Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250149 
Year of Publication: 
2021
Series/Report no.: 
Working Papers in Economics and Statistics No. 2021-27
Publisher: 
University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon), Innsbruck
Abstract: 
Previous work has shown that unobservable random shocks on output have a detrimental effect on effort provision in short-term ('static') employment relationships. Given the prevalence of long-term ('dynamic') relationships in firms, we investigate whether the impact of shocks is similarly pronounced in gift-exchange relationships where the same principalagent pair interacts repeatedly. In dynamic relationships, shocks have a significantly less pronounced negative effect on the agent's effort provision than in static relationships. In an attempt to identify the drivers for our results we find that the combination of a repeatedgame effect and a noise-canceling effect is required to avoid the detrimental effects of unobservable random shocks on effort provision.
Subjects: 
Gift exchange
principal agent model
incomplete contracts
random shocks
reciprocity
laboratory experiments
long-term contracts
JEL: 
C72
C91
D81
Document Type: 
Working Paper

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