Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment

Anderhub, Vital; Gächter, Simon; Königstein, Manfred

doi:10.2139/ssrn.203290

Cited by 110 publications

(87 citation statements)

References 102 publications

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“…Reciprocity theory postulates that agents prefer a condition of fairness in their exchange relationships with the principal. This fairness can be quantified by the size of the surplus seized by the principal (Anderhub, Gächter and Königstein 2000). An agent is expected to at least partly determine the level of motivation on her perception of fairness (Fehr and Gächter 2000).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study

2005

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Section: Theoretical Backgroundmentioning

confidence: 99%

The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study

2005

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“…Previous experimental studies on asymmetric information have typically examined contracting with hidden action (moral hazard), where effort is not contractible (see notably Anderhub et al 2002;Berg et al 1992;Charness and Dufwenberg 2006;DeJong et al 1985;Keser and Willinger 2000;Königstein 2001). However, there is little experimental work on contracting with hidden information about an agent's type.…”

Section: Related Literaturementioning

confidence: 99%

Hidden information, bargaining power, and efficiency: an experiment

2010

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We devise an experiment to explore the effect of different degrees of bargaining power on the design and the selection of contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a third treatment an agent may choose between the contract menus offered by two principals. We first show theoretically how different ratios of principals and agents affect outcomes and efficiency. Informational asymmetries generate inefficiency. In an environment where principals compete against each other to hire agents, these inefficiencies may disappear, but they are insensitive to the number of principals. In contrast, when agents compete to be hired, efficiency improves dramatically, and it increases in the relative number of agents because competition reduces the agents' informational monopoly power. However, this environment also generates a high inequality level and is characterized by multiple equilibria. In general, there is a fairly high degree of correspondence between the theoretical predictions and the contract menus actually chosen in each treatment. There is, however, a tendency to choose more 'generous' (and more efficient) contract menus over time. We find that competition leads to a substantially higher probability of trade, and that, overall, competition between agents generates the most efficient outcomes.

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“…This leads to the following result. (18), is the unique subgame-perfect Cournot-Nash equilibrium in stationary strategies for the dynamic spot market case.…”

Section: Spot Market Casementioning

confidence: 99%

Financial Markets and Stochastic Growth

Mirman¹,

Sc̣henk-Hoppé²

2003

Rev International Economics

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In this paper, we study the effect of financial markets on the investment of a two-good two-country economy with stochastic production in a dynamic framework. Each country produces and invests only one good and, therefore, makes decisions as a central planner in an optimal growth model. Trade between consumers of both countries, however, takes place on competitive (spot or financial) markets. We compare the investment-consumption decisions of both 'market' models with the benchmark-case of an integrated world-equilibrium. In the log-linear case, we can uniquely characterize the state-dependent preferences of consumers that lead to dynamically efficient investment decisions. We show that the investment decisions in both 'market' models are, in general, inefficient as compared with the efficient, or integrated world economy, case.

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Efficient Contracting and Fair Play in a Simple Principal-Agent Experiment

Cited by 110 publications

References 102 publications

The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study

The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study

Hidden information, bargaining power, and efficiency: an experiment

Financial Markets and Stochastic Growth

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