Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. This model implies that, for a given compensation scheme, the agent’s optimal effort is unrelated to the amount of noise in the performance measure. In contrast,...

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is...

Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. This model implies that, for a given compensation scheme, the agent's optimal effort is unrelated to the amount of noise in the performance measure. In contrast, expectancy...

An important aspect in determining the effectiveness of gift exchange relations in labor markets is the ability of the worker to "repay the gift" to the employer. To test this hypothesis, we conduct a real effort laboratory experiment where we vary the wage and the effect of the worker's effort...

We conduct a field experiment where we vary both the presence of a gift exchange wage and the effect of the worker's effort on the manager's payoff. The results indicate a strong complementarity between the initial wage gift and the agent's ability to "repay the gift". We collect information on...

We conduct a real-effort experiment to test whether workers reciprocate generous wages by managers when workers are tempted to surf the internet. Further, we investigate how an active policy of restricting the usage of the internet affects the workers' motivation. We observe that the temptation...

Economic theory predicts that agents will work harder if they believe in the "mission" of the organization. Well-identified estimates of exactly how much harder they will work have been elusive, however, because agents select into jobs. We conduct a real effort experiment with participants who...

Modern 'principal-agent theory' has made a lot of progress in proposing theoretical Solutions to agency problems. This paper contributes to a better understanding of behavior in agency situations. In particular, we provide experimental evidence on offered contracts and effort choices in a simple...

Drawing on the proposer-responder game examined by Andreoni, Harbaugh, and Vesterlund (2003), I experimentally test four variations of a principal-agent relationship with fixed pay and real effort. Depending on the treatment, the principal can voluntarily, but at her own expense, (1) only reward...

We conducted a lab experiment with 253 participants to examine how constraints on bonus akin to bonus regulations, such as bonus cap and malus, could affect individuals' risk-taking in the presence of relative performance pay. Participants took greater risks when bonus was linked to investment...