Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23944
Authors: 
Gächter, Simon
Königstein, Manfred
Year of Publication: 
2006
Series/Report no.: 
Discussion paper / Universität Erfurt, Staatswissenschaftliche Fakultät 2006,001E
Abstract: 
We present a simple classroom principal-agent experiment that can effectively be used as a teaching device to introduce important concepts of organizational economics and contracting. In a first part, students take the role of a principal and design a contract that consists of a fixed payment and an incentive component. In the second part, students take the role of agents and decide on an effort level. The experiment can be used to introduce students to the concepts of efficiency, incentive compatibility, outside options and participation constraints, the Coase theorem, and fairness and reciprocity in contracting.
Subjects: 
Classroom experiments
post-contractual opportunism
incentive contracts
efficiency
reciprocity
Coase theorem
JEL: 
C92
A22
Document Type: 
Working Paper

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