Year: 2001
Type: preprint
Abstract: In this Paper we provide experimental evidence indicating that incentive contracts may cause a strong crowding out of voluntary cooperation. This crowding-out effect constitutes costs of incentive provision that have been largely neglected by economists. In our experiments the crowding-out effect is so strong that the incentive contracts are less efficient than contracts without any incentives. Principals, nonetheless, prefer the incentive contracts because they allow them to appropriate a much larger share of the (smaller) total surplus and are, hence, more profitable for them.
Authors: Ernst Fehr, Simon Gächter
Language: English
Subfield: Safety Research
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125199561