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Team building and hidden costs of control

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Author Info

  • Riener, Gerhard
  • Wiederhold, Simon

Abstract

This paper investigates the interaction of intrinsic and extrinsic incentives. We propose a simple principal-agent model with control that incorporates the existence of social groups resulting from common experiences in the past. Our laboratory experiment shows that agents with previous common experiences with their principals (CE agents) perform better than agents without such experiences (NCE agents). However, as soon as actual control exceeds their expectation, CE agents decrease their performance substantially, which has no equivalent for NCE agents. This pronounced decrease in effort when control is perceived as excessive represents a novel channel through which hidden costs of control materialize. Our results have important implications for firms' strategies to motivate employees. --

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Bibliographic Info

Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 66.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:66

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Related research

Keywords: Employee motivation; Principal-agent theory; Experiments;

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References

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  1. Charness, Gary & Frechette, Guillaume R & Kagel, John H, 2002. "How Robust is Laboratory Gift Exchange?," University of California at Santa Barbara, Economics Working Paper Series qt8qq4k3ph, Department of Economics, UC Santa Barbara.
  2. Wendelin Schnedler & Radovan Vadovic, 2011. "Legitimacy of Control," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 985-1009, December.
  3. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  4. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  6. Dufwenberg, Martin & Muren, Astri, 2006. "Generosity, anonymity, gender," Journal of Economic Behavior & Organization, Elsevier, vol. 61(1), pages 42-49, September.
  7. Masella, Paolo & Meier, Stephan & Zahn, Philipp, 2012. "Incentives and Group Identity," IZA Discussion Papers 6815, Institute for the Study of Labor (IZA).
  8. Ferdinand von Siemens, 2011. "Intention-Based Reciprocity and the Hidden Costs of Control," Tinbergen Institute Discussion Papers 11-115/1, Tinbergen Institute.
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Cited by:
  1. Riener, Gerhard & Wiederhold, Simon, 2012. "Heterogeneous treatment effects in groups," DICE Discussion Papers 73, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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