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Fairness in Delegated Bargaining

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  • Frauke Lammers

Abstract

This article examines whether a principal prefers to hire a fair or a selfish agent. A fair agent cares to some extent for the well‐being of other people and thus he also cares for the principal. Therefore, if the agent performs individual work, the principal is always better off to hire a fair agent. However, we show that when a third party with conflicting interests is introduced, it may be advantageous for the principal to hire a selfish agent. The reason is that the selfish agent will be a tough bargainer not only when negotiating his employment contract with the principal but also when dealing with the third party, for example, when selling the principal's product to a buyer.

Suggested Citation

  • Frauke Lammers, 2010. "Fairness in Delegated Bargaining," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(1), pages 169-183, March.
    • Handle: RePEc:bla:jemstr:v:19:y:2010:i:1:p:169-183
    DOI: 10.1111/j.1530-9134.2009.00249.x
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    References listed on IDEAS

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    Cited by:

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    4. Kopel, Michael & Putz, Eva Maria, 2021. "Why socially concerned firms use low-powered managerial incentives: A complementary explanation," Economic Modelling, Elsevier, vol. 94(C), pages 473-482.

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