Group Identity and Relation-Specific Investment: An Experimental Investigation

Hodaka Morita () and Maroš Servátka

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

Abstract: The hold-up problem has played a central role in the study of firm boundaries that originated with the pathbreaking essay by Coase (1937). This paper studies a previously unexplored mechanism through which integration could resolve the hold-up problem. Based on Tajfel and Turner’s (1979) social identification theory, we conjecture that team membership increases the degree of altruism towards another team member, and this in turn helps resolving the hold-up problem. We test this conjecture in a laboratory experiment. Our subjects are randomly divided into two teams and given their respective team uniforms to wear. In Task 1 they answer two trivia questions and can use a chat program to help their team members. In Task 2 the subjects play a standard hold-up game with a member of their own team (representing integration) or with a member of the other team (non-integration). We find that team membership significantly increases the investment rate as well as the share of the surplus offered back to the investor and thus mitigates the hold-up problem.

Keywords: altruism; experiment; hold-up problem; identity; integration; other-regarding preferences; relation-specific investment; team membership (search for similar items in EconPapers)
JEL-codes: C91 D20 L20 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011-01-19
New Economics Papers: this item is included in nep-cbe, nep-evo and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://repec.canterbury.ac.nz/cbt/econwp/1101.pdf (application/pdf)

Related works:
Journal Article: Group identity and relation-specific investment: An experimental investigation (2013)
Working Paper: Group Identity and Relation-Specific Investment: An Experimental Investigation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:11/01

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