Group Identity and Relation-Specific Investment: An Experimental Investigation

Type of content
Discussion / Working Papers
Publisher's DOI/URI
Thesis discipline
Degree name
Publisher
Department of Economics & Finance, College of Business & Economics, University of Canterbury
University of Canterbury. Department of Economics and Finance
Journal Title
Journal ISSN
Volume Title
Language
Date
2011
Authors
Morita, H.
Servátka, M.
Abstract

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.

Description
Citation
Morita, H., Servátka, M. (2011) Group Identity and Relation-Specific Investment: An Experimental Investigation. No. 1/2011..
Keywords
altruism, experiment, hold-up problem, identity, integration, other-regarding preferences, relation-specific investment, team membership
Ngā upoko tukutuku/Māori subject headings
ANZSRC fields of research
Fields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
Field of Research::17 - Psychology and Cognitive Sciences::1701 - Psychology::170107 - Industrial and Organisational Psychology
Fields of Research::35 - Commerce, management, tourism and services::3507 - Strategy, management and organisational behaviour::350710 - Organisational behaviour
Field of Research::17 - Psychology and Cognitive Sciences::1701 - Psychology::170113 - Social and Community Psychology
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