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Shocks and Relationships

Ninghua Du
Shanghai University of Finance and Economics

Maros Servatka
University of Canterbury - Department of Economics

April 27, 2009

Abstract:
In this paper we experimentally study effects of exogenous revenue shocks on long-term relationships between firms and workers. While we find that shocks have no significant effect on wages and a little effect on the duration of relationships, we observe their significant effect on effort levels: given the same wage, the workers exert lower effort in the condition with shocks than in the condition with no shocks. As a result, the presence of shocks in our experiment decreases market efficiency.

Keywords: Experiment, exogenous revenue shocks, gift exchange

JEL Classifications: C91, D82, J41

Working Paper Series

Date posted: April 27, 2009 ; Last revised: November 08, 2009

Suggested Citation

Du, Ninghua and Servatka, Maros, Shocks and Relationships (April 27, 2009). Available at SSRN: http://ssrn.com/abstract=1395543

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Contact Information

Maros Servatka (Contact Author) University of Canterbury - Department of Economics ( email ) Private Bag 4800 Christchurch New Zealand +64 3 364 2825 (Phone) +64-3-3642635 (Fax) HOME PAGE: http://www.econ.canterbury.ac.nz/people/servatka.shtml
Ninghua Du Shanghai University of Finance and Economics ( email ) 777 Guoding Road Shanghai 200433 200433 China

Abstract

References (9)

Date posted: April 27, 2009 ; Last revised: November 08, 2009

Suggested Citation

Contact Information

Maros Servatka (Contact Author)

Ninghua Du