Managerial Payoff and Gift-Exchange in the Field

• Published in: Review of industrial organization Vol. 56; no. 2; pp. 259 - 280
• Main Authors: Englmaier, Florian, Leider, Stephen
• Format: Journal Article
• Language: English
• Published: New York Springer Science + Business Media 01-03-2020; Springer US; Springer Nature B.V
• Subjects: Cognition & reasoning; Compensation; Complementarity; Donations; Economics; Economics and Finance; Efficacy; Employees; Experiments; Gifts; Incentives; Industrial Organization; Labor market; Laboratories; Microeconomics; Personality; Principal-agent models; Reciprocity; Students; Studies; Wages & salaries; Workers; Incentives; Gift-exchange; Reciprocity; Field experiments
• ISSN: 0889-938X; 1573-7160
• DOI: 10.1007/s11151-019-09737-y

We conduct a field experiment where we vary both the presence of a gift-exchange wage and the effect of the worker’s effort on the manager’s payoff. Results indicate a strong complementarity between the initial wage-gift and the agent’s ability to “repay the gift”. We control for differences in ability and reciprocal inclination and show that gift-exchange is more effective with more reciprocal agents. We present a principal-agent model with reciprocal subjects that motivates our findings. Our results help to reconcile the conflicting evidence on the efficacy of gift-exchange outside the lab.