TY  - RPRT
        AU  - Abeler, Johannes
AU  - Altmann, Steffen
AU  - Kube, Sebastian
AU  - Wibral, Matthias
        TI  - Reciprocity and Payment Schemes: When Equality Is Unfair
        PY  - 2006/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2500
        UR  - https://www.iza.org/publications/dp2500
        AB  - A growing literature stresses the importance of reciprocity, especially for employment relations. In this paper, we study the interaction of different payment modes with reciprocity. In particular, we analyze how equal wages affect performance and efficiency in an environment characterized by contractual incompleteness. In our experiment, one principal is matched with two agents. The principal pays equal wages in one treatment and can set individual wages in the other. We find that the use of equal wages elicits substantially lower efforts and efficiency. This is not caused by monetary incentives per se since under both wage schemes it is profit-maximizing for agents to exert high efforts. The treatment difference is rather driven by the fact that reciprocity is violated far more frequently in the equal wage treatment. Agents suffering from a violation of reciprocity subsequently withdraw effort. Our results suggest that individual reward and punishment opportunities are crucial for making reciprocity a powerful contract enforcement device.
        KW  - incomplete contracts
KW  - social norms
KW  - reciprocity
KW  - gift exchange
KW  - wage setting
KW  - wage equality
KW  - laboratory experiment
KW  - multiple agents
        ER  -