The Hidden Costs of Control
American Economic Review · 2006 · Volume 96 · Issue 5
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)
Keywords
Asymmetric and Private Information, Mechanism Design, Economic Sociology, Economic Anthropology, Social and Economic Stratification
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