A Gift-exchange with Probabilistc Payoffs

Creators: Luzuriaga, Miguel and Kunze, Oliver
Title: A Gift-exchange with Probabilistc Payoffs
Item Type: Article
Event Title: 2016 World Economic Science Association (ESA)
Event Location: Hebrew University of Jerusalem
Event Dates: July 7-11th
Projects: ILR
Journal or Publication Title: International Journal of Applied Behavioral Economics
Page Range: pp. 1-18
Date: October 2017
Divisions: Wirtschaftswissenschaften
Abstract: Ample experimental evidence demonstrates a positive wage-effort relationship in which the results from the employee’s effort lead to deterministic firm’ payoffs. We thus investigate a reframed version of the gift-exchange game by Fehr et al. (1998) in which the firms’ payoffs can take two values and one of them is randomly determined by an external process after the effort choice has been made. We find that effort levels are significantly lower when payoffs are probabilistic than when they are deterministic. As a consequence, high waging is profitable in the deterministic, but not in the probabilistic condition. Moreover, the treatment effect is strongest among firms which offer high wages.
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Luzuriaga, Miguel and Kunze, Oliver (2017) A Gift-exchange with Probabilistc Payoffs. International Journal of Applied Behavioral Economics, 6 (4). pp. 1-18.

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