Effects of In-Group Bias in a Gift-Exchange Transaction: A Theory of Employee Ownership and Evidence from a Laboratory Experiment

Abstract

This dissertation presents a behavioral model of employee ownership and an experimental examination of the model. Chapter 1 reviews literature on employee ownership, gift-exchange, social preferences in experimental economics, and in-group bias. The model of employee ownership, presented in Chapter 2, incorporates in-group bias into a gift-exchange framework. Predictions of the model include higher productivity, higher profits, higher wages, and greater worker satisfaction in employee owned firms relative to otherwise identical publicly traded or private firms with no employee ownership. Chapter 3 presents the results of a laboratory experiment designed to test both the assumptions and the predictions of the model described in Chapter 2. In-group bias is found to affect the giving and trusting behavior, but not the reciprocal behavior of the subjects in the experiment.