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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. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. Gould, Eric D & Winter, Eyal, 2007. "Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball," CEPR Discussion Papers 6527, C.E.P.R. Discussion Papers.
  3. Jeffrey Carpenter & Peter Matthews, 2009. "What norms trigger punishment?," Experimental Economics, Springer, vol. 12(3), pages 272-288, September.
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  5. 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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  7. Robert Dur & Joeri Sol, 2008. "Social Interaction, Co-Worker Altruism, and Incentives," CESifo Working Paper Series 2476, CESifo Group Munich.
  8. Potters, J.J.M. & Suetens, S., 2006. "Cooperation in Experimental Games of Strategic Complements and Substitutes," Discussion Paper 2006-48, Tilburg University, Center for Economic Research.
  9. Pedro Rey-Biel, . "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
  10. Corneo, Giacomo & Rob, Rafael, 2003. "Working in public and private firms," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1335-1352, August.
  11. Benabou, Roland & Tirole, Jean, 2005. "Incentives and Prosocial Behavior," IZA Discussion Papers 1695, Institute for the Study of Labor (IZA).
  12. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
  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. 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.
  15. Simon Gaechter & Daniele Nosenzo & Martin Sefton, 2010. "The Impact of Social Camparisons of Reciprocity," Discussion Papers 2010-10, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  16. Heike Hennig-Schmidt & Bettina Rockenbach & Abdolkarim Sadrieh, 2010. "In Search Of Workers' Real Effort Reciprocity-A Field and a Laboratory Experiment," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 817-837, 06.
  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. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
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