Skip to Main content Skip to Navigation
Journal articles

Respect and relational contracts

Abstract : Assuming that people care not only about what others do but also on what others think, we study respect in a labor market context where the length of the employment relationship is endogenous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. We study whether symbolic rewards are used by the employers mainly to praise employees or as a coordination device to build relational contracts by manipulating the balance between labor demand and supply in the market. We find that a high proportion of long-term relationships have been initiated by the assignment of symbolic rewards. However, the assignment of symbolic rewards decreases when it becomes clear that the relationship is durable, suggesting that employers mainly use symbolic rewards as a coordination device to initiate relational contracts. Compared to the balanced market condition, assigning symbolic rewards in initial relationships is less likely when there is excess demand in the market and more likely when there is excess supply, i.e. when the relationship is more valuable. Receiving symbolic rewards increases the employees' likelihood of accepting to continue the relationship with the same employer. It also motivates them to increase their effort further but only when the market is balanced. Overall, the ability to assign symbolic rewards does not give rise to higher profits because it is associated with lower rents offered to the employees on average, leading to lower effort levels.
Document type :
Journal articles
Complete list of metadatas

Cited literature [33 references]  Display  Hide  Download

https://halshs.archives-ouvertes.fr/halshs-00642527
Contributor : Nelly Wirth <>
Submitted on : Wednesday, January 18, 2012 - 4:57:43 PM
Last modification on : Thursday, April 30, 2020 - 3:12:05 PM
Long-term archiving on: : Thursday, April 19, 2012 - 2:20:06 AM

Files

Respect_21Oct11.pdf
Files produced by the author(s)

Identifiers

  • HAL Id : halshs-00642527, version 1

Citation

Tor Eriksson, Marie Claire Villeval. Respect and relational contracts. Journal of Economic Behavior and Organization, Elsevier, 2012, 81 (1), pp. 286-298. ⟨halshs-00642527⟩

Share

Metrics

Record views

511

Files downloads

614