Reputation and Market Wage as Contract Enforcement Device: An Experimental Evidence

Theoretical and Applied Economics

卷:XVII

Ch’ng KEAN SIANG¹ 

[1] University Sains, Malaysia;

关键词: incomplete contract;    reciprocal behavior;    repeated game effect;    wage differential;    co-operation;   

DOI  :  

来源: DOAJ

【 摘 要 】

Shirking opportunity has always been present in anincomplete economic exchange in a labor-employer relation. Due tounverifiability of a contract, economic agents resort to reciprocal norm toenhance the co-operation and efficiency of the relation. This paper usessome data from Kean Siang et al. (2010) to investigate individual behavior.We experimentally show the reciprocal incentives can improve the relationby increasing the number of co-operations. In total we consider fourexperimental treatments, each treatment being distinguished by its type ofinformation available to the workers and the type of interaction. Weobserve repetitive interaction and information about market wage enhancethe reciprocal inclinations and co-operative behaviors of the workers. Inour opinion repetitive interaction effect play a “punishment” role on thenon-reciprocal workers and therefore force them to conform to the norm,and workers form the perception of fairness better when the informationabout market wage is available. We find that degree of conformation ishigher when the information is available than the treatment when theinformation is not available. We conclude that the effectiveness ofreciprocity as contract enforcement device can be improved if the workerscan form perception of fairness based on relative wage.

【 授权许可】

Unknown