Design a Contract! A Simple Principal-Agent Problem as a Classroom Experiment
AbstractWe present a simple classroom principal-agent experiment that can effectively be used as a teaching device to introduce important concepts of organizational economics and contracting. In a first part, students take the role of a principal and design a contract that consists of a fixed payment and an incentive component. In the second part, students take the role of agents and decide on an effort level. The experiment can be used to introduce students to the concepts of efficiency, incentive compatibility, outside options and participation constraints, the Coase theorem, and fairness and reciprocity in contracting.
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Bibliographic InfoPaper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2006-04.
Date of creation: Apr 2006
Date of revision:
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Classroom experiments; post-contractual opportunism; incentive contracts; efficiency; reciprocity; Coase theorem;
Other versions of this item:
- Gächter, Simon & Königstein, Manfred, 2006. "Design a contract! : A simple principal-agent problem as a classroom experiment," Discussion Papers 2006,001E, University of Erfurt, Faculty of Economics, Law and Social Sciences.
- Simon Gaechter & Manfred Koenigstein, 2006. "Design a Contract! A Simple Principal-Agent Problem as a Classroom Experiment," Discussion Papers 2006-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
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.:
- Anderhub, Vital & Gächter, Simon & Königstein, Manfred, 1999.
"Efficient contracting and fair play in a simple principal-agent experiment,"
SFB 373 Discussion Papers
1999,82, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Vital Anderhub & Simon GÃ¤chter & Manfred KÃ¶nigstein, 2002. "Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment," Experimental Economics, Springer, vol. 5(1), pages 5-27, June.
- Vital Anderhub & Simon Gaechter & Manfred Koenigstein, . "Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment," IEW - Working Papers 018, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr & Simon G�chter, 2000.
"Fairness and Retaliation: The Economics of Reciprocity,"
Journal of Economic Perspectives,
American Economic Association, vol. 14(3), pages 159-181, Summer.
- Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
- Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
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