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Group identity and relation-specific investment: An experimental investigation

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  • Morita, Hodaka
  • Servátka, Maroš
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.

Suggested Citation

  • Morita, Hodaka & Servátka, Maroš, 2013. "Group identity and relation-specific investment: An experimental investigation," European Economic Review, Elsevier, vol. 58(C), pages 95-109.
    • Handle: RePEc:eee:eecrev:v:58:y:2013:i:c:p:95-109
    DOI: 10.1016/j.euroecorev.2012.11.006
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    Keywords

    Altruism; Experiment; Hold-up problem; Group identity; Integration; Other-regarding preferences; Relation-specific investment; Team membership;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D20 - Microeconomics - - Production and Organizations - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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