Gift-exchange, incentives, and heterogeneous workers

Arbeitspapier

By incorporating reciprocity in an otherwise standard principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some, but not all, workers care more for their principal when they are convinced that the principal cares for them. The principal can be egoistic or altruistic. Absent worker heterogeneity, an altruistic principal signals his altruism by offering relatively weak incentives and a relatively high expected total compensation. However, the latter is not always required to credibly signal altruism. Furthermore, since some workers do not reciprocate the principal's altruism, the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types. Such a contract is characterised by excessively strong incentives and a relatively high expected total compensation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3547

Classification and Topics

• Classification: Wirtschaft ; Economics of Contract: Theory ; Labor Contracts ; Personnel Economics: Compensation and Compensation Methods and Their Effects ; Personnel Economics: Labor Contracting Devices
• Subject: reciprocity ; gift-exchange ; signaling game ; incentive contracts ; screening ; Austauschtheorie (Soziologie) ; Geschenk ; Signalling ; Anreizvertrag ; Prinzipal-Agent-Theorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Non, Arjan
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/49496
• Last update: 10.03.2025, 11:43 AM CET