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The Dark Side of Reciprocity

Author

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  • Natalia Montinari

    () (Max Planck Institute of Economics)

Abstract

Whether friendship or competitive relationships deserve to be encouraged in the workplace is not obvious a priori. In this paper we derive the conditions under which a profit-maximizing employer finds it convenient to induce a rat race among workers exhibiting horizontal reciprocity in order to obtain underpaid or unpaid extra effort. We characterize the optimal compensation scheme under both symmetric and asymmetric information about workers' actions, and we also derive conditions for our result to hold in the presence of vertical reciprocity.

Suggested Citation

  • Natalia Montinari, 2011. "The Dark Side of Reciprocity," Jena Economic Research Papers 2011-052, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2011-052
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    File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2011_052.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Extra Effort; Horizontal Reciprocity; Negative Reciprocity;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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