Optimal Contracting with Altruism and Reciprocity

Matteo Bassi (), Marco Pagnozzi and Salvatore Piccolo ()
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Matteo Bassi: Università di Napoli Federico II and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal-agent model where each player cares about other players’ utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players are altruistic. Nevertheless, in contrast to what may be expected, an increase in the degree of the agent’s altruism as well as a more reciprocal behavior by players has ambiguous effects on efficiency. We also consider the effects of the presence of spiteful players and discuss how monetary transfers between players depend on their degrees of altruism and spitefulness.

Keywords: Adverse selection; altruism; reciprocity; optimal contracting (search for similar items in EconPapers)
JEL-codes: D64 D86 (search for similar items in EconPapers)
Date: 2013-10-10
New Economics Papers: this item is included in nep-cta, nep-evo, nep-exp, nep-hrm, nep-mic and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Research in Economics, 2014, 68(1), 27–38

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http://www.csef.it/WP/wp342.pdf (application/pdf)

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Journal Article: Optimal contracting with altruism and reciprocity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:342

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