Group identity and relation-specific investment: An experimental investigation

Hodaka Morita, Maroš Servátka*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

24 Citations (Scopus)

Abstract

The hold-up problem has played a central role in the study of firm boundaries, which is a fundamental element of the economic study of organizations. We study a previously unexplored mechanism by which integration between two parties could mitigate the problem. Based on the social identity theory, we conjecture that group identity strengthens agents' altruistic preferences towards group members, and this helps mitigate the hold-up problem. We test this conjecture in a laboratory experiment. Our subjects were randomly divided into two teams and asked to wear their team uniform. Task 1 required them to answer questions about trivia, where the subjects had access to a chat program that enabled them to help their team members. For Task 2, the subjects played a hold-up game with either a member of their own team (representing integration) or a member of the other team (non-integration). The experimental results support our conjectures.

Original languageEnglish
Pages (from-to)95-109
Number of pages15
JournalEuropean Economic Review
Volume58
DOIs
Publication statusPublished - Feb 2013
Externally publishedYes

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