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Gaining Experience as Principal or Agent. An Experimental Study

Author

Listed:
  • Giovanni Ponti

    (Universidad de Alicante)

  • Marcello Sartarelli

    (Dpto. Fundamentos del Análisis Económico)

  • Iryna Sikora

    (KPMG España)

  • Zhukova Vita

    (Dpto. Fundamentos del Análisis Económico)

Abstract

We study experimentally whether decisions in a principal-agent model differ when subjects gain experience by changing roles rather being in a ¿xed role over time. In addition, we examine whether increasing principals’ pro¿t opportunities has an impact on their decisions. To this aim, we use a stylised labour market where multiple principals compete to hire teams of two agents by o¿ering wage contracts and claiming residual pro¿ts after paying agents. Players’ roles, either assigned randomly every round or ¿xed, and principals’ pro¿t opportunities, either high or low, vary in a between-subject design. We ¿nd that both changing roles and facing high pro¿t opportunities leads principals to o¿er more frequently e¿cient contracts in inducing both agents to put e¿ort and to higher payo¿s for everyone, with some complementarity between role changes and pro¿t opportunities.

Suggested Citation

  • Giovanni Ponti & Marcello Sartarelli & Iryna Sikora & Zhukova Vita, 2018. "Gaining Experience as Principal or Agent. An Experimental Study," Working Papers. Serie AD 2018-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2018-08
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    References listed on IDEAS

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    More about this item

    Keywords

    direct-response method; experience; ¿xed role; laboratory experiment; principal-agent; pro¿t opportunities; role change; stakes size;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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