1 Personal Relations and their Effect on Behavior in an Organizational Setting: An Experimental Study

We study how personal relations affect performance in organizations. In the game we use a manager has to assign different degrees of decision power to two employees, who then have to make decisions which affect the manager. Our evidence shows that managers favor employees that they personally know and that these employees favor the manager in their decisions. However, this behavior does not affect the performance of the employees that do not know the manager. These effects are independent of whether the employees that know the manager are more or less productive than those who do not know the manager