We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We empirically examine these predictions using data from the German Socio-Economic Panel. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.

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Keywords Double moral-hazard, GSOEP, Incentive contracts, Reciprocity, Social exchange
Persistent URL dx.doi.org/10.1016/j.joep.2010.05.001, hdl.handle.net/1765/76545
Journal Journal of Economic Psychology
Dur, A.J, Non, J.A, & Roelfsema, H.J. (2010). Reciprocity and incentive pay in the workplace. Journal of Economic Psychology, 31(4), 676–686. doi:10.1016/j.joep.2010.05.001