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Mediocrity and Induced Reciprocity

  • Natalia Montinari


    (Max Planck Institute of Economics, Jena, Germany)

  • Antonio Nicolò


    (University of Padua, Italy)

  • Regine Oexl


    (University of Innsbruck, Austria)

We report evidence from an experiment where a principal chooses an agent out of two to perform a task for a fixed compensation. The principal's payoff depends on the agent's ex-ante ability and on a non-contractible effort that the agent has to exert once employed. We find that a significant share of principals select the mediocre agent (i.e. the one with the lower ex-ante ability). When the principal is allowed to send a message, mediocre agents exert more effort than agents with the higher ability, and principals who chooses mediocre agents on average have a larger payoff than principals who select agents with higher ability. This difference in effort overcompensates the difference in ability. Mediocre agents reciprocate more than agents who have ex-ante higher ability when the principals are able to make them feeling indebted.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2012-053.

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Date of creation: 12 Sep 2012
Date of revision:
Handle: RePEc:jrp:jrpwrp:2012-053
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