Legitimacy of Control

Wendelin Schnedler and Radovan Vadovic ()

No 3013, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: guilt aversion; intrinsic motivation; moral hazard (search for similar items in EconPapers)
JEL-codes: C7 C9 M5 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-08
New Economics Papers: this item is included in nep-bec and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Journal of Economics and Management Strategy, 2011, 20 (4), 985-1009

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Related works:
Journal Article: Legitimacy of Control (2011)
Working Paper: Legitimacy of Control (2007)
Working Paper: Legitimacy of control (2007)
Working Paper: Legitimacy of Control (2007)
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