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CeDEx 2010-10: The Impact of Social Comparisons on Reciprocity

Abstract

This paper investigates how social comparison information about referent others (i.e. learning what similar others do and how they are treated) affects reciprocal relationships. Using a three-person gift-exchange game we study how employees’ reciprocity towards an employer is affected by exposure to pay comparison information (what co-workers earn) and effort comparison information (how co-workers perform). We find that pay comparison information does not affect reciprocity. Effort comparison information, however, influences reciprocal relationships in important ways: the ability to observe reciprocal behavior on the part of others strongly affects employees’ reciprocity towards the employer. While our data show that social information in principle may either erode or amplify reciprocal relationships, we find that, on average, social comparisons have a detrimental impact on reciprocity.

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Revised version of 2008-09

Now published in Scandinavian Journal of Economics 2012 114(4);1346-1367

Authors

Simon Gächter, Daniele Nosenzo and Martin Sefton

 

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Posted on Saturday 1st May 2010

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