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 Leeds - Faculty of Business; IZA Institute of Labor Economics

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 Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

IZA Institute of Labor Economics ( email )

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

Simon Halliday (Contact Author)

Smith College ( email )

Northampton, MA 01060
United States

Fabio Landini

University of Parma ( email )

Parma
Italy

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