IDEAS home Printed from
   My bibliography  Save this paper

Managerial Compensation in a Two-Level Gift-Exchange Experiment


  • Nils Hesse

    () (Albert-Ludwigs Universit├Ąt Freiburg)

  • Fernanda Rivas

    () (Universidad Carlos III de Madrid)


In times of increasing international competition firms demand concessions from employees to carry out necessary restructuring measures, which can partly be resisted by workers, whose behavior at work can not be fully contracted upon. At the same time, management compensations are perceived as too high by the majority of the population. In our paper we explore to what extent these two observations are related. In a two-level gift-exchange experiment it is asked if the managerial compensation influences workers' effort decisions and workers' willingness to accept wage cuts. We compare sessions in which the managerial compensation is public information with private information sessions. Our data suggests that the managerial compensations in public wage sessions are signiffcantly negatively correlated with the workers' effort choices -in particular after wage cuts. The profit-maximizing strategy for the firm is to compress wages when the managerial compensation is public information.

Suggested Citation

  • Nils Hesse & Fernanda Rivas, 2007. "Managerial Compensation in a Two-Level Gift-Exchange Experiment," Documentos de Trabajo (working papers) 2307, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:2307

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    managerial compensation; social preferences; laboratory experiment; gift-exchange; effort; downsizing;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ude:wpaper:2307. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrea Doneschi) or (H├ęctor Pastori). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.