The hidden advantage of delegation: pareto-improvements in a gift-exchange game

Charness, Gary, Cobo-Reyes, Ramón, Jiménez Jiménez, Natalia ORCID logoORCID: https://orcid.org/0000-0001-9077-4824, Lacomba, Juan A and Lagos, Francisco (2012) The hidden advantage of delegation: pareto-improvements in a gift-exchange game. American Economic Review, 102 (5) . pp. 2358-2379. ISSN 0002-8282 [Article] (doi:10.1257/aer.102.5.2358)

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Abstract

This paper analyzes the effect on performance and earnings of delegating the wage choice to employees. Our results how that such delegation significantly increases effort levels.
Moreover, we observe a Pareto-improvement, as the earnings of both employers and employees increase when employers delegate than when they do not. Interestingly, we also find that the employees’ performance under delegation is higher than under non-delegation, even for similar wages. While there is strong evidence that behavior reflects strategic considerations, this result also holds for one-shot interactions. A possible non-strategic motivation explaining the positive reaction to delegation is a sense of enhanced responsibility.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 13028
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Depositing User: Natalia Jimenez Jimenez
Date Deposited: 14 Feb 2014 10:57
Last Modified: 07 Jun 2022 06:58
URI: https://eprints.mdx.ac.uk/id/eprint/13028

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