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Third-Party vs. Second-Party Control: Disentangling the Role of Autonomy and Reciprocity

Gabriel Burdín (), Simon Halliday () and Fabio Landini ()
Additional contact information
Fabio Landini: University of Parma

No 9251, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies the role of autonomy and reciprocity in explaining control averse responses in principal-agents interactions. While most of the social psychology literature emphasizes the role of autonomy, recent economic research has provided an alternative explanation based on reciprocity. We propose a simple model and an experiment to test the relative strength of these two motives. We compare two treatments: one in which control is exerted directly by the principal (second-party control); and the other in which it is exerted by a third party enjoying no residual claimancy rights (third-party control). If control aversion is driven mainly by autonomy, then it should persist in the third-party treatment. Our results, however, suggest that this is not the case. Moreover, when a third party instead of the principal exerts control, control results in a greater expected profit for the principal. The implications of these results for organizational design are discussed.

Keywords: social preferences; principal-agent game; autonomy; control aversion; second party; third party; trust; reciprocity (search for similar items in EconPapers)
JEL-codes: C72 C91 D23 M54 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-08
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm and nep-soc
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Published - revised version published as 'The hidden benefits of abstaining from control' in: Journal of Economic Behavior and Organization, 2018, 147, 1-12.

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Working Paper: Third-Party vs. Second-Party Control: Disentangling the role of Autonomy and Reciprocity (2015) Downloads
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