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The Dark Side of Reciprocity

  • Natalia Montinari

    ()

    (Max Planck Institute of Economics)

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.

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File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2011_052.pdf
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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2011-052.

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Date of creation: 04 Nov 2011
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Handle: RePEc:jrp:jrpwrp:2011-052
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  1. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
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  4. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
  5. Potters, J.J.M. & Suetens, S., 2009. "Cooperation in experimental games of strategic complements and substitutes," Other publications TiSEM 694e692f-f551-421e-8cf0-a, School of Economics and Management.
  6. Pedro Rey-Biel, 2007. "Inequity Version and Team Incentives," UFAE and IAE Working Papers 677.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. Gould, Eric D. & Winter, Eyal, 2007. "Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball," IZA Discussion Papers 3096, Institute for the Study of Labor (IZA).
  8. Landers, Renee M & Rebitzer, James B & Taylor, Lowell J, 1996. "Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms," American Economic Review, American Economic Association, vol. 86(3), pages 329-48, June.
  9. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
  10. Roland Bénabou & Jean Tirole, 2005. "Incentives and Prosocial Behavior," NBER Working Papers 11535, National Bureau of Economic Research, Inc.
  11. Jeffrey Carpenter & Peter Matthews, 2009. "What norms trigger punishment?," Experimental Economics, Springer, vol. 12(3), pages 272-288, September.
  12. Robert Dur & Joeri Sol, 2008. "Social Interaction, Co-Worker Altruism, and Incentives," CESifo Working Paper Series 2476, CESifo Group Munich.
  13. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
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  15. Meyer, Anna & Wallette, Mårten, 2005. "Absence of Absenteeism and Overtime work – Signaling Factors for Temporary Workers?," Working Papers 2005:15, Lund University, Department of Economics.
  16. Abdolkarim Sadrieh & Bettina Rockenbach & Heike Hennig-Schmidt, 2005. "In search of worker's real effort reciprocity - a field and a laboratory experiment," Artefactual Field Experiments 00065, The Field Experiments Website.
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  18. John S. Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Getting along with Colleagues - Does Profit Sharing Help or Hurt?," Kyklos, Wiley Blackwell, vol. 58(4), pages 557-573, November.
  19. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  20. Andrew E. Clark, 2004. "What makes a good job? Evidence from OECD countries," DELTA Working Papers 2004-28, DELTA (Ecole normale supérieure).
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