Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73885
Authors: 
Montinari, Natalia
Nicolo, Antonio
Oexl, Regine
Year of Publication: 
2012
Series/Report no.: 
Working Papers in Economics and Statistics 2012-19
Abstract: 
We report evidence from an experiment where a principal chooses an agent out of two to perform a task for a fixed compensation. The principal's payoff depends on the agent's ex-ante ability and on a non-contractible effort that the agent has to exert once employed. We find that a significant share of principals select the mediocre agent (i.e. the one with the lower ex-ante ability). When the principal is allowed to send a message, mediocre agents exert more effort than agents with higher ability, and principals who choose mediocre agents on average have a larger payoff than principals who select agents with higher ability. This difference in effort overcompensates the difference in ability. Mediocre agents reciprocate more than agents who have ex-ante higher ability when the principals are able to make them feeling indebted.
Subjects: 
reciprocity
communication
incentives
mediocrity
JEL: 
C9
Document Type: 
Working Paper

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