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

Alexander Sebald () and Markus Walzl

No 10-18, Discussion Papers from University of Copenhagen. Department of Economics

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.

Keywords: contracts; subjective performance evaluations; self-esteem; ego-threats (search for similar items in EconPapers)
JEL-codes: D01 D02 D82 D86 J41 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2010-08
New Economics Papers: this item is included in nep-cbe, nep-cta and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1018

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