Principal-Agent Settings with Random Shocks

• 成果类型: Article
• 署名作者: Rubin, Jared; Sheremeta, Roman
• 署名单位: Chapman University System; Chapman University; Chapman University System; Chapman University; University System of Ohio; Case Western Reserve University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2177
• 发表日期: 2016
• 页码: 985-999
• 关键词: gift exchange; principal-agent model; contract theory; RECIPROCITY; Effort; shocks; laboratory experiment

摘要

Using a gift-exchange experiment, we show that the ability of reciprocity to overcome incentive problems inherent in principal-agent settings is greatly reduced when the agent's effort is distorted by random shocks and transmitted imperfectly to the principal. Specifically, we find that gift exchange contracts without shocks encourage effort and wages well above standard predictions. However, the introduction of random shocks reduces wages and effort, regardless of whether the shocks can be observed by the principal. Moreover, the introduction of shocks significantly reduces the probability of fulfilling the contract by the agent, the payoff of the principal, and total welfare. Therefore, our findings demonstrate that random shocks place an important bound on the ability of gift exchange to overcome principal-agent problems.