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When to Pay More: Incentives, Culture and Status in Principal‐ Agent Interactions

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  • Dessi, Roberta
  • Miquel-Florensa, Josepa

Abstract

We study the role of status in an experimental Principal-Agent game.Status is awarded to subjects based on either talent or luck. In each randomly matched principal-agent pair, the principal chooses the agent's status-contingent piece rate for a task in which talent matters for performance (an IQ test). We perform the experiment in Cambridge (UK) and in HCMV (Vietnam). We find that in Cambridge piece rate others are significantly higher for high-status agents (only) when status signals talent. However, these higher offers are not payoff-maximizing for the principals.In contrast, Vietnam piece rate offers are significantly higher for high-status agents (only) when status is determined by luck. We explore possible explanations, and the implications for status and incentives.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 13-413.

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Date of creation: May 2013
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Handle: RePEc:tse:wpaper:27275

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Keywords: incentives; status; identity; piece rate; principal-agent; signaling; culture.;

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  1. Timothy Besley & Maitreesh Ghatak, 2008. "Status incentives," LSE Research Online Documents on Economics 5913, London School of Economics and Political Science, LSE Library.
  2. Emmanuelle Auriol & Régis Renault, 2007. "Status and Incentives," THEMA Working Papers 2007-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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  8. Tore Ellingsen & Magnus Johannesson, 2007. "Paying Respect," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 135-150, Fall.
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  12. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  13. Sheryl Ball & Catherine Eckel & Philip J. Grossman & William Zame, 2001. "Status In Markets," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 161-188, February.
  14. Ball, Sheryl & Eckel, Catherine C., 1998. "The Economic Value of Status," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 24(4), pages 495-514.
  15. Falk, Armin & Zehnder, Christian, 2013. "A city-wide experiment on trust discrimination," Journal of Public Economics, Elsevier, vol. 100(C), pages 15-27.
  16. Catherine Eckel & Rick Wilson, 2007. "Social learning in coordination games: does status matter?," Experimental Economics, Springer, vol. 10(3), pages 317-329, September.
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