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Backscratching in Hierarchical Organizations

Maggian, Valeria; Montinari, Natalia LU and Nicolò, Antonio (2015) In Working Paper / Department of Economics, School of Economics and Management, Lund University
Abstract
In this paper we investigate the role of reciprocity in sustaining the emergence of implicit collusive agreements in hierarchical organizations. We conduct a laboratory experiment in which an agent hires, on behalf of the principal, one worker out of two candidates. The two candidates differ in their ability and, once employed, the worker chooses a level of non-contractible effort to exert in two tasks: one benefits the organization (that is both the principal and the agent) while the other one is less profitable, only benefits the agent and provides him with higher earnings. We provide evidence that: i) low ability workers are more likely to exert effort in the task that is exclusively beneficial to the agent; ii) as a consequence, agents... (More)
In this paper we investigate the role of reciprocity in sustaining the emergence of implicit collusive agreements in hierarchical organizations. We conduct a laboratory experiment in which an agent hires, on behalf of the principal, one worker out of two candidates. The two candidates differ in their ability and, once employed, the worker chooses a level of non-contractible effort to exert in two tasks: one benefits the organization (that is both the principal and the agent) while the other one is less profitable, only benefits the agent and provides him with higher earnings. We provide evidence that: i) low ability workers are more likely to exert effort in the task that is exclusively beneficial to the agent; ii) as a consequence, agents distort the hiring process in favor of the low ability workers and iii) sharing a small part of the organization’s profits with the workers alleviates their effort distortion. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
Conflict of Interest, Effort Distortion, Profit Sharing, and Reciprocity
in
Working Paper / Department of Economics, School of Economics and Management, Lund University
issue
10
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
f5de329d-b041-4c94-b62e-6a7b1b5da5cc (old id 5268206)
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2015_010.htm
date added to LUP
2015-04-08 16:05:41
date last changed
2016-04-16 07:16:59
@misc{f5de329d-b041-4c94-b62e-6a7b1b5da5cc,
  abstract     = {In this paper we investigate the role of reciprocity in sustaining the emergence of implicit collusive agreements in hierarchical organizations. We conduct a laboratory experiment in which an agent hires, on behalf of the principal, one worker out of two candidates. The two candidates differ in their ability and, once employed, the worker chooses a level of non-contractible effort to exert in two tasks: one benefits the organization (that is both the principal and the agent) while the other one is less profitable, only benefits the agent and provides him with higher earnings. We provide evidence that: i) low ability workers are more likely to exert effort in the task that is exclusively beneficial to the agent; ii) as a consequence, agents distort the hiring process in favor of the low ability workers and iii) sharing a small part of the organization’s profits with the workers alleviates their effort distortion.},
  author       = {Maggian, Valeria and Montinari, Natalia and Nicolò, Antonio},
  keyword      = {Conflict of Interest,Effort Distortion,Profit Sharing,and Reciprocity},
  language     = {eng},
  number       = {10},
  publisher    = {ARRAY(0xb0bad98)},
  series       = {Working Paper / Department of Economics, School of Economics and Management, Lund University},
  title        = {Backscratching in Hierarchical Organizations},
  year         = {2015},
}