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No contract or unfair contract: What's better?

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  • Bruttel, Lisa
  • Eisenkopf, Gerald

Abstract

We investigate the welfare implications of unfair incentive contracts in comparison with interactions without contracts. Reciprocal people should cooperate conditionally in the latter situation but punish unfairness by non-cooperation. We confirm that some people do cooperate conditionally in a sequential prisoner's dilemma. Furthermore, some subjects do not cooperate if they face an unfair incentive contract in a similar context. However, there is no correlation between these two types of reciprocity. At an aggregate level, all contracts – no matter how fair they are – improve welfare even if agents are conditionally cooperative.

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  • Bruttel, Lisa & Eisenkopf, Gerald, 2012. "No contract or unfair contract: What's better?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 384-390.
    • Handle: RePEc:eee:soceco:v:41:y:2012:i:4:p:384-390
    DOI: 10.1016/j.socec.2012.04.014
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    Cited by:

    1. Gerald Eisenkopf & Urs Fischbacher, 2015. "Naïve Responses to Kind Delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 36(7), pages 487-498, October.
    2. Jo?l J. van der Weele & Julija Kulisa & Michael Kosfeld & Guido Friebel, 2014. "Resisting Moral Wiggle Room: How Robust Is Reciprocal Behavior?," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 256-264, August.
    3. Gerald Eisenkopf, 2013. "The Impact of Management Incentives in Intergroup Contests," Working Paper Series of the Department of Economics, University of Konstanz 2013-26, Department of Economics, University of Konstanz.
    4. Gerald Eisenkopf, 2013. "The Impact of Management Incentives in Intergroup Contests," TWI Research Paper Series 87, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    5. Eisenkopf, Gerald, 2013. "Management Impact in an Experimental Intergroup Contest," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79863, Verein für Socialpolitik / German Economic Association.
    6. Eisenkopf, Gerald, 2014. "The impact of management incentives in intergroup contests," European Economic Review, Elsevier, vol. 67(C), pages 42-61.

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    More about this item

    Keywords

    Contracts; Prisoner's dilemma; Experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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