Fairness considerations in joint venture formation
Tanjim Hossain (),
Elizabeth Lyons () and
Aloysius Siow ()
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Elizabeth Lyons: University of California
Aloysius Siow: University of Toronto
Experimental Economics, 2020, vol. 23, issue 3, No 3, 632-667
Abstract Using a series of laboratory experiments in the context of bilateral bargaining over whether and how to engage in a joint venture, this paper shows that fairness concerns result in failures to undertake profitable joint production opportunities. We find that framing an opportunity as an employment relationship rather than as a partnership significantly reduces these inefficiencies and increases subjects’ welfare. Consistent with the theoretical model developed in the paper, text analysis and a follow-up experiment demonstrate that the lower likelihood of an efficient outcome in the partnership frame is driven primarily by a concern for fairness generated by the perceived social relationship associated with partnerships, and not by differences in the economic structure, cognition, subject motivation, or changes in relative bargaining power.
Keywords: Firm formation; Fairness concerns; Cooperative bargaining; Organizational structure (search for similar items in EconPapers)
JEL-codes: C92 D83 D91 L14 (search for similar items in EconPapers)
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