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The Dark Side of Reciprocity

Natalia Montinari ()

No 2011-052, Jena Economic Research Papers from Friedrich-Schiller-University Jena

Abstract: Whether friendship or competitive relationships deserve to be encouraged in the workplace is not obvious a priori. In this paper we derive the conditions under which a profit-maximizing employer finds it convenient to induce a rat race among workers exhibiting horizontal reciprocity in order to obtain underpaid or unpaid extra effort. We characterize the optimal compensation scheme under both symmetric and asymmetric information about workers' actions, and we also derive conditions for our result to hold in the presence of vertical reciprocity.

Keywords: Extra Effort; Horizontal Reciprocity; Negative Reciprocity (search for similar items in EconPapers)
JEL-codes: D03 D83 J33 (search for similar items in EconPapers)
Date: 2011-11-04
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-cta, nep-hrm and nep-mic
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