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Legitimacy of Control

Author

Listed:
  • Schnedler, Wendelin

    (University of Paderborn)

  • Vadovic, Radovan

    (Carleton University)

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.

Suggested Citation

  • Schnedler, Wendelin & Vadovic, Radovan, 2007. "Legitimacy of Control," IZA Discussion Papers 3013, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3013
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    References listed on IDEAS

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    More about this item

    Keywords

    guilt aversion; intrinsic motivation; moral hazard;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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