Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment

Vital Anderhub, Simon Gaechter and Manfred Koenigstein
Authors registered in the RePEc Author Service: Simon Gächter

No 18, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: We study behavior within a simple principal--agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of `fair sharing' and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also `fair sharing' and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are `reciprocity-compatible'. Principals recognize the agency problem and react accordingly.

Keywords: Principal-agent theory; contract theory; fair sharing; incentive contracts; reciprocity; experiments (search for similar items in EconPapers)
JEL-codes: C91 J33 J41 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-fin and nep-ind
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Citations: View citations in EconPapers (50)

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Related works:
Journal Article: Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment (2002)
Working Paper: Efficient contracting and fair play in a simple principal-agent experiment (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:018

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