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The gift of advice: communication in a bilateral gift exchange game

Published online by Cambridge University Press:  14 March 2025

David J. Cooper  and
John P. Lightle
David J. Cooper
Affiliation:
Department of Economics, Florida State University and School of Economics, University of East Anglia, Norwich, UK
John P. Lightle*
Affiliation:
Department of Economics, Florida State University, Tallahassee, FL 32306-2180, USA
*
e-mail: [email protected]
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Abstract

We augment a standard bilateral gift exchange game so employees can send messages at the same time as choosing an effort level. Employee effort (controlling for wages) is unaffected by allowing messages, but wages dramatically increase. Messages affect wages because employees give managers advice to set higher wages, usually explaining that this will result in higher effort. This advice prompts managers to try higher wages, helping them learn that raising wages increases their payoffs. In a follow-up experiment, we directly provide managers with additional information about the relationship between wages and effort. This too causes wages to increase, but to a lesser extent than allowing messages. Our results highlight the critical role of learning in generating gains from positive gift exchange.

Keywords

Gift exchangeCommunicationAdviceLearningExperiment

JEL classification

D23: Organizational Behavior • Transaction Costs • Property Rights J30: General C70: General C92: Laboratory, Group Behavior
Type
Original Paper
Information
Experimental Economics , Volume 16 , Issue 4 , December 2013 , pp. 443 - 477
Copyright
Copyright © 2013 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-012-9347-3) contains supplementary material, which is available to authorized users.

An erratum to this article can be found at 10.1007/s10683-013-9371-y.

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Supplementary material: File

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Appendix A: Experimental Instructions for Messages First
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