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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
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  1. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  2. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  3. Georg Kirchsteiger & Martin Dufwenberg, 2004. "A theory of sequential reciprocity," ULB Institutional Repository 2013/5899, ULB -- Universite Libre de Bruxelles.
  4. 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.
  5. Legros, Patrick & Matsushima, Hitoshi, 1991. "Efficiency in partnerships," Journal of Economic Theory, Elsevier, vol. 55(2), pages 296-322, December.
  6. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Levine's Bibliography 784828000000000046, UCLA Department of Economics.
  7. Georg Kirchsteiger & Martin Dufwenberg, 2000. "Reciprocity and wage undercutting," ULB Institutional Repository 2013/5905, ULB -- Universite Libre de Bruxelles.
  8. 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.
  9. Jianpei Li, 2009. "Team production with inequity-averse agents," Portuguese Economic Journal, Springer, vol. 8(2), pages 119-136, August.
  10. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  11. Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  12. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
  13. Eric Rasmusen, 1987. "Moral Hazard in Risk-Averse Teams," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 428-435, Autumn.
  14. 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.
  15. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  16. Armin Falk & Ernst Fehr & Urs Fischbacher, . "On the Nature of Fair Behavior," IEW - Working Papers 017, Institute for Empirical Research in Economics - University of Zurich.
  17. Nick Netzer & Armin Schmutzler, 2009. "Rotten Kids With Bad Intentions," SOI - Working Papers 0919, Socioeconomic Institute - University of Zurich, revised Nov 2011.
  18. 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.
  19. 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.
  20. David Rahman & Ichiro Obara, 2010. "Mediated Partnerships," Econometrica, Econometric Society, vol. 78(1), pages 285-308, 01.
  21. 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.
  22. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  23. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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