Legitimacy of control


Schnedler, Wendelin ; Vadovic, Radovan


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URL: https://ub-madoc.bib.uni-mannheim.de/2507
URN: urn:nbn:de:bsz:180-madoc-25076
Document Type: Working paper
Year of publication: 2007
The title of a journal, publication series: None
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 300 Social sciences, sociology, anthropology
Classification: JEL: M5 C9 C7 ,
Subject headings (SWD): Leistungskontrolle , Moral Hazard , Leistungsmotivation , Theorie
Keywords (English): moral-hazard , intrinsic motivation , guilt-aversion
Abstract: What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal-agent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate (i) if it is not exclusively aimed at a specific agent or (ii) if it protects the endowment of the principal. Given the conjecture, the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.
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