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Partnership, Reciprocity and Team Design

This paper studies the impact of intention-based reciprocity preferences on the free-riding problem arising in partnerships. Our results suggest a tendency of efficient partnerships to consist of members whose sensitivity to reciprocity is -- individually or jointly -- sufficiently high. Sufficient conditions for the implementation of the efficient strategy profile require a reciprocity based sharing rule such that each partner gets a fraction of the output that is a percentage of his own reciprocity with respect to the overall reciprocity in the team. Finally, we introduce the concept of psychological strong Nash equilibrium and show that it allows for the unique and collusion-proof implementation of the efficient strategy profile.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 257.

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Date of creation: 31 Jul 2010
Date of revision: 24 Mar 2011
Publication status: Published in Research in Economics, 2013, 67(1), 39-58
Handle: RePEc:sef:csefwp:257
Contact details of provider: Postal: I-80126 Napoli
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Web page: http://www.csef.it/
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  1. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper 1998-37, Tilburg University, Center for Economic Research.
  2. Giuseppe De Marco & Giovanni Immordino, 2012. "Reciprocity in the Principal Multiple Agent Model," CSEF Working Papers 314, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Georg Kirchsteiger & Martin Dufwenberg, 2000. "Reciprocity and wage undercutting," ULB Institutional Repository 2013/5905, ULB -- Universite Libre de Bruxelles.
  4. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Dilip Mookherjee, 1982. "Optimal Incentive Schemes in Multiagent Situations (Now published in Review of Economic Studies, (1984).)," STICERD - Theoretical Economics Paper Series 57, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Jianpei Li, 2009. "Team production with inequity-averse agents," Portuguese Economic Journal, Springer, vol. 8(2), pages 119-136, August.
  7. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  8. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
  9. Legros, Patrick & Matsushima, Hitoshi, 1991. "Efficiency in partnerships," Journal of Economic Theory, Elsevier, vol. 55(2), pages 296-322, December.
  10. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  11. Florian Englmaier & Stephen Leider, 2012. "Contractual and Organizational Structure with Reciprocal Agents," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 146-83, May.
  12. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  13. Björn Bartling & Ferdinand A. von Siemens, 2010. "Equal Sharing Rules in Partnerships," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 299-320, June.
  14. Battigalli, Pierpaolo & Dufwenberg, Martin, 2009. "Dynamic psychological games," Journal of Economic Theory, Elsevier, vol. 144(1), pages 1-35, January.
  15. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  16. Falk, Armin & Fischbacher, Urs, 2001. "A Theory of Reciprocity," CEPR Discussion Papers 3014, C.E.P.R. Discussion Papers.
  17. David Rahman & Ichiro Obara, 2010. "Mediated Partnerships," Econometrica, Econometric Society, vol. 78(1), pages 285-308, 01.
  18. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  19. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  20. Nick Netzer & Armin Schmutzler, 2009. "Rotten Kids With Bad Intentions," SOI - Working Papers 0919, Socioeconomic Institute - University of Zurich, revised Nov 2011.
  21. Radner, Roy, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 43-57, January.
  22. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  23. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
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