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Subjective Performance Evaluations and Reciprocity in Principal–Agent Relations

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  • Alexander Sebald
  • Markus Walzl

Abstract

We conduct a laboratory experiment with agents working on, and principals benefiting from, a real effort task in which the agents' performance can only be evaluated subjectively. Principals give subjective performance feedback to agents, and agents have an opportunity to sanction principals. In contrast to existing models of reciprocity, we find that agents tend to sanction whenever the feedback of principals is below their subjective self-evaluations even if agents' pay-offs are independent of it. In turn, principals provide more positive feedback (relative to their actual performance assessment of the agent) if this does not affect their pay-off.

Suggested Citation

  • Alexander Sebald & Markus Walzl, 2014. "Subjective Performance Evaluations and Reciprocity in Principal–Agent Relations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(2), pages 570-590, April.
    • Handle: RePEc:bla:scandj:v:116:y:2014:i:2:p:570-590
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    File URL: http://hdl.handle.net/10.1111/sjoe.12045
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    Cited by:

    1. Lucia Marchegiani & Tommaso Reggiani & Matteo Rizzolli, 2013. "Severity vs. Leniency Bias in Performance Appraisal: Experimental evidence," BEMPS - Bozen Economics & Management Paper Series BEMPS01, Faculty of Economics and Management at the Free University of Bozen.
    2. Marchegiani, Lucia & Reggiani, Tommaso & Rizzolli, Matteo, 2016. "Loss averse agents and lenient supervisors in performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 183-197.
    3. Patrick Kampkötter & Dirk Sliwka, 2016. "The Complementary Use of Experiments and Field Data to Evaluate Management Practices: The Case of Subjective Performance Evaluations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 364-389, June.
    4. Marco Kleine & Sebastian Kube, 2015. "Communication and Trust in Principal-Team Relationships: Experimental Evidence," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2015_06, Max Planck Institute for Behavioral Economics.
    5. Axel Ockenfels & Dirk Sliwka & Peter Werner, 2025. "Multirater Performance Evaluations and Incentives," Journal of Labor Economics, University of Chicago Press, vol. 43(4), pages 985-1004.
    6. Livio, Luca & De Chiara, Alessandro, 2019. "Friends or foes? Optimal incentives for reciprocal agents," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 245-278.
    7. Alexander Sebald & Markus Walzl, 2012. "Optimal contracts based on subjective evaluations and reciprocity," Working Papers 2012-16, Faculty of Economics and Statistics, Universität Innsbruck, revised Nov 2014.
    8. W. Bentley MacLeod & Victoria Valle Lara & Christian Zehnder, 2020. "Worker Empowerment and Subjective Evaluation: On Building an Effective Conflict Culture," NBER Working Papers 27857, National Bureau of Economic Research, Inc.
    9. Kusterer, David & Sliwka, Dirk, 2022. "Social Preferences and Rating Biases in Subjective Performance Evaluations," IZA Discussion Papers 15496, IZA Network @ LISER.
    10. Sebald, Alexander & Walzl, Markus, 2015. "Optimal contracts based on subjective performance evaluations and reciprocity," Journal of Economic Psychology, Elsevier, vol. 47(C), pages 62-76.
    11. W. Bentley MacLeod & Victoria Valle Lara & Christian Zehnder, 2025. "Worker Empowerment and Subjective Evaluation: On Building an Effective Conflict Culture," Management Science, INFORMS, vol. 71(6), pages 4643-4668, June.

    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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