Title: Monotone vs. non-monotone incentive structures: an experimental analysis

Authors: Christian Lukas

Addresses: Department of Management and Economics, Friedrich-Schiller-University of Jena, Carl-Zeiss-Strasse 3, 07743 Jena, Germany

Abstract: This paper reports results from an experiment studying contract choice and effort provision under different contracts in a long-term agency relationship. Principals can choose between a theoretically optimal non-monotone contract N and a monotone contract M. Agents in general provide more effort under M than under N. Information about incentive compatibility further increases effort provision under contract M but not under contract N. However, principals who constantly select contract N realise the highest payoffs.

Keywords: contract choice; agency; effort; experiment; non-monotone; incentives.

DOI: 10.1504/IJEBR.2018.093370

International Journal of Economics and Business Research, 2018 Vol.16 No.1, pp.12 - 34

Received: 13 Mar 2017
Accepted: 29 Apr 2017
Published online: 25 Jul 2018 *

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