Third-Party vs. Second-Party Control: Disentangling the Role of Autonomy and Reciprocity

31 Pages Posted: 4 Sep 2015

See all articles by Gabriel Burdin

Gabriel Burdin

University of Siena - Department of Economics and Statistics; IZA Institute of Labor Economics; University of Leeds - Faculty of Business

Simon Halliday

Smith College

Fabio Landini

University of Parma

Abstract

This paper studies the role of autonomy and reciprocity in explaining control averse responses in principal-agents interactions. While most of the social psychology literature emphasizes the role of autonomy, recent economic research has provided an alternative explanation based on reciprocity. We propose a simple model and an experiment to test the relative strength of these two motives. We compare two treatments: one in which control is exerted directly by the principal (second-party control); and the other in which it is exerted by a third party enjoying no residual claimancy rights (third-party control). If control aversion is driven mainly by autonomy, then it should persist in the third-party treatment. Our results, however, suggest that this is not the case. Moreover, when a third party instead of the principal exerts control, control results in a greater expected profit for the principal. The implications of these results for organizational design are discussed.

Keywords: third party, second party, control aversion, autonomy, principal-agent game, social preferences, trust, reciprocity

JEL Classification: C72, C91, D23, M54

Suggested Citation

Burdin, Gabriel and Halliday, Simon and Landini, Fabio, Third-Party vs. Second-Party Control: Disentangling the Role of Autonomy and Reciprocity. IZA Discussion Paper No. 9251, Available at SSRN: https://ssrn.com/abstract=2655291 or http://dx.doi.org/10.2139/ssrn.2655291

Gabriel Burdin

University of Siena - Department of Economics and Statistics ( email )

Piazza San Francesco 7
Siena, Siena 53100
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

Simon Halliday (Contact Author)

Smith College ( email )

Northampton, MA 01060
United States

Fabio Landini

University of Parma ( email )

Parma
Italy

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