The effect of random shocks on reciprocal behavior in dynamic principal-agent settings

Rudolf Kerschbamer and Regine Oexl ()

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: Previous work has shown that unobservable random shocks on output have a detrimental effect on effort provision in short-term ('static') employment relationships. Given the prevalence of long-term ('dynamic') relationships in firms, we investigate whether the impact of shocks is similarly pronounced in gift-exchange relationships where the same principal-agent pair interacts repeatedly. In dynamic relationships, shocks have a significantly less pronounced negative effect on the agent's effort provision than in static relationships. In an attempt to identify the drivers for our results we find that the combination of a repeated-game effect and a noise-canceling effect is required to avoid the detrimental effects of unobservable random shocks on effort provision.

Keywords: Gift exchange; principal agent model; incomplete contracts; random shocks; reciprocity; laboratory experiments; long-term contracts (search for similar items in EconPapers)
JEL-codes: C72 C91 D81 (search for similar items in EconPapers)
Pages: 56
Date: 2021
New Economics Papers: this item is included in nep-cta, nep-cwa, nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www2.uibk.ac.at/downloads/c9821000/wpaper/2021-27.pdf (application/pdf)

Related works:
Journal Article: The effect of random shocks on reciprocal behavior in dynamic principal-agent settings (2023)
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:inn:wpaper:2021-27

Access Statistics for this paper

More papers in Working Papers from Faculty of Economics and Statistics, Universität Innsbruck Contact information at EDIRC.
Bibliographic data for series maintained by Judith Courian ().