Does Group Identity Prevent Inefficient Investment in Outside Options? An Experimental Investigation

Hodaka Morita and Maroš Servátka

A chapter in Experiments in Organizational Economics, 2016, vol. 19, pp 105-126 from Emerald Group Publishing Limited

Abstract: We study whether group identity mitigates inefficiencies associated with appropriable quasi-rents, which are often created by relationship-specific investments in bilateral trade relationships. We conjecture that group identity strengthens the effect of an agent’s generous action in increasing his trade partner’s altruistic preferences, and this effect helps reduce incentives to undertakeex-postinefficient opportunistic behavior such as investment in an outside option. Our experimental results, however, do not support this conjecture, and contrast with our previous experimental findings that group identity mitigates distortions inex-anteefficient relation-specific investment. We discuss a possible cause of the difference and its implications for the theory of the firm.

Keywords: Relation-specific investment; group identity; opportunistic behavior; other-regarding preferences; outside option; transaction cost economics; C91; D20; L20 (search for similar items in EconPapers)
Date: 2016
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Related works:
Working Paper: Does Group Identity Prevent Inefficient Investment in Outside Options? An Experimental Investigation (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rexezz:s0193-230620160000019010

DOI: 10.1108/S0193-230620160000019010

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