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Hidden costs of control: four repetitions and an extension

Published online by Cambridge University Press:  14 March 2025

Anthony Ziegelmeyer ,
Katrin Schmelz  and
Matteo Ploner
Anthony Ziegelmeyer*
Affiliation:
Strategic Interaction Group, Max Planck Institute of Economics, Kahlaische Strasse 10, 07745 Jena, Germany
Katrin Schmelz*
Affiliation:
Thurgau Institute of Economics, University of Konstanz, Hauptstrasse 90, 8280 Kreuzlingen 2, Switzerland
Matteo Ploner*
Affiliation:
Department of Economics, Computable and Experimental Economics Laboratory, University of Trento, Via Inama 5, 38100 Trento, Italy
*
[email protected]
[email protected]
[email protected]
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Abstract

We report four repetitions of Falk and Kosfeld's (Am. Econ. Rev. 96(5):1611—1630, 2006) low and medium control treatments with 476 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. We largely confirm the existence of hidden costs of control but, contrary to the original study, hidden costs of control are usually not substantial enough to significantly undermine the effectiveness of economic incentives. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld's (Am. Econ. Rev. 96(5):1611—1630, 2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid according to a flat participation fee. We observe that hidden costs significantly outweigh benefits of control under hypothetical incentives.

Keywords

ControlLaboratory experimentsMotivationPrincipal-agent theory

JEL classification

C91: Laboratory, Individual Behavior M52: Compensation and Compensation Methods and Their Effects C81: Methodology for Collecting, Estimating, and Organizing Microeconomic Data • Data Access
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 2 , June 2012 , pp. 323 - 340
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

The order of authors reflects their relative contributions to the article.

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-011-9302-8) contains supplementary material, which is available to authorized users.

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