Average Wage, Reputation and Reciprocity

Abstract

Four experiments with different treatments were conducted to investigate reciprocal behaviour and the role of average wage information in a gift exchange game. No significant differences were found between the stranger and partner treatments but when workers have information on the average wage in the partner treatments, significant differences between stranger and partner treatments emerge. This suggests that average wage information reinforces positive reciprocity as intentions of the employer becomes clearer and easier to interpret. Furthermore, the information on average wage gives workers who are concerned with wage-effort equality the incentive to reciprocate effort relative to average wage.