Relational contracts with individual and standardized wages # Martin G. Kocher *§ , Wolfgang Luhan § and Matthias Sutter § Preliminary version, Do not cite! Oct-06 Abstract: Wage or contract standardization for the same job within a given firm is a common phenomenon on many markets. We analyze whether such standardization has any effects on incomplete contract markets compared to a situation where each agent receives an individual contract. In a gift-exchange experiment with a market on which principals can offer contracts and employ several agents, we observe that contract standardization leads to significantly higher wages, effort levels and a higher market efficiency. Since existing theories fail to account for the difference, we provide an explanation that is consistent with our findings. JEL classification: C72, C91, C92, D21, J31, J50 Keywords: gift-exchange, multiple agents, standardized contracts, collective wages, experiment # We would like to thank Martin Dufwenberg, Ernst Fehr, Stephan Kroll and seminar participants in Amsterdam, Göteborg, Magdeburg, Zürich and at the ESA Meetings 2005 at Montreal and Alessandria for very helpful comments. We are grateful to the Center for Experimental Economics at the University of Innsbruck (sponsored by Raiffeisen-Landesbank Tirol) and the Austrian Science Foundation – FWF (Project P16617) for financial support. Kocher acknowledges financial support from the ENABLE Project under the European Union 6th Framework Program. The paper reflects the views of the authors, and the Community is not liable for any use that may be made of the information contained therein. * Corresponding author. University of Amsterdam, Department of Economics, CREED. Roetersstraat 11, NL-1018 WB Amsterdam, Netherlands. E-mail: martin.kocher@uibk.ac.at § University of Innsbruck, Department of Public Economics. Universitätsstraße 15, A-6020 Innsbruck, Austria.