Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127267
Authors: 
Schnedler, Wendelin
Vadovic, Radovan
Year of Publication: 
2007
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 450
Abstract: 
What is the motivational effect of imposing a minimum effort require- ment? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal- agent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate (i) if it is not exclusively aimed at a specifc agent or (ii) if it protects the endowment of the principal. Given the conjecture, the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.
Subjects: 
moral-hazard
intrinsic motivation
guilt-aversion
JEL: 
C7
C9
M5
Document Type: 
Working Paper

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