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Attribution and reciprocity in a simulated labor market: An experimental investigation

  • Gary Charness

While papers such as Akerlof and Yellen (1990) and Rabin (1993) argue that psychological considerations such as fairness and reciprocity are important in individual decision-making, there is little explicit empirical evidence of reciprocal altruism in economic environments. This paper tests whether attribution of volition in choosing a wage has a significant effect on subsequent costly effort provision. An experiment was conducted in which subjects are first randomly divided into groups of employers and employees. Wages were selected and employees asked to choose an effort level, where increased effort is costly to the employee, but highly beneficial to the employer. The wage-determination process was common knowledge and wages were chosen either by the employer or by an external process. There is evidence for both distributional concerns and reciprocal altruism. The slope of the effort/wage profile is clearly positive in all cases, but is significantly higher when wages are chosen by the employer, offering support for the hypothesis of reciprocity. There are implications for models of utility and a critique of some current models is presented.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/283.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 283.

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Date of creation: Sep 1996
Date of revision: Oct 1997
Handle: RePEc:upf:upfgen:283
Contact details of provider: Web page: http://www.econ.upf.edu/

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