This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Hidden Costs of Control

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Armin Falk
Michael Kosfeld

Additional information is available for the following registered author(s):

Abstract

In this paper we analyze the behavioral consequences of control on motivation. We study a simple experimental principal-agent game, where the principal decides whether he controls the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our main finding is that a principal's decision to control has a negative impact on the agent's motivation. While there is substantial individual heterogeneity among agents, most agents reduce their performance as a response to the principals' controlling decision. The majority of the principals seem to anticipate the hidden costs of control and decide not to control. In several treatments we vary the enforceable level of control and show that control has a non-monotonic effect on the principal's payoff. In a variant of our main treatment principals can also set wages. In this gift-exchange game control partly crowds out agents' reciprocity. The economic importance and possible applications of our experimental results are further illustrated by a questionnaire study which reveals hidden costs of control in various real-life labor scenarios. We also explore possible reasons for the existence of hidden costs of control. Agents correctly believe that principals who control expect to get less than those who don't. When asked for their emotional perception of control, most agents who react negatively say that they perceive the controlling decision as a signal of distrust and a limitation of their choice autonomy.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.iew.unizh.ch/wp/iewwp250.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp250.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation:
Date of revision:
Handle: RePEc:zur:iewwpx:250

Contact details of provider:

For technical questions regarding this item, or to correct its listing, contact: (Hanna Britt).

Related research
Keywords: hidden costs; control;

Other versions of this item:

Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
C9 - Mathematical and Quantitative Methods - - Design of Experiments
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics

References listed on IDEAS
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.:

  1. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers iewwp040, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  2. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine. [Downloadable!]
  3. Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-32, September. [Downloadable!] (restricted)
    Other versions:
  4. Gary Charness, 2004. "Attribution and Reciprocity in an Experimental Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 665-688, July. [Downloadable!]
    Other versions:
  5. Sliwka, Dirk, 2003. "On the Hidden Costs of Incentive Schemes," IZA Discussion Papers 844, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  7. Allen, Franklin & Gale, Douglas, 1992. "Measurement Distortion and Missing Contingencies in Optimal Contracts," Economic Theory, Springer, vol. 2(1), pages 1-26, January.
    Other versions:
  8. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 437-59, May. [Downloadable!] (restricted)
  9. Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Blackwell Publishing, vol. 70(3), pages 489-520, 07. [Downloadable!] (restricted)
  10. Bauer, Thomas K., 2004. "High Performance Workplace Practices and Job Satisfaction: Evidence from Europe," IZA Discussion Papers 1265, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
  12. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers iewwp004, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  13. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May. [Downloadable!] (restricted)
  14. Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July. [Downloadable!]
  15. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May. [Downloadable!] (restricted)
    Other versions:
  16. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  17. Gary Charness & Martin Dufwenberg, 2004. "Promises and Partnership," Levine's Bibliography 122247000000000001, UCLA Department of Economics. [Downloadable!]
    Other versions:
  18. Ernst Fehr & Armin Falk, 1999. "Wage Rigidity in a Competitive Incomplete Contract Market," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 106-134, February. [Downloadable!] (restricted)
    Other versions:
  19. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer. [Downloadable!] (restricted)
    Other versions:
  20. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Blackwell Publishing, vol. 15(5), pages 589-611, December. [Downloadable!] (restricted)
  21. Barkema, Harry G, 1995. "Do Top Managers Work Harder When They Are Monitored?," Kyklos, Blackwell Publishing, vol. 48(1), pages 19-42.
  22. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
Full 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.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? A few items listed on IDEAS are over 2000 years old!

This page was last updated on 2009-11-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.