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Trust and efficiency

dc.contributor.author Chami, Ralph
dc.contributor.author Fullenkamp, Connel
dc.date.accessioned 2010-03-09T15:42:20Z
dc.date.issued 2002-08-23
dc.identifier.issn 0378-4266
dc.identifier.uri https://hdl.handle.net/10161/2040
dc.description.abstract Agency problems within the firm are a significant hindrance to efficiency. We propose trust between coworkers as a superior alternative to the standard tools used to mitigate agency problems: increased monitoring and incentive-based pay. We model trust as mutual, reciprocal altruism between pairs of coworkers and show how it induces employees to work harder, relative to those at firms that use the standard tools. In addition, we show that employees at trusting firms have higher job satisfaction, and that these firms enjoy lower labor cost and higher profits. We conclude by discussing how trust may also be easier to use within the firm than the standard agency-mitigation tools. © 2002 Elsevier Science B.V. All rights reserved.
dc.format.mimetype application/pdf
dc.language.iso en_US
dc.relation.ispartof Journal of Banking and Finance
dc.relation.isversionof 10.1016/S0378-4266(02)00191-7
dc.title Trust and efficiency
dc.type Journal article
pubs.begin-page 1785
pubs.end-page 1809
pubs.issue 9
pubs.organisational-group Duke
pubs.organisational-group Economics
pubs.organisational-group Trinity College of Arts & Sciences
pubs.publication-status Published
pubs.volume 26


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