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Principals’ preferences for agents with social preferences

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  • 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
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    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. 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.
    3. Daniel Arce, 2015. "Integrity, unprincipled agents and corporate governance reform," European Journal of Law and Economics, Springer, vol. 39(3), pages 539-551, June.
    4. Peiyang Su & Ying Peng & Qidan Hu & Ruwen Tan, 2020. "Incentive Mechanism and Subsidy Design for Construction and Demolition Waste Recycling under Information Asymmetry with Reciprocal Behaviors," IJERPH, MDPI, vol. 17(12), pages 1-26, June.
    5. Koch, Simon & Weinschenk, Philipp, 2021. "Contract design with socially attentive preferences," Games and Economic Behavior, Elsevier, vol. 130(C), pages 591-601.
    6. Kjell Hausken, 2019. "Principal–Agent Theory, Game Theory, and the Precautionary Principle," Decision Analysis, INFORMS, vol. 16(2), pages 105-127, June.
    7. Daniel G. Arce & Laura Razzolini, 2018. "The Indirect Ethics of AIG’s ‘Backdoor Bailout’," Journal of Business Ethics, Springer, vol. 148(1), pages 37-51, March.
    8. Daniel G. Arce, 2017. "Screening for Managerial Objectives," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 442-455, October.
    9. Prasenjit Banerjee & Rupayan Pal & Ada Wossink & James Asher, 2021. "Heterogeneity in Farmers’ Social Preferences and the Design of Green Payment Schemes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(2), pages 201-226, February.

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    More about this item

    Keywords

    Agency; Ethics; Corporate governance; Social preferences; Social identity; Motivated agents;
    All these keywords.

    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

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