Arbeitspapier
Finding the cost of control
A large and growing literature has demonstrated that explicit incentives, such as enforceable contracts, can lead agents to withhold effort. We investigate when this behavioral result arises. In an extensive laboratory experiment, we find that imposing control through an enforceable contract is only detrimental to principals in a special case when: (1) there is a preexisting norm that agents provide high effort; (2) control is imposed unilaterally and has an asymmetric effect on the agent; (3) control is weak (i.e. it cannot induce significant effort); and (4) the agent does not use control when acting as a principal.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 4188
- Classification
-
Wirtschaft
Design of Experiments: General
Wages, Compensation, and Labor Costs: General
Firm Objectives, Organization, and Behavior: General
- Subject
-
experiment
principal-agent problem
hidden cost of control
- Event
-
Geistige Schöpfung
- (who)
-
Kessler, Judd
Leider, Stephen G.
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Kessler, Judd
- Leider, Stephen G.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2013
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