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Contractual and Organizational Structure with Reciprocal Agents

Florian Englmaier () and Stephen Leider ()

American Economic Journal: Microeconomics, 2012, vol. 4, issue 2, 146-83

Abstract: We solve for the optimal contract when agents are reciprocal, demonstrating that generous compensation can substitute for performance-based pay. Our results suggest several factors that make firms more likely to use reciprocal incentives. Reciprocity is most powerful when output is a poor signal of effort and when the agent is highly reciprocal and/or productive. Similarly, reciprocal incentives are attractive when firm managers have strong incentive pay and discretion over employee compensation. While reciprocal incentives can be optimal even when identical firms compete, a reciprocity contract is most likely when one firm has a match-specific productivity advantage with the agent. (JEL D23, D86, J33, M12, M52)

JEL-codes: D23 D86 J33 M12 M52 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/mic.4.2.146
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Related works:
Working Paper: Contractual and organizational structure with reciprocal agents (2012)
Working Paper: Contractual and Organizational Structure with Reciprocal Agents (2008) Downloads
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