Universität zu Köln

Bolton, Gary, Ockenfels, Axel ORCID: 0000-0003-1456-0191 and Werner, Peter (2016). Leveraging social relationships and transparency in the insider game. J. Econ. Sci. Assoc.-JESA, 2 (2). S. 127 - 144. NEW YORK: SPRINGER. ISSN 2199-6784

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Abstract

We exhibit a mechanism by which two parties leverage their social relationship to ratchet up the rents they collect from a third party residual claimant. Specifically, in a laboratory environment, we study a novel three-person insider game in which 'insiders' decide how to distribute profits among themselves and an 'outsider' who is the residual claimant. We find that the distribution of payments is largely determined by an informal quid pro quo among the two decision makers at the expense of the outsider. We then manipulate pay transparency and the competition to keep interaction partners, thereby improving the strategic position of one insider. Pay transparency increases the profit share that goes to rent seekers. In addition, rent extraction from the third party persists when competition for interaction partners is introduced. As a result, we find that payments both affect and reflect the influence of social relationships.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Bolton, Gary UNSPECIFIED UNSPECIFIED UNSPECIFIED Ockenfels, Axel UNSPECIFIED orcid.org/0000-0003-1456-0191 UNSPECIFIED Werner, Peter UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-257870
DOI:	10.1007/s40881-016-0030-x
Journal or Publication Title:	J. Econ. Sci. Assoc.-JESA
Volume:	2
Number:	2
Page Range:	S. 127 - 144
Date:	2016
Publisher:	SPRINGER
Place of Publication:	NEW YORK
ISSN:	2199-6784
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Economics > Macroeconomic, Financial and Economic Policy > Professur für Economics, Design and Behavior Center of Excellence C-SEB
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/25787