Abstract

http://ssrn.com/abstract=203290
 
 

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


Vital Anderhub


Humboldt University of Berlin - Faculty of Economics

Simon Gächter


CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

Manfred Königstein


University of Erfurt; Institute for the Study of Labor (IZA)

October 2001

Institute for Empirical Research in Economics Working Paper No. 18

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.

Number of Pages in PDF File: 42

Keywords: Principal-agent theory, contract theory, fair sharing, incentive contracts, reciprocity, experiments

JEL Classification: J33, J41, L14, C91

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Date posted: February 20, 2000  

Suggested Citation

Anderhub, Vital and Gächter, Simon and Königstein, Manfred, Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment (October 2001). Institute for Empirical Research in Economics Working Paper No. 18. Available at SSRN: http://ssrn.com/abstract=203290 or http://dx.doi.org/10.2139/ssrn.203290

Contact Information

Vital Anderhub
Humboldt University of Berlin - Faculty of Economics ( email )
Spandauer Strasse 1
D-10178 Berlin
Germany
Simon Gächter (Contact Author)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Manfred Königstein
University of Erfurt ( email )
Internationales Buro
Nordhaeuser Str. 63
D - 99089 Erfurt
Germany
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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