. "Becoming Friends or Foes? How Competitive Environments Shape Social Preferences," Discussion Papers 2019-18, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Masella, Paolo & Meier, Stephan & Zahn, Philipp, 2014. "Incentives and group identity," Games and Economic Behavior, Elsevier, vol. 86(C), pages 12-25.
    2. Riener, Gerhard & Wiederhold, Simon, 2016. "Team building and hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 1-18.
    3. Brice Corgnet & Brian Gunia & Roberto Hernán González, 2021. "Harnessing the power of social incentives to curb shirking in teams," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(1), pages 139-167, February.
    4. Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
    5. Bicskei, Marianna & Lankau, Matthias & Bizer, Kilian, 2016. "Negative reciprocity and its relation to anger-like emotions in identity-homogeneous and -heterogeneous groups," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 17-34.
    6. Weng, Qian & Carlsson, Fredrik, 2015. "Cooperation in teams: The role of identity, punishment, and endowment distribution," Journal of Public Economics, Elsevier, vol. 126(C), pages 25-38.
    7. Dickinson, David L. & Masclet, David & Peterle, Emmanuel, 2018. "Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market," European Economic Review, Elsevier, vol. 104(C), pages 220-236.
    8. Drouvelis, Michalis & Nosenzo, Daniele, 2013. "Group identity and leading-by-example," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 414-425.
    9. Pan, Xiaofei & Houser, Daniel, 2019. "Why trust out-groups? The role of punishment under uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 236-254.
    10. Tor Eriksson & Lei Mao & Marie Claire Villeval, 2017. "Saving face and group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 622-647, September.
    11. Kato, Takao & Shu, Pian, 2016. "Competition and social identity in the workplace: Evidence from a Chinese textile firm," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 37-50.
    12. Butler, Je rey V. & Conzo, Pierluigi & Leroch, Martin A., 2013. "Social Identity and Punishment," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201329, University of Turin.
    13. Dimant, Eugen, 2015. "On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity," MPRA Paper 68732, University Library of Munich, Germany.
    14. Bauer, Kevin, 2020. "How did we do? The impact of relative performance feedback on intergroup hostilities," SAFE Working Paper Series 281, Leibniz Institute for Financial Research SAFE.
    15. Chowdhury, Subhasish M. & Jeon, Joo Young & Ramalingam, Abhijit, 2016. "Identity and group conflict," European Economic Review, Elsevier, vol. 90(C), pages 107-121.
    16. Li, Sherry Xin & de Oliveira, Angela C.M. & Eckel, Catherine, 2017. "Common identity and the voluntary provision of public goods: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 32-46.
    17. Delavande, Adeline & Zafar, Basit, 2015. "Stereotypes and Madrassas: Experimental evidence from Pakistan," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 247-267.
    18. Yan Chen & Sherry Xin Li, 2009. "Group Identity and Social Preferences," American Economic Review, American Economic Association, vol. 99(1), pages 431-457, March.
    19. Barr, Abigail & Lane, Tom & Nosenzo, Daniele, 2018. "On the social inappropriateness of discrimination," Journal of Public Economics, Elsevier, vol. 164(C), pages 153-164.
    20. Cason, Timothy N. & Lau, Sau-Him Paul & Mui, Vai-Lam, 2019. "Prior interaction, identity, and cooperation in the Inter-group Prisoner's Dilemma," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 613-629.

    More about this item

    Keywords

    Group identity; Principal-agent problem; Hidden action; Laboratory experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:160:y:2019:i:c:p:202-213. 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: (Nithya Sathishkumar). General contact details of provider: http://www.elsevier.com/locate/jebo .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.