Legitimacy of Control

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Legitimacy of Control

Author Info

Wendelin Schnedler () (University of Heidelberg and IZA)
Radovan Vadovic () (ITAM, Mexico City)

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Abstract

What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principalagent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate (i) if it is not exclusively aimed at a specific agent or (ii) if it protects the endowment of the principal. Given the conjecture, the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3013.

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Length: 29 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3013

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Paper
- Wendelin Schnedler & Radovan Vadovic, 2007. "Legitimacy of Control," The Centre for Market and Public Organisation 07/178, Department of Economics, University of Bristol, UK. [Downloadable!]
- Schnedler, Wendelin & Vadovic, Radovan, 2007. "Legitimacy of Control," Sonderforschungsbereich 504 Publications 07-61, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
- Wendelin Schnedler & Radovan Vadovic, 2007. "Legitimacy of Control," Working Papers 0450, University of Heidelberg, Department of Economics, revised Aug 2007. [Downloadable!]

Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
C9 - Mathematical and Quantitative Methods - - Design of Experiments
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-09-24 (All new papers)
NEP-BEC-2007-09-24 (Business Economics)
NEP-EXP-2007-09-24 (Experimental Economics)

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.:

Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May. [Downloadable!] (restricted)
Other versions:
- Dufwenberg, M. & Kirchsteiger, G., 1998. "A theory of sequential reciprocity," Discussion Paper 37, Tilburg University, Center for Economic Research. [Downloadable!]
- Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine. [Downloadable!]
Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Ernst Fehr & Armin Falk, . "Psychological Foundations of Incentives," IEW - Working Papers iewwp095, Institute for Empirical Research in Economics - IEW. [Downloadable!]
- Falk, Armin & Fehr, Ernst, 2002. "Psychological Foundations of Incentives," CEPR Discussion Papers 3185, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Ernst Fehr & Armin Falk, 2002. "Psychological Foundations of Incentives," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA. [Downloadable!]
- Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May. [Downloadable!] (restricted)
Sliwka, Dirk, 2003. "On the Hidden Costs of Incentive Schemes," IZA Discussion Papers 844, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Dirk Sliwka, 2003. "On the Hidden Costs of Incentive Schemes," Bonn Econ Discussion Papers bgse12_2003, University of Bonn, Germany. [Downloadable!]
Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May. [Downloadable!]
Guido Friebel & Wendelin Schnedler, 2007. "Team Governance: Empowerment or Hierarchical Control," IZA Discussion Papers 3143, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Friebel, Guido & Schnedler, Wendelin, 2007. "Team Governance: Empowerment of Hierarchical Control," IDEI Working Papers 520, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
- Guido Friebel & Wendelin Schnedler, 2007. "Team Governance: Empowerment or Hierarchical Control," Working Papers 0457, University of Heidelberg, Department of Economics, revised Oct 2007. [Downloadable!]
- Friebel, Guido & Schnedler, Wendelin, 2007. "Team Governance: Empowerment or Hierarchical Control," CEPR Discussion Papers 6575, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November. [Downloadable!] (restricted)
Other versions:
- Gary Charness & Martin Dufwenberg, 2004. "Promises and Partnership," Levine's Bibliography 122247000000000001, UCLA Department of Economics. [Downloadable!]
Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers 5768, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June. [Downloadable!]
Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 489-520, 07. [Downloadable!] (restricted)
Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
Armin Falk & Michael Kosfeld, . "The Hidden Costs of Control," IEW - Working Papers iewwp250, Institute for Empirical Research in Economics - IEW. [Downloadable!]
Other versions:
- Armin Falk & Michael Kosfeld, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December. [Downloadable!]

Full references

Cited by:
(explanations, 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.)

Grout, Paul & Schnedler, Wendelin, 2008. "Non-Profit Organizations in a Bureaucratic Environment," Sonderforschungsbereich 504 Publications 08-17, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
Other versions:
- Paul A. Grout & Wendelin Schnedler, 2008. "Non-Profit Organizations in a Bureaucratic Environment," The Centre for Market and Public Organisation 08/202, Department of Economics, University of Bristol, UK. [Downloadable!]
- Paul Grout & Wendelin Schnedler, 2008. "Non-Profit Organizations in a Bureaucratic Environment," Working Papers 0474, University of Heidelberg, Department of Economics, revised Sep 2008. [Downloadable!]
- Grout, Paul & Schnedler, Wendelin, 2008. "Non-Profit Organizations in a Bureaucratic Environment," IZA Discussion Papers 3685, Institute for the Study of Labor (IZA). [Downloadable!]
Maroš Servátka & Steven Tucker & Radovan Vadovic, 2008. "Strategic Use of Trust," Working Papers in Economics 08/11, University of Canterbury, Department of Economics. [Downloadable!]

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