Employee types and endogenous organizational design: An experiment

Antoni Cunyat () and Randolph Sloof

Journal of Economic Behavior & Organization, 2011, vol. 80, issue 3, 553-573

Abstract: When managers are sufficiently guided by social preferences, incentive provision through an organizational mode based on informal implicit contracts may provide a cost-effective alternative to a more formal mode based on explicit contracts and active monitoring. This paper reports the results from a stylized laboratory experiment designed to test whether subjects in the role of firm owner rely on the social preferences of other (‘employee’) subjects with whom they are matched when choosing which payoff version of a simple trust game these employee subjects should play (‘the organizational mode’). Our main finding is that they do so, albeit in a different way than theory predicts. The importance of the first mover's social preferences for trusting behavior is recognized by the owner subjects, but the significant (first order) impact second movers’ social preferences have on trusting behavior of first movers seems to be overlooked.

Keywords: Social preferences; Organizational design; Experiments; Implicit contracts (search for similar items in EconPapers)
JEL-codes: C91 J40 M50 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Working Paper: Employee types and endofenous organizational design: An experiment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:80:y:2011:i:3:p:553-573

DOI: 10.1016/j.jebo.2011.05.015

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