Contracts for Agents with Biased Beliefs: Some Theory and an Experiment
This paper experimentally tests the predictions of a principal-agent model in which the agent has biased beliefs about his ability. Overconfi dent workers are found to earn lower wages than underconfi dent ones because they overestimate their expected payoff , and principals adjust their off ers accordingly. Moreover, the profi t-maximizing contract distorts e ffort by varying incentives according to self-con fidence, although only the most successful principals use this strategy. These fi ndings have implications for the labor market; in particular, self-con fidence is often correlated with gender, implying that principals would prefer to hire men over women simply because they are more overconfi dent.
Volume (Year): 5 (2013)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aej-microEmail: |
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
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.:
- Hanming Fang & Giuseppe Moscarini, 2004.
Yale School of Management Working Papers
ysm386, Yale School of Management.
- Vital Anderhub & Simon GÃ¤chter & Manfred KÃ¶nigstein, 2002.
"Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment,"
Springer, vol. 5(1), pages 5-27, June.
- Vital Anderhub & Simon Gaechter & Manfred Koenigstein, . "Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment," IEW - Working Papers 018, Institute for Empirical Research in Economics - University of Zurich.
- 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.
- Jeremy Clark & Lana Friesen, 2009.
"Overconfidence in Forecasts of Own Performance: An Experimental Study,"
Royal Economic Society, vol. 119(534), pages 229-251, 01.
- Jeremy Clark & Lana Friesen, 2006. "Overconfidence in Forecasts of Own Performance: An Experimental Study," Working Papers in Economics 06/09, University of Canterbury, Department of Economics and Finance.
- Kfir Eliaz & Rani Spiegler, 2005.
"A Mechanism-Design Approach to Speculative Trade,"
784828000000000429, UCLA Department of Economics.
- Muriel Niederle & Lise Vesterlund, 2007.
"Do Women Shy Away from Competition? Do Men Compete Too Much?,"
The Quarterly Journal of Economics,
MIT Press, vol. 122(3), pages 1067-1101, 08.
- Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away From Competition? Do Men Compete Too Much?," NBER Working Papers 11474, National Bureau of Economic Research, Inc.
- Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers 04-030, Stanford Institute for Economic Policy Research.
- de la Rosa, Leonidas Enrique, 2011.
"Overconfidence and moral hazard,"
Games and Economic Behavior,
Elsevier, vol. 73(2), pages 429-451.
- Tobias Adrian & Mark M. Westerfield, 2009.
"Disagreement and Learning in a Dynamic Contracting Model,"
Review of Financial Studies,
Society for Financial Studies, vol. 22(10), pages 3873-3906, October.
- Tobias Adrian & Mark M. Westerfield, 2008. "Disagreement and learning in a dynamic contracting model," Staff Reports 269, Federal Reserve Bank of New York.
- Mark Westerfield & Tobias Adrian, 2007. "Disagreement and Learning in a Dynamic Contracting Model," 2007 Meeting Papers 270, Society for Economic Dynamics.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Eliaz, Kfir & Spiegler, Ran, 2009. "Bargaining over bets," Games and Economic Behavior, Elsevier, vol. 66(1), pages 78-97, May.
- Eliaz, Kfir & Spiegler, Ran, 2008. "Consumer optimism and price discrimination," Theoretical Economics, Econometric Society, vol. 3(4), December.
- Augustin Landier & David Thesmar, 2009. "Financial Contracting with Optimistic Entrepreneurs," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 117-150, January.
- Santos-Pinto, Luís, 2003.
"Positive self-image and incentives in organizations,"
3141, University Library of Munich, Germany, revised 14 Feb 2007.
- Luís Santos-Pinto, 2008. "Positive Self-image and Incentives in Organisations," Economic Journal, Royal Economic Society, vol. 118(531), pages 1315-1332, 08.
This item is featured on the following reading lists or Wikipedia pages:
When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:5:y:2013:i:3:p:124-56. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.