Subjective Performance Evaluations, Self-esteem, and Ego-threats in Principal-agent Relations

Alexander Sebald, Markus Walzl

Research output: Working paperResearch

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Abstract

We conduct a laboratory experiment with agents working on and principals benefiting from a real effort task in which the agents' effort/performance can only be evaluated subjectively. Principals give subjective performance feedback to agents and agents have an opportunity to sanction principals. We find that agents sanction whenever the feedback of principals is below their subjective self-evaluations even if the agents' payoff is independent of the principals' feedback. Based on our experimental analysis we propose a principal-agent model with subjective performance evaluations that accommodates this finding. We analyze the agents' (optimal) behavior, optimal contracts, and social welfare in this environment.
Original languageEnglish
Place of PublicationCopenhagen
PublisherDepartment of Economics. University of Copenhagen
Number of pages40
Publication statusPublished - 2010
Externally publishedYes
SeriesUniversity of Copenhagen. Institute of Economics. Discussion Papers (Online)
Number10-18
ISSN1601-2461

Keywords

  • Contracts
  • Subjective performance evaluations
  • Self-esteem
  • Ego-threats

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