Asymmetric Adjustment of Control
51 Pages Posted: 24 Jan 2020 Last revised: 11 Aug 2020
Date Written: August 11, 2020
In this study, I examine whether principals’ experience with control decisions produces asymmetry in how they adjust their control over agents. Principals should be equally willing to decrease their control over agents as they are to increase their control over agents. However, building on psychological theory, I predict that experience with controlling agents reinforces a principal’s belief that agents are self-interested and that they should be controlled. In contrast, experience with not controlling agents does not reinforce a principal’s belief that agents are socially interested and that they should not be controlled. Accordingly, principals should be less willing to decrease their control over agents than they are to increase their control over agents. Results of my experiment support my prediction and also showcase conditions under which the asymmetry disappears. Overall, my study suggests that experience with controlling agents may cause principals to hold on to their control.
Keywords: controls, control systems, asymmetry, beliefs, agency, dynamics, stickiness, trust
JEL Classification: C92, D91, M40, M41
Suggested Citation: Suggested Citation