Work

Fairness and Incentives in a Multi‐task Principal–Agent Model

Year: 2004

Type: article

Abstract: This paper reports on a two‐task principal–agent experiment in which only one task is contractible. The principal can either offer a piece‐rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece‐rate contracts. Many principals reward high effort on both tasks with substantial bonuses. Agents anticipate this and provide high effort on both tasks. In contrast, almost all agents with a piece‐rate contract focus on the first task and disregard the second. Principals understand this and predominantly offer bonus contracts. This behavior contradicts the self‐interest theory but is consistent with theories of fairness.

Source: Scandinavian Journal of Economics

DOI: 10.1111/j.0347-0520.2004.00372.x

Authors: Ernst Fehr, Klaus M. Schmidt

Language: English

Topic: Experimental Behavioral Economics Studies

Subfield: Safety Research

Field: Social Sciences

Domain: Social Sciences

Open Access status: green

Funders: National Science Foundation, John D. and Catherine T. MacArthur Foundation, Deutsche Forschungsgemeinschaft, Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung

Award: G577476671

OpenAlex ID: W2954281079

FWCI: 46.56

Cites: 30

Cited by: 253

Related to: 10