contracts which determine their managers' salaries. One contract simply gives managers incentives to maximize firm profits …, while the second contract gives an additional sales bonus. Although theory predicts the second contract to be chosen, it is … only rarely chosen in the experimental markets. This behavior is rational given that managers do not play according to the …

performance elasticities are contrary to predictions of agency theory. Both results provide further support to the common belief … that compensation contracts in public corporations seem imperfectly tied to firm performance and managers' tasks. …