Efficiency and Fairness in Revenue Sharing Contracts

Alexandros Karakostas, Axel Sonntag and Daniel Zizzo

No 13-03, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: If principals are allowed to choose between a revenue sharing, a bonus and a trust contract, a large majority of experimental subjects choose the revenue sharing contract. We find that this choice is the most efficient while at the same time being fair in the Paretian sense that on average agents are not worse off than in the other contracts. Furthermore, the distribution of earnings is only mildly skewed towards the principal. We conclude that under revenue sharing contracts concerns for fairness can go in hand with the use of monetary incentives.

Keywords: efficiency; fairness; revenue sharing contract; bonus contract; trust contract; moral hazard (search for similar items in EconPapers)
JEL-codes: C91 J41 M52 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp and nep-hrm
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Citations: View citations in EconPapers (6)

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