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Fairness and Incentives in a Multi-Task Principal-Agent Model Author info | Abstract | Publisher info | Download info | Related research | Statistics Ernst Fehr
Klaus M. Schmidt
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This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece rate contracts. Many principals reward high efforts on both tasks with substantial bonuses. Agents anticipate this and provide high efforts on both tasks. In contrast, almost all agents with a piece rate contract focus on the first task and disregard the second. Principals understand this and predominantly offer bonus contracts. This behavior contradicts the self-interest theory but is consistent with theories of fairness.
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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number
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Keywords: Incentives ; Moral Hazard ; Multiple Tasks ; Fairness ; Experiments ; Other versions of this item:
Article Paper Fehr, Ernst & Schmidt, Klaus M., 2004.
"Fairness and Incentives in a Multi-Task Principal-Agent Model ,"
Discussion Papers in Economics
335, University of Munich, Department of Economics.
[Downloadable!] Fehr, Ernst & Schmidt, Klaus M., 2004.
"Fairness and Incentives in a Multi-Task Principle-Agent Model ,"
CEPR Discussion Papers
4464, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Find related papers by JEL classification: C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory C9 - Mathematical and Quantitative Methods - - Design of Experiments J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
This paper has been announced in the following NEP Reports :
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Schmalenbach Business Review (sbr) ,
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Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2004.
"Contracts, Fairness, and Incentives ,"
Discussion Papers in Economics
334, University of Munich, Department of Economics.
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Other versions:
Ernst Fehr & Alexander Klein & Klaus Schmidt, 2004.
"Contracts, Fairness, and Incentives ,"
CESifo Working Paper Series
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references Cited by : (explanations , 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.)
Ernst Fehr & Klaus M. Schmidt, 2009.
"On Inequity Aversion A Reply to Binmore and Shaked ,"
Discussion Papers
276, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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Microeconomics
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CPB Discussion Papers
60, CPB Netherlands Bureau for Economic Policy Analysis.
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Ernst Fehr & Klaus M. Schmidt, 2007.
"Adding a Stick to the Carrot? The Interaction of Bonuses and Fines ,"
Discussion Papers
197, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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"Teacher Incentives ,"
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