Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision

Dennis Dittrich and Martin Kocher

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, monitoring and pay should be complements. In our experiment, between and within treatment variation is qualitatively in line with the normative predictions of the model under standard assumptions. Yet, we also find evidence for reciprocal behavior. Our data analysis shows, however, that it does not pay for the employer to solely rely on the reciprocity of employees.

Keywords: incentive contracts; supervision; efficiency wages; experiment; incomplete contracts; reciprocity (search for similar items in EconPapers)
JEL-codes: C91 J31 J41 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-cta, nep-exp, nep-hrm, nep-lab and nep-mic
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:12222

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