Abstract
A peer worker is introduced in a controlled labor market experiment characterized by unobservable effort and incomplete contracts. Workers make decisions independently and without knowledge of each other’s actions in a modified gift exchange experiment. Introducing a peer worker into an ongoing market has a negative and significant effect on effort. This decrease in effort is consistent with responsibility-alleviation on the part of employees and not with other-regarding equity concerns for the manager’s payoffs.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
These findings are not limited to laboratory experiments. Al-Ubaydli et al. (2008) and Kube et al. (2008) find gift exchange behavior in field experiments and Campbell and Kamlani (1997) and Bewley (1998) find evidence of other-regarding behavior in employer surveys. See Gächter and Fehr (2002), for a survey of the gift exchange literature as well as other experiments on fairness.
To the extent that employees care about equality of payoffs in the sense of Fehr and Schmidt (1999) and Bolton and Ockenfels (2000), a worker may be willing to give higher effort when their earnings are higher than the manager’s because effort costs are outweighed by the utility gained from reducing inequality in profits. The purpose of Maximiano et al. (2007) was not to investigate peer effects.
Other experiments which utilize multiple second movers in prisoners’ dilemma games have not generally found differences with the number of agents. Guth and Van Damme (1998) find the division of the money in an ultimatum game with a third player (with no decision making capability) to be similar to the standard game. The effect of the number of participants in public goods games seems less important than the marginal per capita return (Isaac and Walker 1988) or minimal profitable coalition (Isaac et al. 1991). More recently Andreoni (2007) shows that altruistic giving decreases with the number of recipients.
The experimental materials and matching grid are available online at: http://frank.mtsu.edu/~mfowens/Exp_materials_Peer_GE.docx.
The term “effort” is used throughout this paper but in the experiment “amount of work” was used in its place.
This matching procedure follows that of Charness (2000) and creates a series of one-shot games so that the only motivation for offering efficiency wages is the potential gain from higher effort.
Gift exchange experiments have been conducted both with unemployed workers (see for example Fehr et al. 1993 and Brandts and Charness 2004; in the ESL treatment) and without unemployed workers (see for example Charness 2004). However, in previous studies with unemployed workers, the unemployed in a market period do not necessarily remain unemployed in the next period because wage offers are selected on a first-come, first-served basis. The unemployed workers in our study remain out of the labor market for three periods in order to generate enough data for analysis.
The payoff functions for employees and the managers (described below) are a rescaled version of the profit functions used in Brandts and Charness (2004).
Monitors made every attempt to ensure that all subjects completely understood the payoffs before beginning the session so that the introduction of new payoffs and subsequent practice problems would not influence the play of the game. In every case subjects completed the second set of practice problems in far less time than the first. The timing of the Reverse treatment offers a test to see if this pause in the game has an effect on the provision of effort.
The data from both locations are pooled after regressions testing for differences by location failed to find any significant difference. The baseline data consists of the first five market periods of observations presented in Owens and Kagel (2010) which analyses minimum wages in the gift exchange framework. The payoffs, basic procedures, and examples are identical, but the primary treatment of Owens and Kagel (2010) introduces a minimum wages in the sixth market period. Thus, only the first five periods which have no minimum wage are used as a baseline.
This result is generated from a regression (not reported) that includes the wage and also an indicator variable for SR periods. Regressions were also performed to test for differences between the behavior of regular and unemployed workers. The results did not reveal any significant differences between the responses of those employed throughout and those who were unemployed.
No individual treatment is significantly different from any other treatment.
It is worth noting that Maximiano et al. (2007) found no difference between two treatments (labeled 1–4 and 1–4E) which differed in their initial endowments suggesting that participants largely ignored them. The within design makes these differences more salient.
