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Gaining Experience as Principal or Agent. An Experimental Study

Giovanni Ponti (), Marcello Sartarelli, Iryna Sikora and Zhukova Vita ()
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Zhukova Vita: Dpto. Fundamentos del Análisis Económico

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We study experimentally whether decisions in a principal-agent model differ when subjects gain experience by changing roles rather being in a ¿xed role over time. In addition, we examine whether increasing principals’ pro¿t opportunities has an impact on their decisions. To this aim, we use a stylised labour market where multiple principals compete to hire teams of two agents by o¿ering wage contracts and claiming residual pro¿ts after paying agents. Players’ roles, either assigned randomly every round or ¿xed, and principals’ pro¿t opportunities, either high or low, vary in a between-subject design. We ¿nd that both changing roles and facing high pro¿t opportunities leads principals to o¿er more frequently e¿cient contracts in inducing both agents to put e¿ort and to higher payo¿s for everyone, with some complementarity between role changes and pro¿t opportunities.

Keywords: direct-response method; experience; ¿xed role; laboratory experiment; principal-agent; pro¿t opportunities; role change; stakes size (search for similar items in EconPapers)
JEL-codes: C91 C92 D8 J41 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cta, nep-exp and nep-hrm
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