Fairness and Incentives in a Multi-Task Principal-Agent Model

Ernst Fehr and Klaus M. Schmidt

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

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 efforts on both tasks with substantial bonuses. Agents anticipate this and provide high efforts 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.

Keywords: Incentives; Moral Hazard; Multiple Tasks; Fairness; Experiments (search for similar items in EconPapers)
JEL-codes: C7 C9 J3 (search for similar items in EconPapers)
Date: 2004-04-30
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-ltv
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Citations: View citations in EconPapers (106)

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https://epub.ub.uni-muenchen.de/335/1/Multi-Task-MunichEcon_040430.pdf (application/pdf)

Related works:
Journal Article: Fairness and Incentives in a Multi‐task Principal–Agent Model (2004)
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
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:335

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