Incomplete and Asymmetric Surplus Information in Labor Relations

CentER Discussion Paper No. 2003-121

25 Pages Posted: 24 Jun 2004

See all articles by Heike Hennig‐Schmidt

Heike Hennig‐Schmidt

University of Bonn - Laboratory for Experimental Economics

Bettina Rockenbach

University of Cologne

Abdolkarim Sadrieh

University of Magdeburg

Date Written: December 2003

Abstract

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

Henning-Schmidt, Heike and Rockenbach, Bettina and Sadrieh, Abdolkarim, Incomplete and Asymmetric Surplus Information in Labor Relations (December 2003). CentER Discussion Paper No. 2003-121, Available at SSRN: https://ssrn.com/abstract=556958 or http://dx.doi.org/10.2139/ssrn.556958

Heike Henning-Schmidt (Contact Author)

University of Bonn - Laboratory for Experimental Economics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

Bettina Rockenbach

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
++49 470 8664 (Phone)
++49 470 8668 (Fax)

Abdolkarim Sadrieh

University of Magdeburg ( email )

Faculty of Economics and Management
Postbox 4120
39016 Magdeburg
Germany

HOME PAGE: http://www.ww.uni-magdeburg.de

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