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Charness, Gary,
Ramón Cobo-Reyes,
Natalia Jiménez,
Juan A. Lacomba, and
Francisco Lagos. 2012. "The Hidden Advantage of Delegation: Pareto Improvements in a Gift Exchange Game."
,
102(5): 2358-79.
Show Article Details
DOI: 10.1257/aer.102.5.2358
Abstract:This paper analyzes the effect on performance and earnings of delegating the wage choice to employees. Our results show that such delegation significantly increases effort levels. Moreover, we observe a Pareto improvement, as the earnings of both employers and employees increase when employers delegate than when they do not. Interestingly, we also find that the employees' performance under delegation is higher than under nondelegation, even for similar wages. While there is strong evidence that behavior reflects strategic considerations, this result also holds for one-shot interactions. A possible nonstrategic motivation explaining the positive reaction to delegation is a sense of enhanced responsibility. (JEL J31, J33, J41)
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Authors:
Charness, Gary (U CA, Santa Barbara)
Cobo-Reyes, Ramón (U Granada and Globe, Cartuja)
Jiménez, Natalia (U Granada and Globe, Cartuja)
Lacomba, Juan A. (U Granada and Globe, Cartuja)
Lagos, Francisco (U Granada and Globe, Cartuja)
JEL Classifications:
J31: Wage Level and Structure; Wage Differentials
J33: Compensation Packages; Payment Methods
J41: Labor Contracts
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