Backscratching in Hierarchical Organizations

33 Pages Posted: 16 Apr 2015

See all articles by Valeria Maggian

Valeria Maggian

Ca Foscari University of Venice - Dipartimento di Economia

Natalia Montinari

University of Lund, School of Economics

Antonio Nicolò

University of Padua - Department of Economics; University of Manchester

Multiple version iconThere are 2 versions of this paper

Date Written: April 14, 2015

Abstract

In this paper we investigate the role of reciprocity in sustaining the emergence of implicit collusive agreements in hierarchical organizations. We conduct a laboratory experiment in which an agent hires, on behalf of the principal, one worker out of two candidates. The two candidates differ in their ability and, once employed, the worker chooses a level of non-contractible effort to exert in two tasks: one benefits the organization (that is both the principal and the agent) while the other one is less profitable, only benefits the agent and provides him with higher earnings. We provide evidence that: i) low ability workers are more likely to exert effort in the task that is exclusively beneficial to the agent; ii) as a consequence, agents distort the hiring process in favor of the low ability workers and iii) sharing a small part of the organization's profits with the workers alleviates their effort distortion.

Keywords: Conflict of interest, Effort Distortion, Profit Sharing, and Reciprocity

JEL Classification: C91, J50, L14, M52

Suggested Citation

Maggian, Valeria and Montinari, Natalia and Nicolò, Antonio, Backscratching in Hierarchical Organizations (April 14, 2015). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 299, Available at SSRN: https://ssrn.com/abstract=2594334 or http://dx.doi.org/10.2139/ssrn.2594334

Valeria Maggian (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 234 9150 (Phone)

Natalia Montinari

University of Lund, School of Economics ( email )

Tycho Brahes väg 1,
S-220 07 Lund, 223 63
Sweden

Antonio Nicolò

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

University of Manchester ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
75
Abstract Views
734
Rank
454,852
PlumX Metrics