American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Hidden Costs of Control
American Economic Review
vol. 96,
no. 5, December 2006
(pp. 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)Citation
Falk, Armin, and Michael Kosfeld. 2006. "The Hidden Costs of Control." American Economic Review, 96 (5): 1611–1630. DOI: 10.1257/aer.96.5.1611Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- Z13 Economic Sociology; Economic Anthropology; Social and Economic Stratification