Fairness and incentives in a multi-task principal–agent model

Fairness and incentives in a multi-task principal–agent model

0.00 Avg rating0 Votes
Article ID: iaor20051604
Country: United Kingdom
Volume: 106
Issue: 3
Start Page Number: 453
End Page Number: 474
Publication Date: Jul 2004
Journal: Scandinavian Journal of Economics
Authors: ,
Keywords: agent technology, supply chain
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 participate 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 behaviour contradicts the self-interest theory but is consistent with theories of fairness.

Reviews

Required fields are marked *. Your email address will not be published.