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Robustness of Relational Contracts to Interruptions in Employer-Worker Gift Exchange Experiments

Camerer, Colin and Linardi, Sera (2019) Robustness of Relational Contracts to Interruptions in Employer-Worker Gift Exchange Experiments. . (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20200327-125903840

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Abstract

This paper experimentally investigates the robustness of the “two-tiered labor market” of Brown, Falk and Fehr (2004). In the experiments, relatively efficient private relational contracts emerge between firms and specific workers, as firms make worker-specific wage effors. Public contracts which any worker can accept are also made.. Robustness is tested by introducing stochastic interruptions in which firms cannot hire workers for three periods. Workers that are involuntarily laid off by the interruptions are eager to be reemployed; they are unselective about job offers and typically do not shirk. Firms prefer these laid-off “temp workers” to others who weren’t laid off. Heightened job insecurity induces all workers to compete to enter relational contracts why delivering substantial effort close to the level requested by firms. The results show that interruptions may shorten relational contracts but do not harm market efficiency (except in the last few periods when there is more shirking). A simplified equilibrium model in which fair-minded and selfish workers both exist make several predictions about the nature of contracts and dynamics which are generally consistent with the evidence.


Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription
https://doi.org/10.2139/ssrn.3382951DOIWorking Paper
ORCID:
AuthorORCID
Camerer, Colin0000-0003-4049-1871
Additional Information:Date Written: May 5, 2019; Posted: 29 May 2019.
Subject Keywords:experimental economics, gift exchange, relational contracts, behavioral economics
Classification Code:JEL: C92
Record Number:CaltechAUTHORS:20200327-125903840
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20200327-125903840
Official Citation:Camerer, Colin F. and Linardi, Sera, Robustness of Relational Contracts to Interruptions in Employer-Worker Gift Exchange Experiments (May 5, 2019). Available at SSRN: https://ssrn.com/abstract=3382951 or http://dx.doi.org/10.2139/ssrn.3382951
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:102148
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:27 Mar 2020 20:50
Last Modified:27 Mar 2020 20:50

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