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Communication and Trust in Principal-Team Relationships: Experimental Evidence

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  • Kleine, Marco

    () (Max Planck Institute for Innovation and Competition)

  • Kube, Sebastian

    () (University of Bonn)

Abstract

We study how upward communication – from workers to managers – about individual efforts affects the effectiveness of gift exchange as a contract-enforcement device for work teams. Our findings suggest that the use of such self-assessments can be detrimental to workers' performance. In the controlled environment of a laboratory gift-exchange experiment, our workers regularly overstate their own contribution to the joint team output. Misreporting seems to spread distrust within the team of workers, as well as between managers and workers. This manifests itself in managers being less generous with workers' payments, and in workers being more sensitive to the perceived kindness of their relative wage payments. By varying the source and degree of information about individual efforts between treatments, we see that precise knowledge about workers' actual contributions to the team output is beneficial for the success of gift-exchange relationships. Yet, workers' self-assessments can be a problematic tool to gather this information.

Suggested Citation

  • Kleine, Marco & Kube, Sebastian, 2015. "Communication and Trust in Principal-Team Relationships: Experimental Evidence," IZA Discussion Papers 8762, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8762
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    Cited by:

    1. Carpenter, Jeffrey, 2017. "The sequencing of gift exchange: A field trial," Journal of Economic Behavior & Organization, Elsevier, vol. 139(C), pages 26-31.

    More about this item

    Keywords

    communication; gift exchange; incomplete contracts; reciprocity; performance appraisal; self-assessment; work team; laboratory experiment;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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