Shocks and Relationships

Ninghua Du and Maroš Servátka

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: In this paper we experimentally study effects of exogenous revenue shocks on long-term relationships between firms and workers. While we find that shocks have no significant effect on wages and a little effect on the duration of relationships, we observe their significant effect on effort levels: given the same wage, the workers exert lower effort in the condition with shocks than in the condition with no shocks. As a result, the presence of shocks in our experiment decreases market efficiency.

Keywords: Experiment; exogenous revenue shocks; gift exchange (search for similar items in EconPapers)
JEL-codes: C91 D82 J41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-04-27
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:09/07

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