Adopting the indirect evolutionary approach, we show that it might be beneficial for firms on a heterogeneous market not only to care for their profits but also for their respective customers' welfare.

In this study we propose a formal framework for the indirect evolutionary approach as initiated by Güth and Yaari (1992). It allows to endogenize preferences and to study their evolution. We define two-player indirect evolutionary games with observable types and show how to incorporate...

Principal-agent theory usually assumes that the players are perfectly rational. In contrast, real human decision makers are only boundedly rational. If a firm (principal) wants to design a work contract that maximizes profit, it should consider how workers (agents) will actually react rather...

Whether Individuals can build up and sustain mutually beneficial cooperation or, more generally, whether they comply with social norms, may depend crucially on the observability of their actions. If these cannot be monitored perfectly, the individual might be tempted to egoistically exploit this...

The principal-agent problem is often illustrated by the relationship between owners and managers in modern corporations. Our experimental study considers the problem where the owner has to motivate the manager by an employment contract serving the owner'rsquo;s interest. The contract specifies a...

We present a lab experiment on an endogenous trust game in which one player (the principal) may decide to leave the investment choice to the agent or to take the investment decision himself/herself. In the latter case we refer to this as “voluntary leadership”. We show that voluntary...