Experimental Economics

, Volume 5, Issue 1, pp 5–27

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

  • Vital Anderhub
  • Simon Gächter
  • Manfred Königstein
Article

DOI: 10.1023/A:1016380207200

Cite this article as:
Anderhub, V., Gächter, S. & Königstein, M. Experimental Economics (2002) 5: 5. doi:10.1023/A:1016380207200

Abstract

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of 'fair sharing' and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also 'fair sharing' and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are 'reciprocity-compatible'. Principals recognize the agency problem and react accordingly.

principal-agent theory contract theory fair sharing incentive contracts reciprocity experiments 

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Vital Anderhub
    • 1
  • Simon Gächter
    • 2
  • Manfred Königstein
    • 1
  1. 1.Department of EconomicsHumboldt-University at BerlinBerlinGermany
  2. 2.FEW-HSGUniversity of St. GallenSt. GallenSwitzerland

Personalised recommendations