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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. Simon Gaechter & Daniele Nosenzo & Martin Sefton, 2008. "The Impact of Social Comparisons on Reciprocity," Discussion Papers 2008-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  2. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  3. Robert Dur & Joeri Sol, 2008. "Social Interaction, Co-Worker Altruism, and Incentives," CESifo Working Paper Series 2476, CESifo Group Munich.
  4. Roland Bénabou & Jean Tirole, 2006. "Incentives and Prosocial Behavior," Post-Print hal-00173700, HAL.
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  6. Jan Potters & Sigrid Suetens, 2009. "Cooperation in Experimental Games of Strategic Complements and Substitutes," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1125-1147.
  7. 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.
  8. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  9. Jeffrey Carpenter & Peter Hans Matthews, 2007. "What Norms Trigger Punishment," Middlebury College Working Paper Series 0708, Middlebury College, Department of Economics.
  10. Eric D. Gould & Eyal Winter, 2009. "Interactions between Workers and the Technology of Production: Evidence from Professional Baseball," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 188-200, February.
  11. James C. Cox & Daniel Friedman & Steven Gjerstad, 2006. "A Tractable Model of Reciprocity and Fairness," Experimental Economics Center Working Paper Series 2006-05, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
  12. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  13. 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.
  14. 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.
  15. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  16. Andrew E. Clark, 2005. "What Makes a Good Job? Evidence from OECD Countries," Post-Print halshs-00754731, HAL.
  17. 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.
  18. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
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