IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Social Exchange and Common Agency in Organizations

  • R Dur
  • H.J. Roelfsema

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate to a manager's attention with higher effort. To this end, we develop a common agency model with two-sided moral hazard. We show that when effort is contractible and attention is not, the first-best can be achieved through bonus pay for both managers and employees. When neither effort nor attention are contractible, an `attention race' arises, as each manager tries to sway the employee's effort his way. While this may result in too much social exchange, the attention race may also be a blessing because it alleviates managers' moral-hazard problem in attention provision. Lastly, we derive the implications of these contract imperfections for the optimal number of managers that share one employee.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://dspace.library.uu.nl/bitstream/handle/1874/37088/06-11.pdf
Download Restriction: no

Paper provided by Utrecht School of Economics in its series Working Papers with number 06-11.

as
in new window

Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:use:tkiwps:0611
Contact details of provider: Postal:
P.O. Box 80125, NL-3508 TC Utrecht

Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  2. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  3. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  4. Roman Inderst & Holger Müller & Karl Wärneryd, 2005. "Influence costs and hierarchy," Economics of Governance, Springer, vol. 6(2), pages 177-197, 07.
  5. Uri Gneezy & John A List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," Econometrica, Econometric Society, vol. 74(5), pages 1365-1384, 09.
  6. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
  7. John A. List, 2006. "The Behavioralist Meets the Market: Measuring Social Preferences and Reputation Effects in Actual Transactions," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 1-37, February.
  8. Michel Marechal & Puppe Clemens & Sebastian Kube, 2006. "Putting reciprocity to work - positive versus negative responses in the field," Natural Field Experiments 00291, The Field Experiments Website.
  9. Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2007. "Fairness and contract design," Munich Reprints in Economics 20618, University of Munich, Department of Economics.
  10. Giacomo Corneo & Rafael Rob, . "Working in Public and Private Firms," Penn CARESS Working Papers 7942b6b570793de0891a05acb, Penn Economics Department.
  11. Emrah Arbak & Laurence Kranich, 2005. "Can Wages Signal Kindness?," Working Papers 0511, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  12. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  13. Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2004. "Gift Exchange in a Multi-worker Firm," Tinbergen Institute Discussion Papers 04-100/1, Tinbergen Institute.
  14. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  15. Maximiano, Sandra & Sloof, Randolph & Sonnemans, Joep, 2013. "Gift exchange and the separation of ownership and control," Games and Economic Behavior, Elsevier, vol. 77(1), pages 41-60.
  16. Martimort, David, 1994. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Theory," IDEI Working Papers 43, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1996.
  17. Laffont, J.J. & Martimort, D., 1996. "The Firm as a Multicontact Organization," Papers 95.390, Toulouse - GREMAQ.
  18. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
  19. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
  20. James A. Fairburn & James M. Malcomson, 2001. "Performance, Promotion, and the Peter Principle," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 45-66.
  21. Dixit, Avinash, 1997. "Power of Incentives in Private versus Public Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 378-82, May.
  22. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, 01.
  23. Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers 5768, C.E.P.R. Discussion Papers.
  24. Dur, Robert, 2008. "Gift Exchange in the Workplace: Money or Attention?," IZA Discussion Papers 3839, Institute for the Study of Labor (IZA).
  25. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
  26. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  27. Falk, Armin & Fischbacher, Urs, 2001. "A Theory of Reciprocity," CEPR Discussion Papers 3014, C.E.P.R. Discussion Papers.
  28. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 437-459.
  29. B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
  30. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 759-789.
  31. Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 120-137, May.
  32. Jean Tirole, 1988. "The Multicontract Organization," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 459-66, August.
  33. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
  34. Daniel Nagin & James Rebitzer & Seth Sanders & Lowell Taylor, 2002. "Monitoring, Motivation and Management: The Determinants of Opportunistic Behavior in a Field Experiment," NBER Working Papers 8811, National Bureau of Economic Research, Inc.
  35. Englmaier, Florian & Wambach, Achim, 2005. "Optimal Incentive Contracts under Inequity Aversion," IZA Discussion Papers 1643, Institute for the Study of Labor (IZA).
  36. Esther Gal-Or, 1991. "A Common Agency with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 274-286, Summer.
  37. Julio J. Rotemberg & Garth Saloner, 1993. "Leadership Style and Incentives," Management Science, INFORMS, vol. 39(11), pages 1299-1318, November.
  38. B. Douglas Bernheim & Michael D. Whinston, 1985. "Common Marketing Agency as a Device for Facilitating Collusion," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 269-281, Summer.
  39. Rafael Rob & Peter Zemsky, 2002. "Social Capital, Corporate Culture, and Incentive Intensity," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 243-257, Summer.
  40. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  41. McCain, Roger A., 2008. "Cooperative games and cooperative organizations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2155-2167, December.
  42. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  43. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0611. 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: (Marina Muilwijk)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.