Incomplete and Asymmetric Surplus Information in Labor Relations
CentER Discussion Paper No. 2003-121
25 Pages Posted: 24 Jun 2004
Date Written: December 2003
Numerous laboratory experiments show that workers reciprocate to high wages with high effort, when there is perfect information on the surplus created. Recent field experiments, however, suggest that trust and reciprocity may be lower or absent when the information is incomplete. We report a laboratory experiment with symmetric and asymmetric incomplete surplus information in a bilateral gift exchange setting. We find that trust and reciprocity have a significant positive effect on wages, effort and efficiency. But, all three are substantially lower under incomplete than under complete information. The negative impact on wages and efficiency is even greater with information asymmetry.
Keywords: Trust, reciprocity, efficiency, incomplete information, asymmetric information
JEL Classification: C92, D82, J41
Suggested Citation: Suggested Citation