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Subjective Performance Evaluations, Self-esteem, and Ego-threats in Principal-agent Relations

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Author Info

  • Alexander Sebald

    (Department of Economics, University of Copenhagen)

  • Markus Walzl

    (Bamberg University)

Abstract

We conduct a laboratory experiment with agents working on and principals benefiting from a real effort task in which the agents’ effort/performance can only be evaluated subjectively. Principals give subjective performance feedback to agents and agents have an opportunity to sanction principals. We find that agents sanction whenever the feedback of principals is below their subjective self-evaluations even if the agents’ payoff is independent of the principals’ feedback. Based on our experimental analysis we propose a principal-agent model with subjective performance evaluations that accommodates this finding. We analyze the agents’ (optimal) behavior, optimal contracts, and social welfare in this environment.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 10-18.

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Length: 18 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:kud:kuiedp:1018

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Related research

Keywords: contracts; subjective performance evaluations; self-esteem; ego-threats;

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  1. Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5768, C.E.P.R. Discussion Papers.
  2. Olivier Compte & Andrew Postlewaite, 2004. "Confidence-Enhanced Performance," American Economic Review, American Economic Association, American Economic Association, vol. 94(5), pages 1536-1557, December.
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