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

Ernst Fehr and Klaus Schmidt ()

Munich Reprints in Economics from University of Munich, Department of Economics

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 anticipate 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 behavior contradicts the self-interest theory but is consistent with theories of fairness.

Date: 2004
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Citations: View citations in EconPapers (97)

Published in Scandinavian Journal of Economics 3 106(2004): pp. 453-474

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Related works:
Journal Article: Fairness and Incentives in a Multi‐task Principal–Agent Model (2004) Downloads
Working Paper: Fairness and Incentives in a Multi-Task Principle-Agent Model (2004) Downloads
Working Paper: Fairness and Incentives in a Multi-Task Principal-Agent Model (2004) Downloads
Working Paper: Fairness and Incentives in a Multi-Task Principal-Agent Model Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20657

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