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Finding the Cost of Control

Authors: Judd Kessler; Stephen G. Leider;

Finding the Cost of Control

Abstract

A large and growing literature has demonstrated that explicit incentives, such as enforceable contracts, can lead agents to withhold effort. We investigate when this behavioral result arises. In an extensive laboratory experiment, we find that imposing control through an enforceable contract is only detrimental to principals in a special case when: (1) there is a preexisting norm that agents provide high effort; (2) control is imposed unilaterally and has an asymmetric effect on the agent; (3) control is weak (i.e. it cannot induce significant effort); and (4) the agent does not use control when acting as a principal.

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Keywords

experiment, principal-agent problem, hidden cost of control, experiment, ddc:330, C90, L20, hidden cost of control, J30, principal-agent problem, jel: jel:C90, jel: jel:L20, jel: jel:J30

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    popularity
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    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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Powered by OpenAIRE graph
Found an issue? Give us feedback
selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
4
Average
Average
Average
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