IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

An Experimental Test of Fairness Under Agency and Profit Constraints (With Notes on Implications for Corporate Law)

Listed author(s):
  • Kent Greenfield

    (Boston College Law School)

  • Peter Kostant

    (Visiting Professor, University of Iowa College of Law)

Registered author(s):

    Building on the scholarship using ultimatum game experiments to explore the presence of fairness norms in bargaining exchanges, the authors test whether such norms are affected by agency relationships alone or agency relationships linked with a duty to maximize returns to the principal. The findings are dramatic. The study, the first of its kind, indicates a significant decrease in a concern for fairness (defined as a willingness to share a pot of money) when a participant in a bargaining transaction acts as an agent for another and owes a duty to maximize the return to the principal. We find no such decrease when the agent is acting without the explicit duty to maximize return to the principal. These findings were made in the context of modified ultimatum game experiments conducted among first year law students. While recognizing the limitations of the experiments as well as the risks of extrapolating from experiment to actual practice, our findings suggest that existing corporate law which requires directors to act as agents of shareholders and to maximize return to those shareholders may provide incentives to directors to act unfairly toward non-shareholder stakeholders. These incentives, which currently exist in the law and norms governing corporate governance may actually encourage inefficient results that may reduce payoffs to corporations.

    If you experience problems downloading a file, check if you have the proper application to view it first. 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:
    Download Restriction: no

    Paper provided by Boston College Law School in its series Boston College Law School Faculty Papers with number bc_bclsfp-1003.

    in new window

    Date of creation:
    Handle: RePEc:bep:bclsfp:bc_bclsfp-1003
    Contact details of provider: Web page:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bep:bclsfp:bc_bclsfp-1003. 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: (Christopher F. Baum)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.