Fairness and Incentives in a Multi‐task Principal–Agent Model

Ernst Fehr and Klaus Schmidt ()

Scandinavian Journal of Economics, 2004, vol. 106, issue 3, 453-474

Abstract: This paper reports on a two‐task principal–agent experiment in which only one task is contractible. The principal can either offer a piece‐rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece‐rate contracts. Many principals reward high effort on both tasks with substantial bonuses. Agents anticipate this and provide high effort on both tasks. In contrast, almost all agents with a piece‐rate contract focus on the first task and disregard the second. Principals understand this and predominantly offer bonus contracts. This behavior contradicts the self‐interest theory but is consistent with theories of fairness.

Date: 2004
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Citations: View citations in EconPapers (94)

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https://doi.org/10.1111/j.0347-0520.2004.00372.x

Related works:
Working Paper: Fairness and Incentives in a Multi-Task Principle-Agent Model (2004)
Working Paper: Fairness and incentives in a multi-task principal-agent model (2004)
Working Paper: Fairness and Incentives in a Multi-Task Principal-Agent Model (2004)
Working Paper: Fairness and Incentives in a Multi-Task Principal-Agent Model
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