Resource title

Social exchange and common agency in organizations

Resource image

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Resource description

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate a manager s attention with higher effort. To this end we develop a common agency model with two-sided moral hazard. We show that when effort is contractible but attention is not, the first-best can be achieved through granting autonomy of effort choice to employees and giving bonus pay to both managers and employees. When neither effort nor attention are contractible, an attention race arises, as each manager tries to sway the employee s effort his way. While this may result in too much social exchange, the attention race may also be a blessing because it alleviates managers moral-hazard problem in attention provision. Lastly, we derive the implications of these contract imperfections for optimal organizational design.

Resource author

Robert Dur, Hein Roelfsema

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26075

Resource license

Adapt according to the presented license agreement and reference the original author.