The Monotonicity Puzzle: An Experimental Investigation of Incentive Structures
Data(s) |
18/05/2010
21/05/2010
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Resumo |
Non-monotone incentive structures, which - according to theory - are able to induce optimal behavior, are often regarded as empirically less relevant for labor relationships. We compare the performance of a theoretically optimal non-monotone contract with a monotone one under controlled laboratory conditions. Implementing some features relevant to real-world employment relationships, our paper demonstrates that, in fact, the frequency of income-maximizing decisions made by agents is higher under the monotone contract. Although this observed behavior does not change the superiority of the non-monotone contract for principals, they do not choose this contract type in a significant way. This is what we call the monotonicity puzzle. Detailed investigations of decisions provide a clue for solving the puzzle and a possible explanation for the popularity of monotone contracts. |
Identificador |
urn:nbn:de:0009-20-24985 |
Idioma(s) |
eng |
Direitos |
authorcontract |
Fonte |
BuR - Business Research ; 3 , 1 |
Palavras-Chave | #experimental agency #non-monotone contracts |