The relationship between an employer and an employee - the gift exchange game

Models of the relationship between employees and employers presented during the undergraduate and graduate studies of economics usually reflect the formal neoclassical approach. Moreover, in everyday life as well as in the public debate those relations are often presented as conflicts in which only one party may win. Such an oversimplified approach to the labor market relationships does not correspond with reality and may affect people's decisions, treating the second party as an enemy. The article presents the multistage educational experiment (18 rounds), in which students play the roles of employers and employees. Their outcomes depend on the declared involvement, their remuneration, and the level of social trust. Results of the experiment reveal that all these factors depend heavily on students' openness to communicate with other players as well as the employer-employee matching. Participation in the experiment allows students to experience that even conflict-provoking labor market relationships do not have to go along with strong disputes and radical opportunism. Learning how to cooperate in the labor market could not only be economically profitable, but it can also help to build social capital, which is even more crucial.