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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 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. Corneo, Giacomo & Rob, Rafael, 2003. "Working in public and private firms," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1335-1352, August.
  2. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
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  9. Hennig-Schmidt, Heike & Rockenbach, Bettina & Sadrieh, Abdolkarim, 2008. "In Search of Workers' Real Effort Reciprocity - A Field and a Laboratory Experiment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 238, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  12. Robert Dur & Joeri Sol, 2008. "Social Interaction, Co-Worker Altruism, and Incentives," CESifo Working Paper Series 2476, CESifo Group Munich.
  13. 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.
  14. Jeffrey Carpenter & Peter Matthews, 2009. "What norms trigger punishment?," Experimental Economics, Springer, vol. 12(3), pages 272-288, September.
  15. Potters, J.J.M. & Suetens, S., 2009. "Cooperation in experimental games of strategic complements and substitutes," Other publications TiSEM 694e692f-f551-421e-8cf0-a, Tilburg University, School of Economics and Management.
  16. 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.
  17. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  18. 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.
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