Does Monitoring Decrease Work Effort? The Complementarity between Agency and Crowding-Out Theorie

Dickinson, David L.; Villeval, Marie Claire

doi:10.2139/ssrn.907441

Cited by 73 publications

(105 citation statements)

References 46 publications

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“…We advance past explanations, which did not explain why some individuals abuse their position under moral hazard while others refrain from such behavior (Chiappori et al, 1998;Dionne & St-Michel, 1991;Miller & Whitford, 2002). Past research also did not explain why some accountability arrangements deter self-serving behavior while others fail to do so (Conlon & Parks, 1990;Dickinson & Villeval, 2008;Tosi et al, 1997). Our findings demonstrate that decision makers' power and the manner in which they are held accountable can help explain these questions.…”

Section: Discussioncontrasting

confidence: 49%

“…Accordingly, they predict that all agents will make self-serving decisions under moral hazard, and if made accountable, all agents will face more costs in doing so, and engage in less self-serving decisions (e.g., Herweg, Muller, & Weinschenk, 2010;Holmstrom, 1979;Pauly, 1968). Yet, this explanation is not fully supported by empirical findings: Not all individuals make self-serving decisions under moral hazard (Chiappori, Durand, & Geoffard, 1998;Dionne & St-Michel, 1991;Miller & Whitford, 2002), and not all accountability systems reduce self-serving behavior (Conlon & Parks, 1990;Dickinson & Villeval, 2008;Tosi, Katz, & Gomez-Mejia, 1997).…”

mentioning

confidence: 97%

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Masters of the universe: How power and accountability influence self-serving decisions under moral hazard.

Pitesa¹,

Thau²

2013

Journal of Applied Psychology

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Section: Discussioncontrasting

confidence: 49%

mentioning

confidence: 97%

Masters of the universe: How power and accountability influence self-serving decisions under moral hazard.

Pitesa¹,

Thau²

2013

Journal of Applied Psychology

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“…Substantial speculation has arisen surrounding the source of this counterintuitive effect, including the possibility that the presence of sanctions might change individuals' perceptions of the environment, thus crowding out internal motivations for cooperation (5)(6)(7)(8). The imposition of sanctions also might be perceived as a signal of distrust (9)(10)(11) and might create a hostile atmosphere (12,13), leading to decreased cooperation.…”

mentioning

confidence: 99%

Neural responses to sanction threats in two-party economic exchange

Xiao²,

Houser

et al. 2009

Proc. Natl. Acad. Sci. U.S.A.

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Sanctions are used ubiquitously to enforce obedience to social norms. However, recent field studies and laboratory experiments have demonstrated that cooperation is sometimes reduced when incentives meant to promote prosocial decisions are added to the environment. Although various explanations for this effect have been suggested, the neural foundations of the effect have not been fully explored. Using a modified trust game, we found that trustees reciprocate relatively less when facing sanction threats, and that the presence of sanctions significantly reduces trustee's brain activities involved in social reward valuation [in the ventromedial prefrontal cortex (VMPFC), lateral orbitofrontal cortex, and amygdala] while it simultaneously increases brain activities in the parietal cortex, which has been implicated in rational decision making. Moreover, we found that neural activity in a trustee's VMPFC area predicts her future level of cooperation under both sanction and no-sanction conditions, and that this predictive activity can be dynamically modulated by the presence of a sanction threat.cooperation ͉ neuroimaging ͉ perception shift ͉ punishment ͉ social norms S anctions are ubiquitous in modern human societies (1). The purpose of sanctions is to enforce norm obedience beyond the level that humans might achieve in the absence of punishment (2-4). However several recent field studies and laboratory experiments have established that adding monetary sanctions to an environment can reduce cooperation (5-7). Substantial speculation has arisen surrounding the source of this counterintuitive effect, including the possibility that the presence of sanctions might change individuals' perceptions of the environment, thus crowding out internal motivations for cooperation (5-8). The imposition of sanctions also might be perceived as a signal of distrust (9-11) and might create a hostile atmosphere (12, 13), leading to decreased cooperation.Previous behavioral experiments have sought to distinguish these competing explanations. For example, a recent study (5) reported data from an experiment aimed at determining the relative importance of intentions and incentives in producing noncooperative behavior. Participants played a one-shot investment experiment in pairs. Investors sent a certain amount to trustees, requested a return on that investment, and, in some treatments, could threaten sanctions to enforce their requests. Decisions by trustees facing threats imposed (or not) by investors were compared with decisions by trustees facing threats imposed (or not) by nature. The main finding was that when not threatened, trustees typically decided to return a positive amount less than the investor requested, but when threatened, that decision was less common. This result is the same whether the sanction is imposed by a human investor or by nature, suggesting that the detrimental effect of sanctions on cooperation might not hinge specifically on trustees' perceptions of investor intentions.

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“…Furthermore, giving such instructions might be costly in terms of undermining the authority of the coach and/or reducing his effort and motivation (Change and Lai (1999), Dickinson and Villeval (2008) and Frey(1993)). Consequently, owners (and their general managers working on their behalf) can be expected to refrain from intervening in coaches' decisions regarding rookie participation absent a strong reason to do so.…”

Section: A the Expected Role Of Termination Riskmentioning

confidence: 99%

Termination Risk and Agency Problems: Evidence from the NBA

2015

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When agents face a risk of termination by the principal in the short term, they may underinvest in projects whose results would be realized only in the long term. We use data on decisions made by NBA coaches to study how risk of termination by the principal affects the behavior of agents. Because letting a rookie play produces long-term benefits on which coaches with a shorter investment horizon might place lower weight, we hypothesize that higher termination risk might lead to lower rookie participation. Consistent with this hypothesis, we find that, during the period of the NBA's 1999 collective bargaining agreement (CBA) and controlling for the characteristics of rookies and their teams, higher termination risk was associated with lower rookie participation and that this association was driven by important games. We also find that the association does not exist for second-year players and that the identified association disappeared when the 2005 CBA gave team owners stronger incentives to monitor the performance of rookies and preclude their underuse. JEL Classification: D20, J44, K00, L83 * We would like to thank Lucian Bebchuk, Liran Einav, Yaniv Grinstein, Saul Lach, Yona Rubinstein, Analia Schlosser, Charles Wang and workshop participants at Harvard, Hebrew University, Tel Aviv University, and IDC for helpful comments and conversations, and Zvika Messing for valuable research assistance. ᵼ Harvard Law School, Tel-Aviv University, and NBER ᵵ Interdisciplinary Center (IDC) ᵴ Tel-Aviv University 1

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Does Monitoring Decrease Work Effort? The Complementarity between Agency and Crowding-Out Theorie

Cited by 73 publications

References 46 publications

Masters of the universe: How power and accountability influence self-serving decisions under moral hazard.

Masters of the universe: How power and accountability influence self-serving decisions under moral hazard.

Neural responses to sanction threats in two-party economic exchange

Termination Risk and Agency Problems: Evidence from the NBA

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