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Mediocrity and Induced Reciprocity

Natalia Montinari (), Antonio Nicolo' () and Regine Oexl ()
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Regine Oexl: University of Innsbruck, Austria

No 2012-053, Jena Economic Research Papers from Friedrich-Schiller-University Jena

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 the higher ability, and principals who chooses 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)
Date: 2012-09-12
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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