DISS_abstract\u3e Most experimental research related to agency settings, such as participative budgeting, has examined how formal controls, such as audits and reviews, influence the behavior of managers. Alternatively, a growing literature in managerial accounting examines the effects of using informal social controls. Some of these studies have examined the ability of the gift-exchange model from economics, founded on reciprocity, to function as a suitable control. Within the social context of an experimental labor market, I examine the relationship between the type of control employers implement (i.e., reviews, a formal control versus reciprocity, an informal control) and the amount of budget slack created by managers. Participants in the market make all hiring and control implementation decisions, thereby providing an environment conducive for reciprocity. I manipulate the labor market conditions at two levels - excess demand and excess supply. I predict and find that the labor market conditions influence the type of control implemented by employers. Employers appear to rely upon reciprocity more heavily when excess supply exists in the labor market. However, managers fail to reciprocate under either labor market condition to employer\u27s attempt to engage in a gift-exchange. The implications of these findings with regard to both organizations and the academic literature are discussed
