Incentive Contracts versus Trust in Three-Person Ultimatum Games - An Experimental Study

Susanne Büchner, Luis Gonzalez, Werner Güth () and Maria Levati

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Whether incentive contracts perform better than trust in terms of productive efficiency is usually explored by principal-agent experiments (most involving only one agent). We investigate this issue in the context of a three-person ultimatum experiment, which is simpler and more neutrally framed than traditional principal-agent designs. Contrary to the game theoretic prediction, we find that (mutual) trust is as good as incentive contracts in inducing costly actions by employees. Moreover, we observe an interesting order effect when switching from one regime to the other. This could be important when considering institutional change since (according to our data) early behavioral patterns may be irreversible.

Keywords: Ultimatum Game; Incentives; Trust; Fairness; Greasing (search for similar items in EconPapers)
JEL-codes: C70 C90 D20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
ftp://papers.econ.mpg.de/esi/discussionpapers/2002-20.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server papers.econ.mpg.de: No such host is known.

Related works:
Journal Article: Incentive contracts versus trust in three-person ultimatum games: an experimental study (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:esi:discus:2002-20

Ordering information: This working paper can be ordered from
http://www.econ.mpg. ... arch/ESI/discuss.php

Access Statistics for this paper

More papers in Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group Contact information at EDIRC.
Bibliographic data for series maintained by Karin Richter ( this e-mail address is bad, please contact ).