Gift Exchange and the Separation of Ownership and Control

Tinbergen Institute Discussion Paper No. 2006-037/1

31 Pages Posted: 14 Apr 2006

See all articles by Sandra Maximiano

Sandra Maximiano

University of Amsterdam - Amsterdam School of Economics (ASE)

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB); Tinbergen Institute

J. H. Sonnemans

University of Amsterdam - Faculty of Social and Behavioral Sciences; Tinbergen Institute

Date Written: April 2006

Abstract

Numerous gift exchange experiments have found a positive relationship between employers' wage offers and workers' effort levels. In (almost) all these experiments the employer both owns and controls the firm. Yet in reality many firms are characterized by the separation of ownership and control. In this paper we explore to what extent this affects the wage-effort relationship observed. We compare the standard bilateral gift exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage-effort relationship we observe is the same in all three situations. Most strikingly, workers still reward higher wages with higher effort levels, even when the manager responsible for choosing the wage does not share in the firm's profits at all. The results of a fourth treatment in which the wage is exogenously given suggest that workers feel reciprocal towards the firm as a whole; both ownership and control are important for the gift exchange relationship.

Keywords: Gift exchange, multi-level hierarchy, reciprocity, experimental economics

JEL Classification: J41, C91, M52

Suggested Citation

Maximiano, Sandra and Sloof, Randolph and Sonnemans, J. H., Gift Exchange and the Separation of Ownership and Control (April 2006). Tinbergen Institute Discussion Paper No. 2006-037/1, Available at SSRN: https://ssrn.com/abstract=895641 or http://dx.doi.org/10.2139/ssrn.895641

Sandra Maximiano (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

J. H. Sonnemans

University of Amsterdam - Faculty of Social and Behavioral Sciences ( email )

Kloveniersburgwal 48
Amsterdam, 1012 CX
Netherlands
+31 20 525-4249 (Phone)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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