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

Article

Charness, G., Cobo-Reyes, R., Jimenez Jimenez, N., Lacomba, J. and Lagos, F. 2012. The hidden advantage of delegation: pareto-improvements in a gift-exchange game. American Economic Review. 102 (5), pp. 2358-2379. https://doi.org/10.1257/aer.102.5.2358
TypeArticle
TitleThe hidden advantage of delegation: pareto-improvements in a gift-exchange game
AuthorsCharness, G., Cobo-Reyes, R., Jimenez Jimenez, N., Lacomba, J. and Lagos, F.
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.

PublisherAmerican Economic Association
JournalAmerican Economic Review
ISSN0002-8282
Publication dates
PrintAug 2012
Publication process dates
Deposited14 Feb 2014
Output statusPublished
Digital Object Identifier (DOI)https://doi.org/10.1257/aer.102.5.2358
Web of Science identifierWOS:000307471600021
LanguageEnglish
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