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The hidden costs of control


Falk, A; Kosfeld, M (2006). The hidden costs of control. American Economic Review, 96(5):1611-1630.

Abstract

We analyze the consequences of control on motivation in an experimental principalagent game, where the principal can control the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our results show that control entails hidden costs since most agents reduce their performance as a response to the principals controlling decision. Overall, the effect of control on the principals payoff is nonmonotonic. When asked for their emotional perception of control, most agents who react negatively say that they perceive the controlling decision as a signal of distrust and a limitation of their choice autonomy. (JEL D82, Z13)

We analyze the consequences of control on motivation in an experimental principalagent game, where the principal can control the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our results show that control entails hidden costs since most agents reduce their performance as a response to the principals controlling decision. Overall, the effect of control on the principals payoff is nonmonotonic. When asked for their emotional perception of control, most agents who react negatively say that they perceive the controlling decision as a signal of distrust and a limitation of their choice autonomy. (JEL D82, Z13)

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:December 2006
Deposited On:11 Feb 2008 12:29
Last Modified:05 Apr 2016 12:22
Publisher:American Economic Association
ISSN:0002-8282
Additional Information:Copyright: American Economic Association
Publisher DOI:10.1257/aer.96.5.1611
Permanent URL: http://doi.org/10.5167/uzh-2251

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