Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62419
Authors: 
Masella, Paolo
Meier, Stephan
Zahn, Philipp
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6815
Abstract: 
This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have hidden costs, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.
Subjects: 
social identity
social preferences
incentives
motivation
crowding out
trust
experiment
JEL: 
C91
D03
Z13
Document Type: 
Working Paper

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