References
Abeler J, Altmann S, Kube S, Wibral M (2010) Gift exchange and worker’s fairness concerns: when equality is unfair. J Eur Econ Assoc 8(6):1299–1324
Al-Ubaydli O, Andersen S., Gneezy U, List J (2008) For love or money? Comparing the effects of non-pecuniary and pecuniary incentive schemes in the workplace. Working Paper, George Mason University 2008
Andreoni J (2007) Giving gifts to groups: how altruism depends on the number of recipients. J Public Econ 91:1731–1749
Bellemare C, Lepage P, Shearer B (2010) Peer pressure, incentives, and gender: an experimental analysis of motivation in the workplace. Labour Econ 17:276–283
Bewley T (1998) Why not cut pay? Eur Econ Rev 42:459–490
Bolton G, Ockenfels A (2000) ERC: a theory of equity, reciprocity, and competition. Am Econ Rev 90:166–193
Brandts J, Charness G (2004) Do labour market conditions affect gift exchange? Some experimental evidence. Econ J 114:684–708
Campbell C, Kamlani K (1997) The reasons for wage rigidity: evidence from a survey of firms. Q J Econ 112:253–261
Charness G (2000) Responsibility and effort in an experimental labor market. J Econ Behav Organ 42:375–384
Charness G (2004) Attribution and reciprocity in an experimental labor market. J Labor Econ 22:665–688
Charness G, Kuhn P (2007) Does pay inequality affect worker effort? Experimental evidence. J Labor Econ 25(4):693–723
Falk A, Ichino A (2006) Clean evidence on peer effects. J Labor Econ 24:39–57
Fehr E, Schmidt K (1999) A theory of fairness, competition, and cooperation. Q J Econ 114:817–868
Fehr E, Kirchsteiger G, Riedl A (1993) Does fairness prevent market clearing? An experimental investigation. Q J Econ 108:437–459
Gächter S, Fehr E (2002) Fairness in labour markets – A survey of experimental results. In: Bolle F, Lehmann-Waffenschmidt M (eds) Surveys in experimental economics: bargaining, cooperation and election markets. Physica-Verlag, Berlin, pp 95–132
Gächter S, Thöni C (2010) Social comparisons and performance: experimental evidence on the fair wage-effort hypothesis. J Econ Behav Organ 76:531–543
Güth W, Van Damme E (1998) Information, strategic behavior and fairness in ultimatum bargaining, an experimental study. J Math Psychol 42:227–247
Hannan R, Kagel J, Moser D (2002) Partial gift exchange in an experimental labor market: impact of subject population differences, productivity differences and effort requests on behavior. J Labor Econ 20:923–951
Issac M, Walker J (1988) Group size effects in public goods provision: the voluntary contributions mechanism. Q J Econ 103:179–199
Isaac M, Walker J, Williams A (1991) Group size and the voluntary provision of public goods: experimental evidence utilizing large groups. J Public Econ 54:1–36
Kube S, Maréchal M, Puppe C (2008) The currency of reciprocity - gift-exchange in the workplace. Working paper, Institute for Empirical Research in Economics
Mas A, Moretti E (2009) Peers at work. Am Econ Rev 99:112–145
Maximiano S, Sloof R, Sonnemans J (2007) Gift exchange in a multi-worker firm. Econ J 117:1025–1050
Owens M, Kagel J (2010) Minimum wage restrictions and employee effort in incomplete labor markets. J Econ Behav Organ 73:317–326
Author information
Authors and Affiliations
Corresponding author
Additional information
This research has been partially supported by a Faculty Research and Creative Projects Grant at Middle Tennessee State University and by the Department of Economics at Ohio State University. The author thanks John Kagel for his help and financial support, Adam Hogan for valuable research assistance and Susan Rose and J. Laron Kirby for their help in conducting experiments. All experimental materials, instructions and data are available upon request from the author at: mark.owens@mtsu.edu.
Rights and permissions
About this article
Cite this article
Owens, M.F. Responsibility-Alleviation and Other-Regarding Preferences with Peer Workers in Labor Markets: An Experimental Investigation. J Labor Res 33, 353–369 (2012). https://doi.org/10.1007/s12122-012-9138-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12122-012-9138-9