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Binary Payment Schemes: Moral Hazard and Loss Aversion

Herweg, Fabian; Müller, Daniel; Weinschenk, Philipp - Max-Planck-Institut zur Erforschung von … - 2010

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...

Persistent link: https://www.econbiz.de/10008693524

Moral Hazard and Ambiguity

Weinschenk, Philipp - Max-Planck-Institut zur Erforschung von … - 2010

We consider a principal-agent model with moral hazard where the agent’s knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures....

Persistent link: https://www.econbiz.de/10008693531

Wage Differentials, Fairness, and Social Comparison: An experimental study of the Co-Employment of Permanent and Temporary Agency Workers†

Alewell, Dorothea; Nicklisch, Andreas - Max-Planck-Institut zur Erforschung von … - 2006

Recent experimental literature in labor economics shows that fairness concerns make a substantial difference for working decisions. Our study systematically explores how the existence of multiple fairness foci influences wage setting and acceptance thresholds. Particularly, we focus on the...

Persistent link: https://www.econbiz.de/10008633213

Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US

Fischer, Sven; Goerg, Sebastian; Hamann, Hanjo - Max-Planck-Institut zur Erforschung von … - 2013

traditionally includes social standards. Our results show that a stakeholder provision, as found in both Germany and the US, cannot … overcome material incentives. However, even absent incentives the stakeholder norm does not foster other regarding behavior but … enterprise legislation and the stakeholder debate. …

Persistent link: https://www.econbiz.de/10010662709

Procrastination in Teams, Contract Design and Discrimination

Weinschenk, Philipp - Max-Planck-Institut zur Erforschung von … - 2011

We study a dynamic model of team production with moral hazard. We show that the players begin to invest effort only shortly before the time limit when the reward for solving the task is shared equally. We explore how the team can design contracts to mitigate this form of procrastination and show...

Persistent link: https://www.econbiz.de/10009226922

Communicating Subjective Evaluations

Lang, Matthias - Max-Planck-Institut zur Erforschung von … - 2012

Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justication by sending a costly cheap-talk message. If she does not provide justication, her message space is restricted, but the message is costless. I show...

Persistent link: https://www.econbiz.de/10010755388

Bank Bonuses and Bail-Outs

Hakenes, Hendrik; Schnabel, Isabel - Max-Planck-Institut zur Erforschung von … - 2013

This paper shows that bonus contracts may arise endogenously as a response to agency problems within banks, and analyzes how compensation schemes change in reaction to anticipated bail-outs. If there is a risk-shifting problem, bail-out expectations lead to steeper bonus schemes and even more...

Persistent link: https://www.econbiz.de/10010667906

Goals (th)at Work – Goals, Monetary Incentives, and Workers’ Performance

Goerg, Sebastian; Kube, Sebastian - Max-Planck-Institut zur Erforschung von … - 2012

In a randomized field experiment, we investigate the connection between work goals, monetary incentives, and work performance. Employees are observed in a natural work environment where they have to do a simple, but effort-intense task. Output is perfectly observable and workers are paid for...

Persistent link: https://www.econbiz.de/10010584376

Communication and Trust in Principal-Team Relationships: Experimental Evidence

Kleine, Marco; Kube, Sebastian - Max-Planck-Institut zur Erforschung von … - 2015

We study how upward communication – from workers to managers – about individual efforts affects the effectiveness of gift exchange as a contract-enforcement device for work teams. Our findings suggest that the use of such self-assessments can be detrimental to workers’ performance. In the...

Persistent link: https://www.econbiz.de/10011199813

The Impact of Institutions on the Decision How to Decide

Engel, Christoph; Weber, Elke U. - Max-Planck-Institut zur Erforschung von … - 2006

The human mind is not a general problem solving machine. Instead of deliberately, consciously and serially processing the available information, men can rely on routines, rules, roles or affect for the purpose. They can bring in technology, experts or groups. For all of these reasons, men have a...

Persistent link: https://www.econbiz.de/10005772782