Fehr, Ernst; Klein, Alexander; Schmidt, Klaus M. - 2005 - This version: November 5, 2005
We show experimentally that fairness concerns may have a decisive impact on the actual and optimal choice of contracts … in a moral hazard context. Bonus contracts that offer a voluntary and unenforceable bonus for satisfactory performance … provide powerful incentives and are superior to explicit incentive contracts when there are some fair-minded players. But …
