Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75753
Authors: 
Fehr, Ernst
Klein, Alexander
Schmidt, Klaus
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 445
Abstract: 
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish actors become inferior when some agents are concerned about fairness. Conversely, contracts that are doomed to fail when there are only selfish actors provide powerful incentives and become superior when there are also fair-minded players. These predictions are strongly supported by the results of a series of experiments. Furthermore, our results suggest that the existence of fair actors may be an important reason why many contracts are left deliberately incomplete.
Subjects: 
Incentive contracts
moral hazard
fairness
reciprocity
incomplete contracts
Document Type: 
Working Paper

Files in This Item:
File
Size





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