Optimal contracts with team production and hidden information: an experiment

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dc.contributor.author Cabrales, Antonio
dc.contributor.author Charness, Gary
dc.contributor.other UC Santa Barbara
dc.date.accessioned 2012-01-09T15:14:54Z
dc.date.available 2012-01-09T15:14:54Z
dc.date.issued 2008-03-01
dc.identifier.uri http://hdl.handle.net/10016/12921
dc.description.abstract It is standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. Yet it may be useful to consider social forces in mechanism design and contract theory. We devise an experiment to explore optimal contracts in a hidden information context. A principal offers one of three possible contract menus to a team of two agents of unknown types. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable menus is proposed and agents accept a contract, selecting actions according to their types. The consensus menu differs across treatments that vary the payoffs resulting from a rejection. We find that an agent is more likely to reject a contract menu if her teammate rejected a contract menu in the previous period, suggesting that agents may be learning social norms; in addition, low-ability agents have a particularly adverse reaction to reduced wage offers.
dc.description.sponsorship We gratefully acknowledge the financial support of Spain’s Ministry of Education under grants CONSOLIDER INGENIO 2010 (CSD2006-0016), and SEJ2006- 11665-C02-00.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Working Papers
dc.relation.ispartofseries 12-08
dc.relation.isversionof http://hdl.handle.net/10016/12809
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Experiment
dc.subject.other Hidden Information
dc.subject.other Optimal contract
dc.subject.other Production Team
dc.subject.other Wage Rigidity
dc.title Optimal contracts with team production and hidden information: an experiment
dc.type workingPaper
dc.subject.jel A13
dc.subject.jel B49
dc.subject.jel C91
dc.subject.jel C92
dc.subject.jel D21
dc.subject.jel J41 UC
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
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