Principal-Agent and Peer Relationships in Tournaments

Gerald Eisenkopf and Sabrina Teyssier

No 2013-07, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: Social preferences explain competitive behavior between agents and reciprocity towards a principal but there is no insight into the interaction of competition and reciprocity. We conducted a laboratory experiment with two treatments to address this issue. In a conventional tournament, an agent receives either the full prize or no prize at all. The other treatment provides the same incentives but the actual payment of an agent equals her expected payment. In both treatments the principal chooses between a low and a high guaranteed payment. Standard economic theory predicts the same effort provision in all situations. Our results show that inequity between agents’ payoffs and generosity of the principal determines the effectiveness of tournaments. Moreover, the data reveal that agents focus their preferences either on the principal or on the agent.

Keywords: Tournament; Envy; Inequity; Agency problem (search for similar items in EconPapers)
JEL-codes: C90 D03 M52 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-04-11
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp and nep-hrm
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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