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Subjective Performance Evaluations, Self-esteem, and Ego-threats in Principal-agent Relations

Author

Listed:
  • Alexander Sebald

    (Department of Economics, University of Copenhagen)

  • Markus Walzl

    (Bamberg University)

Abstract

We conduct a laboratory experiment with agents working on and principals benefiting from a real effort task in which the agents’ effort/performance can only be evaluated subjectively. Principals give subjective performance feedback to agents and agents have an opportunity to sanction principals. We find that agents sanction whenever the feedback of principals is below their subjective self-evaluations even if the agents’ payoff is independent of the principals’ feedback. Based on our experimental analysis we propose a principal-agent model with subjective performance evaluations that accommodates this finding. We analyze the agents’ (optimal) behavior, optimal contracts, and social welfare in this environment.

Suggested Citation

  • Alexander Sebald & Markus Walzl, 2010. "Subjective Performance Evaluations, Self-esteem, and Ego-threats in Principal-agent Relations," Discussion Papers 10-18, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:1018
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2010/1018.pdf/
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    References listed on IDEAS

    as
    1. Olivier Compte & Andrew Postlewaite, 2004. "Confidence-Enhanced Performance," American Economic Review, American Economic Association, vol. 94(5), pages 1536-1557, December.
    2. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    contracts; subjective performance evaluations; self-esteem; ego-threats;

    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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