Legitimacy of Control

Wendelin Schnedler and Radovan Vadovic ()

The Centre for Market and Public Organisation from Department of Economics, University of Bristol, UK

Abstract: What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal-agent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate i) if it is not exclusively aimed at a specific agent or ii) if it protects the endowment of the principal. Given the conjecture the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.

Keywords: moral-hazard; intrinsic motivation; guilt aversion (search for similar items in EconPapers)
JEL-codes: C7 C9 M5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2007-08
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Related works:
Working Paper: Legitimacy of Control (2007)
Working Paper: Legitimacy of Control (2007)
Working Paper: Legitimacy of Control (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:bri:cmpowp:07/178

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