Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment
AbstractWe study behavior within a simple principal--agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of `fair sharing' and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also `fair sharing' and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are `reciprocity-compatible'. Principals recognize the agency problem and react accordingly.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 018.
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Principal-agent theory; contract theory; fair sharing; incentive contracts; reciprocity; experiments;
Other versions of this item:
- 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.
- 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.
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-05-08 (All new papers)
- NEP-EXP-2000-05-08 (Experimental Economics)
- NEP-FIN-2000-05-08 (Finance)
- NEP-IND-2000-05-08 (Industrial Organization)
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