56 Pages Posted: 18 Aug 2005 Last revised: 4 Aug 2015
Date Written: 2006
We examine how a principal implements a joint forcing contract for a team of two agents, whose joint product determines the value of the principal's asset. We focus on the "agents' problem": whether to contribute to a public good when one's costly contribution is unobservable. Our experiments show that agents provide higher levels of effort than predicted given the principal's imposed contract. While principals governing teams of agents sometimes do use incentives, in cases where incentives are not present - if agents trust one another - they are each more likely to contribute high effort.
Keywords: Principal agency, teams, experiments, trust
JEL Classification: M54, C92, D23, H41, J3
Suggested Citation: Suggested Citation