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Group identity and partnership

Jiang Jiang and Sherry Xin Li

Journal of Economic Behavior & Organization, 2019, vol. 160, issue C, 202-213

Abstract: We design a laboratory experiment to investigate how group identity influences decisions in a principal-agent framework with hidden actions and a revenue-sharing payment scheme. Group identity is induced by randomly assigning participants to groups and is further enhanced using a collective puzzle-solving task. We find that the principal makes a more generous revenue-sharing offer to the ingroup agent than to the outgroup agent. While an ingroup agent is less tolerant of a low offer from the principal, she exerts a greater effort in response to a more generous offer than does an outgroup agent. Our findings shed important light on the interplay of monetary incentives and group identity in tackling the principal-agent problem.

Keywords: Group identity; Principal-agent problem; Hidden action; Laboratory experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D82 J3 (search for similar items in EconPapers)
Date: 2019
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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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Handle: RePEc:eee:jeborg:v:160:y:2019:i:c:p:202-213