Abstract
This paper studies the role of negative reciprocity, positive reciprocity and preferences for autonomy in explaining agents’ reactions to control in experimental principal-agent games. While most of the social psychology literature emphasizes the role of autonomy, recent economic research has provided an alternative explanation based on reciprocity. To understand the behavioral mechanisms underlying such reactions, we conduct an experiment in which we compare two treatments: one in which control is exerted directly by the principal; and the other in which it is exerted by a third party enjoying no residual claimancy rights (third-party control). The results indicate that when either the principal or a third party decides to control the average level of effort that is selected by the agents is similar. What changes remarkably are the agents’ reactions to the decision of the other participants not to control. When the principal decides not to control, then the agent exerts greater effort relative to the case when the third party decides not to control. Agents seem to reward principals who abstain from control for their trust, rather than punish controlling ones for their distrust.
Highlights
In contemporary societies, significant resources are devoted to control people's actions.For instance, a substantial fraction of the labor force is allocated to supervisory tasks in both developed and developing countries (Acemoglu and Newman, 2002; Jayadev and Bowles, 2006; Fafchamps and Söderbom, 2006)
According to figures computed from the European Working Condition Survey (EWCS), more than half (57%) of nonsupervisory employees lack procedural autonomy at work in at least one dimension
In this paper we do not explicitly compare alternative type of social preferences, our results suggest that reciprocity-based explanations are more reliable than conformism-based ones and we stick to reciprocity as the main reference in our analysis
Summary
Significant resources are devoted to control people's actions. ED In this paper we extend F&K’s experimental design to separate the role of autonomy T and reciprocity in explaining how individuals react to control in a principal-agent P relationship. We vary their experiment to permit it to include three parties: the principal, E who benefits from the effort of the agent, the agent, and a third party who is given a C show-up fee and chooses whether or not to exert control over the agent, but does not directly benefit from the agent’s actions (i.e. he does not have any claim over the ACresidual). The impersonal orientation people experience their behavior as “beyond their intentional control.” A person who rates highly on the impersonal orientation may view himself or herself as incompetent, or see their behavior as subject to the whims of impersonal forces
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