Abstract
AbstractThis paper studies how incentives are affected by intention-based reciprocity preferences when the principal hires many agents. Our results describe the set of agents’ sensitivities to reciprocity required to sustain a given strategy profile. We also show that hiring reciprocal agents to implement a first- or a second-best contract will always benefit the principal if the strategy profile is symmetric. Instead, when the profile (first or second best) is asymmetric the principal’s interest might be better served by self-interested agents. We conclude the paper by clarifying when symmetric profiles are most likely to arise.
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