Social Exchange and Common Agency in Organizations

Arbeitspapier

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 optimal organizational design.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 06-111/1

Classification and Topics

• Classification: Wirtschaft ; Economics of Contract: Theory ; Labor Contracts ; Personnel Economics: General ; Personnel Economics: Labor Management ; Personnel Economics: Labor Contracting Devices
• Subject: social exchange ; reciprocity ; incentive contracts ; common agency ; organizational design ; Anreizvertrag ; Leistungsmotivation ; Prinzipal-Agent-Theorie ; Soziale Beziehungen ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dur, Robert ; Roelfsema, Hein
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/86450
• Last update: 10.03.2025, 11:42 AM CET