Fairness and Incentives in a Multi-Task Principal-Agent Model

Fehr, Ernst und Schmidt, Klaus M. (30. April 2004): Fairness and Incentives in a Multi-Task Principal-Agent Model. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2004-8 Scandinavian Journal of Economics, 106

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 efforts on both tasks with substantial bonuses. Agents anticipate this and provide high efforts 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.

• Dokumententyp: Paper
• Keywords: Incentives; Moral Hazard; Multiple Tasks; Fairness; Experiments
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics ; Volkswirtschaft > Munich Discussion Papers in Economics > Mikroökonomik ; Volkswirtschaft > Munich Discussion Papers in Economics > Arbeit ; Volkswirtschaft > Munich Discussion Papers in Economics > Informationsökonomik ; Volkswirtschaft > Munich Discussion Papers in Economics > Verhaltenswissenschaftliche Ökonomik ; Volkswirtschaft > Munich Discussion Papers in Economics > Spieltheorie ; Volkswirtschaft > Lehrstühle > Seminar für Wirtschaftstheorie
• Themengebiete: 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie ; 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: C7, C9, J3
• Sprache: Englisch