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Mediocrity and induced reciprocity

Natalia Montinari (), Antonio Nicolo' () and Regine Oexl ()

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: We report evidence from an experiment where a principal chooses an agent out of two to perform a task for a fixed compensation. The principal's payoff depends on the agent's ex-ante ability and on a non-contractible effort that the agent has to exert once employed. We find that a significant share of principals select the mediocre agent (i.e. the one with the lower ex-ante ability). When the principal is allowed to send a message, mediocre agents exert more effort than agents with higher ability, and principals who choose mediocre agents on average have a larger payoff than principals who select agents with higher ability. This difference in effort overcompensates the difference in ability. Mediocre agents reciprocate more than agents who have ex-ante higher ability when the principals are able to make them feeling indebted.

Keywords: reciprocity; communication; incentives; mediocrity (search for similar items in EconPapers)
JEL-codes: C9 (search for similar items in EconPapers)
Pages: 29
Date: 2012-09
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-cta, nep-exp, nep-hrm and nep-soc
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Working Paper: Mediocrity and Induced Reciprocity (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2012-19

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