Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107447
Authors: 
Erlei, Mathias
Schenk-Mathes, Heike
Year of Publication: 
2012
Series/Report no.: 
TUC Working Papers in Economics 06
Abstract: 
We conducted six treatments of a standard moral hazard experiment with hidden action. All treatments had identical Nash equilibria. However, the behavior in all treatments and periods was inconsistent with established agency theory (Nash equilibrium). In the early periods of the experiment, behavior differed significantly between treatments. This difference largely vanished in the final periods. We used logit equilibrium (LE) as a device to grasp boundedly rational behavior and found the following: (1) LE predictions are much closer to subjects’ behavior in the laboratory; (2) LE probabilities of choosing between strategies and experimental behavior show remarkably similar patterns; and (3) profit‐maximizing contract offers according to the LE are close to those derived from regressions.
Subjects: 
experiment
logit equilibrium
moral hazard
hidden action
JEL: 
C72
C92
J31
L14
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.