Advanced Search
MyIDEAS: Login to save this article or follow this journal

Incentive contracts versus trust in three-person ultimatum games: an experimental study

Contents:

Author Info

  • Buchner, Susanne
  • Gonzalez, Luis G.
  • Guth, Werner
  • Levati, M. Vittoria

Abstract

Whether incentive contracts perform better than trust in terms of productive efficiency is usually explored by principal-agent experiments (most involving only one agent). We investigate this issue in the context of a three-person ultimatum experiment, which is simpler and more neutrally framed than traditional principal-agent designs. Contrary to the game theoretic prediction, we find that (mutual) trust is as good as incentive contracts in inducing costly actions by employees. Moreover, we observe an interesting order effect when switching from one regime to the other. This could be important when considering institutional change since (according to our data) early behavioral patterns may be irreversible.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V97-4BVP5W5-4/2/84937191911170a6bdac0418d9764844
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 20 (2004)
Issue (Month): 3 (September)
Pages: 673-694

as in new window
Handle: RePEc:eee:poleco:v:20:y:2004:i:3:p:673-694

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 97(2), pages 295-307, June.
  2. Werner Guth & Carsten Schmidt & Matthias Sutter, 2003. "Fairness in the mail and opportunism in the internet - a newspaper experiment on ultimatum bargaining," Artefactual Field Experiments, The Field Experiments Website 00051, The Field Experiments Website.
  3. Werner Güth & Carsten Schmidt & Matthias Sutter, 2005. "Bargaining Outside the Lab – A Newspaper Experiment of a Three-Person Ultimatum Game," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2002-11, Max Planck Institute of Economics, Strategic Interaction Group.
  4. Shirley, Mary M & Xu, Lixin Colin, 1998. "Information, Incentives, and Commitment: An Empirical Analysis of Contracts between Government and State Enterprises," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 14(2), pages 358-78, October.
  5. Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1997. "Reciprocity as a contract enforcement device: experimental evidence," ULB Institutional Repository 2013/5911, ULB -- Universite Libre de Bruxelles.
  6. Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 44-49, May.
  7. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
  8. Sanford J Grossman & Oliver D Hart, 2001. "An Analysis of the Principal-Agent Problem," Levine's Working Paper Archive 391749000000000339, David K. Levine.
  9. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
  10. Werner Güth & Manfred Königstein & Judit Kovács & Enikõ Zala-Mezõ, 2001. "Fairness Within Firms: The Case Of One Principal And Multiple Agents," Schmalenbach Business Review (sbr), LMU Munich School of Management, LMU Munich School of Management, vol. 53(2), pages 82-101, April.
  11. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, American Economic Association, vol. 63(2), pages 134-39, May.
  12. Bewley, Truman F, 1995. "A Depressed Labor Market as Explained by Participants," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 250-54, May.
  13. Austen-Smith, David, 1998. "Allocating Access for Information and Contributions," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 14(2), pages 277-303, October.
  14. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
  15. Luis Gonzalez & Werner Güth & Maria Vittoria Levati, . "Speeding up Bureaucrats by Greasing Them - An Experimental Study -," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2002-05, Max Planck Institute of Economics, Strategic Interaction Group.
  16. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 255-83, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rietz, Thomas & Sheremeta, Roman & Shields, Timothy & Smith, Vernon, 2013. "Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games," MPRA Paper 53594, University Library of Munich, Germany.
  2. Sheremeta, Roman & Zhang, Jingjing, 2013. "Three-Player Trust Game with Insider Communication," MPRA Paper 43533, University Library of Munich, Germany.
  3. Andres Reeson & John Tisdell, 2007. "Markets, Motivations And Public Goods: Experimental Investigations On The Impact Of Institutions," Development Research Unit Working Paper Series, Monash University, Department of Economics 22-07, Monash University, Department of Economics.
  4. Mary Rigdon, 2005. "Trust and Reciprocity in Incentive Contracting," Experimental, EconWPA 0511007, EconWPA.
  5. Reeson, Andrew F. & Tisdell, John G., 2008. "Institutions, motivations and public goods: An experimental test of motivational crowding," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 68(1), pages 273-281, October.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:20:y:2004:i:3:p:673-694. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.