Does group identity prevent inefficient investment in outside options? An experimental investigation

Hodaka Morita, Maroš Servátka

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Citation (Scopus)

Abstract

We study whether group identity mitigates inefficiencies associated with appropriable quasi-rents, which are often created by relationship-specific investments in bilateral trade relationships. We conjecture that group identity strengthens the effect of an agent's generous action in increasing his trade partner's altruistic preferences, and this effect helps reduce incentives to undertake ex-post inefficient opportunistic behavior such as investment in an outside option. Our experimental results, however, do not support this conjecture, and contrast with our previous experimental findings that group identity mitigates distortions in ex-ante efficient relation-specific investment. We discuss a possible cause of the difference and its implications for the theory of the firm.

Original languageEnglish
Title of host publicationExperiments in organizational economics
EditorsSebastian J. Goerg, John R. Hamman
Place of PublicationLondon
PublisherEmerald Group Publishing
Pages105-126
Number of pages22
ISBN (Electronic)9781785609633
ISBN (Print)9781785609640
DOIs
Publication statusPublished - 2016

Publication series

NameResearch in Experimental Economics
PublisherEmerald Group Publishing
Volume19
ISSN (Print)0193-2306

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Keywords

  • group identity
  • opportunistic behavior
  • other-regarding preferences
  • outside option
  • relation-specific investment
  • transaction cost economics

Cite this

Morita, H., & Servátka, M. (2016). Does group identity prevent inefficient investment in outside options? An experimental investigation. In S. J. Goerg, & J. R. Hamman (Eds.), Experiments in organizational economics (pp. 105-126). (Research in Experimental Economics; Vol. 19). London: Emerald Group Publishing. https://doi.org/10.1108/S0193-230620160000019010