Incentives in Principal-Agent Relationships

Incentives and Risks in Relationships Between the Principal and the Agent

The Appeals Process in Principal–Agent Relationships

The appeals process is employed in many organizations, including administrative agencies, regulatory authorities, sports organizations, and private companies. This paper examines the dual role of the appeals process in correcting errors and inducing compliance in principal-agent relationships in the presence of imperfect performance evaluation. Some surprising results emerge. For example, appea...

Fairness and Incentives in a Multi-task Principal–Agent Model*

This paper reports on a two-task principal–agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece-rate contracts. Many principals reward high effort on both tasks with substantial bonuses. Agents anticipate this and provide high effort on both tasks. In contrast,...

Online Exchange Relationships: a Principal– Agent Perspective

Despite a decade since the inception of B2C e-commerce, the uncertainty of the online environment still makes many consumers reluctant to engage in online exchange relationships. Elena Karahanna was the accepting senior editor for this paper. D. Harrison McKnight and Jonathan D. Wareham served as reviewers. The associate editor and the third reviewer chose to remain anonymous. Even if uncertain...

Task-Specific Abilities in Multi-Task Principal-Agent Relationships∗

This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent’s task-specific abilities if contractible performance measures do not reflect the agent’s multidimensional contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task p...