Monotone vs. non-monotone incentive structures: an experimental analysis
by Christian Lukas
International Journal of Economics and Business Research (IJEBR), Vol. 16, No. 1, 2018

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.

Online publication date: Wed, 25-Jul-2018

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