Group Identity and Relation-Specific Investment: An Experimental Investigation (2011)
Type of ContentDiscussion / Working Papers
PublisherDepartment of Economics & Finance, College of Business & Economics, University of Canterbury
University of Canterbury. Department of Economics and Finance
The hold-up problem has played a central role in the study of firm boundaries that originated with the pathbreaking essay by Coase (1937). This paper studies a previously unexplored mechanism through which integration could resolve the hold-up problem. Based on Tajfel and Turner’s (1979) social identification theory, we conjecture that team membership increases the degree of altruism towards another team member, and this in turn helps resolving the hold-up problem. We test this conjecture in a laboratory experiment. Our subjects are randomly divided into two teams and given their respective team uniforms to wear. In Task 1 they answer two trivia questions and can use a chat program to help their team members. In Task 2 the subjects play a standard hold-up game with a member of their own team (representing integration) or with a member of the other team (non-integration). We find that team membership significantly increases the investment rate as well as the share of the surplus offered back to the investor and thus mitigates the hold-up problem.
CitationMorita, H., Servátka, M. (2011) Group Identity and Relation-Specific Investment: An Experimental Investigation. No. 1/2011..
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Keywordsaltruism; experiment; hold-up problem; identity; integration; other-regarding preferences; relation-specific investment; team membership
ANZSRC Fields of Research35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
17 - Psychology and Cognitive Sciences::1701 - Psychology::170107 - Industrial and Organisational Psychology
35 - Commerce, management, tourism and services::3507 - Strategy, management and organisational behaviour::350710 - Organisational behaviour
17 - Psychology and Cognitive Sciences::1701 - Psychology::170113 - Social and Community Psychology
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Morita, H.; Servátka, M. (University of Canterbury. Department of Economics and Finance, 2013)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 unex-plored mechanism by which integration between ...
Morita, H.; Servátka, M. (College of Business and Economics, University of CanterburyUniversity of Canterbury. Department of Economics and Finance, 2011)Groups, companies, and organizations identify themselves via symbols. Symbols have the potential to create group identity and at the same time create group boundaries, thus allowing for achieving the benefits of cooperation ...
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