IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v90y2013icp154-163.html
   My bibliography  Save this article

Principals’ preferences for agents with social preferences

Author

Listed:
  • Arce, Daniel G.

Abstract

This study explores a nested representation of ethical, moral, social identity, motivated, opportunistic and reciprocal agent preferences to characterize screening contracts in a principal–agent model under adverse selection. This leads to a ranking of the type of social preferences that principals should seek in agents, based upon the information rents associated with each agent type. When moral hazard is introduced the ranking further depends upon the interaction of limited liability with self-selection. These results are interpreted in light of the 2010 Dodd-Frank Act and principal–agent experiments.

Suggested Citation

  • Arce, Daniel G., 2013. "Principals’ preferences for agents with social preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 154-163.
  • Handle: RePEc:eee:jeborg:v:90:y:2013:i:c:p:154-163
    DOI: 10.1016/j.jebo.2012.01.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268112000388
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter.
    2. Hideshi Itoh, 2004. "Moral Hazard and Other‐Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45, March.
    3. Lerong He & Shih-Jen Ho, 2011. "Monitoring Costs, Managerial Ethics and Corporate Governance: A Modeling Approach," Journal of Business Ethics, Springer, vol. 99(4), pages 623-635, April.
    4. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    5. Friedman, Daniel & Singh, Nirvikar, 2009. "Equilibrium vengeance," Games and Economic Behavior, Elsevier, vol. 66(2), pages 813-829, July.
    6. Cabrales, Antonio & Charness, Gary, 2011. "Optimal contracts with team production and hidden information: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 77(2), pages 163-176, February.
    7. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, January.
    8. Delfgaauw, Josse & Dur, Robert, 2007. "Signaling and screening of workers' motivation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 605-624, April.
    9. Stevens, Douglas E. & Thevaranjan, Alex, 2010. "A moral solution to the moral hazard problem," Accounting, Organizations and Society, Elsevier, vol. 35(1), pages 125-139, January.
    10. Ferdinand A. von Siemens, 2011. "Heterogeneous social preferences, screening, and employment contracts," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 499-522, July.
    11. Bruce Ian Carlin & Simon Gervais, 2009. "Work Ethic, Employment Contracts, and Firm Value," Journal of Finance, American Finance Association, vol. 64(2), pages 785-821, April.
    12. Michael J. Brennan, 1994. "Incentives, Rationality, And Society," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(2), pages 31-39, June.
    13. Makris, Miltiadis, 2009. "Incentives for motivated agents under an administrative constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 428-440, August.
    14. Paul Fischer & Steven Huddart, 2008. "Optimal Contracting with Endogenous Social Norms," American Economic Review, American Economic Association, vol. 98(4), pages 1459-1475, September.
    15. Ramon Casadesus-Masanell, 2004. "Trust in Agency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 375-404, September.
    16. Daniel G. Arce, 2007. "Is Agency Theory Self‐Activating?," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 708-720, October.
    17. Daniel G. Arce, 2011. "Putting Agency and Integrity to the Test," Southern Economic Journal, Southern Economic Association, vol. 77(4), pages 843-855, April.
    18. George A. Akerlof & Rachel E. Kranton, 2008. "Identity, Supervision, and Work Groups," American Economic Review, American Economic Association, vol. 98(2), pages 212-217, May.
    19. W. Bentley MacLeod, 2007. "Can Contract Theory Explain Social Preferences?," American Economic Review, American Economic Association, vol. 97(2), pages 187-192, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Galina Besstremyannaya & Sergei Golovan, 2019. "Physician’s altruism in incentive contracts: Medicare’s quality race," CINCH Working Paper Series 1903, Universitaet Duisburg-Essen, Competent in Competition and Health.
    2. repec:eee:jeborg:v:148:y:2018:i:c:p:105-120 is not listed on IDEAS
    3. Donze, Jocelyn & Gunnes, Trude, 2018. "Becoming “We” instead of “I”, identity management and incentives in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 105-120.
    4. Daniel Arce, 2015. "Integrity, unprincipled agents and corporate governance reform," European Journal of Law and Economics, Springer, vol. 39(3), pages 539-551, June.
    5. repec:kap:jbuset:v:148:y:2018:i:1:d:10.1007_s10551-016-3029-6 is not listed on IDEAS

    More about this item

    Keywords

    Agency; Ethics; Corporate governance; Social preferences; Social identity; Motivated agents;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:90:y:2013:i:c:p:154-163. 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: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.