Self-Interest through Delegation: An Additional Rationale for the Principal-Agent Relationship

Principal-agent relationships are typically assumed to be motivated by efficiency gains from comparative advantage. However, principals may also delegate tasks to avoid taking direct responsibility for selfish or unethical behavior. We report three laboratory experiments in which principals repeatedly either decide how much money to share with a recipient or hire agents to make sharing decisions on their behalf. Across several experimental treatments, recipients receive significantly less, and in many cases close to nothing, when allocation decisions are made by agents. (JEL D82)

[1]  Gary E. Bolton,et al.  ERC: A Theory of Equity, Reciprocity, and Competition , 2000 .

[2]  Klaus M. Schmidt,et al.  A Theory of Fairness, Competition, and Cooperation , 1999 .

[3]  John H. Miller,et al.  NOTES AND COMMENTS GIVING ACCORDING TO GARP: AN EXPERIMENTAL TEST OF THE CONSISTENCY OF PREFERENCES FOR ALTRUISM , 2002 .

[4]  T. Mulgan.  The Contract Theory , 2006 .

[5]  Tara J. Radin,et al.  The Struggle Against Sweatshops: Moving Toward Responsible Global Business , 2006 .

[6]  James Konow,et al.  Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions , 2000 .

[7]  Urs Fischbacher,et al.  Shifting the Blame: On Delegation and Responsibility , 2011 .

[8]  B. Latané,et al.  Group inhibition of bystander intervention in emergencies. , 1968, Journal of personality and social psychology.

[9]  Chaim Fershtman,et al.  Strategic delegation : An experiment , 2001 .

[10]  Roberto A. Weber,et al.  Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness , 2007 .

[11]  Gary Charness,et al.  The hidden advantage of delegation: pareto-improvements in a gift-exchange game , 2012 .

[12]  Stephen M. Garcia,et al.  Crowded Minds : The Implicit Bystander Effect , 2002 .

[13]  B. Latané,et al.  Bystander intervention in emergencies: diffusion of responsibility. , 1968, Journal of personality and social psychology.

[14]  M. Katz.  Game-Playing Agents: Unobservable Contracts as Precommitments , 1991 .

[15]  Lucas C. Coffman,et al.  Intermediation Reduces Punishment (and Reward) , 2009 .

[16]  J. Andreoni.  Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects , 2009 .

[17]  G. Loewenstein,et al.  Behavioral Law and Economics: Explaining Bargaining Impasse: The Role of Self-serving Biases , 1997 .

[18]  E. Fehr.  A Theory of Fairness, Competition and Cooperation , 1998 .

[19]  V. Smith,et al.  Preferences, Property Rights, and Anonymity in Bargaining Games , 1994 .

[20]  J. Thomson,et al.  Mercenaries, Pirates, and Sovereigns: State-Building and Extraterritorial Violence in Early Modern Europe , 1994 .

[21]  Roberto A. Weber,et al.  Sorting in Experiments with Application to Social Preferences , 2019 .

[22]  Alexander W. Cappelen,et al.  The Pluralism of Fairness Ideals: An Experimental Approach , 2005, SSRN Electronic Journal.

[23]  Roberto A. Weber,et al.  Self-serving interpretations of ambiguity in other-regarding behavior , 2010, Games Econ. Behav..

[24]  C. Fershtman,et al.  Observable Contracts: Strategic Delegation and Cooperation , 1991 .

[25]  George Loewenstein,et al.  The ostrich effect: Selective attention to information , 2009 .

[26]  Ernest K. Lai,et al.  Authority and communication in the laboratory , 2012, Games Econ. Behav..

[27]  Martin Strobel,et al.  Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments , 2002 .

[28]  Daniel Kahneman,et al.  Fairness and the Assumptions of Economics , 1986 .

[29]  K. Bagwell.  Commitment and observability in games , 1995 .

[30]  James Andreoni,et al.  Giving according to GARP: an experimental study of rationality and altruism , 1997 .

[31]  J. Tirole,et al.  Incentives and Prosocial Behavior , 2004 .

[32]  J. Horowitz,et al.  Fairness in Simple Bargaining Experiments , 1994 .

[33]  Gary E. Bolton,et al.  Dictator game giving: Rules of fairness versus acts of kindness , 1998, Int. J. Game Theory.

[34]  Urs Fischbacher,et al.  z-Tree - Zurich toolbox for readymade economic experiments: experimenter's manual , 1999 .

[35]  Paul R. Milgrom,et al.  Economics, Organization and Management , 1992 .

[36]  James Andreoni,et al.  Giving According to GARP , 2001 .

[37]  Bethany McLean,et al.  The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron , 2003 .

[38]  Axel Ockenfels,et al.  ‘Hiding behind a small cake’ in a newspaper dictator game , 2012 .

[39]  R. Dawes,et al.  What You Don't Know Won't Hurt Me: Costly (But Quiet) Exit in a Dictator Game , 2005 .

[40]  Robyn M. Dawes,et al.  What you don't know won't hurt me: Costly (but quiet) exit in dictator games , 2006 .

[41]  Paul Milgrom,et al.  Economics, organization and management / Paul Milgrom, John Roberts , 1992 .

[42]  Roberto A. Weber,et al.  Favorable Interpretations of Ambiguity and Unstable Preferences for Fairness , 2004 .

[43]  U. Fischbacher.  z-Tree: Zurich toolbox for ready-made economic experiments , 1999 .

[44]  L. Thompson,et al.  Social Utility and Decision Making in Interpersonal Contexts , 1989 .

[45]  Duane J. Seppi,et al.  The 'Ostrich Effect': Selective Attention to Information About Investments , 2005 .

[46]  Colin Camerer.  Behavioral Game Theory: Experiments in Strategic Interaction , 2003 .

[47]  Wei Zheng,et al.  Bargaining Through Agents: An Experimental Study of Delegation and Commitment , 2000, Games Econ. Behav..

[48]  E.E.C. van Damme,et al.  Games with imperfectly observable commitment , 1997 .

[49]  J. Keith Murnighan,et al.  Player Types and Self-Impression Management in Dictatorship Games: Two Experiments , 2001, Games Econ. Behav..

[50]  M. Rabin,et al.  Understanding Social Preference with Simple Tests , 2001 .

[51]  D. Prelec,et al.  Self-signaling and self-control. , 2003 .

[52]  M. Rabin.  Published by: American , 2022 .

[53]  J. Tirole,et al.  Identity, morals, and taboos: beliefs as assets. , 2011, The quarterly journal of economics.