Overcoming moral hazard with social networks in the workplace: An experimental approach

Amrita Dhillon (), Ronald Peeters and Ayse Muge Yuksel
Additional contact information
Ayse Muge Yuksel: Maastricht University

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: The use of social networks in the workplace has been documented by many authors, although the reasons for their widespread prevalence are less well known. In this paper we present evidence based on a combined eld-laboratory experiment that social networks are used by employers to reduce worker moral hazard. The worker chooses an e ort level given a xed wage under di erent settings of social proximity. Social proximity is captured using actual Facebook friendship information revealed anonymously to subjects once they have been recruited. Since employers themselves do not have access to social connections, they delegate the decision to referrers who can select among workers with different degrees of social proximity to themselves. We show that employers choose referrals over anonymous hiring about 80% of the time. In keeping with our predictions, referrers also choose workers with a greater social proximity to themselves and workers who are closer to referrers indeed pay back more to the referrer. The advantage of the lab setting is thatwe can isolate moral hazard and directed altruism as the main driving forces for these results.

Keywords: Efficiency wage contracts; Moral hazard; Dictator game; Referrals; Altruism; Reciprocity; Directed altruism; Social proximity; Facebook; Experiment; Social networks; Strength of ties; Spot market. (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp, nep-hrm, nep-lab, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www2.warwick.ac.uk/fac/soc/economics/resear ... 206-2014_dhillon.pdf

Related works:
Working Paper: Overcoming Moral Hazard with Social Networks in the Worksplace: An Experimental Approach (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:206

Access Statistics for this paper

More papers in CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE) Contact information at EDIRC.
Bibliographic data for series maintained by Jane Snape ().