Self-Interest Through Agency: An Alternative Rationale for the Principal-Agent Relationship

38 Pages Posted: 23 Sep 2008

See all articles by John Hamman

John Hamman

Carnegie Mellon University - Department of Social and Decision Sciences

George Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 28, 2008

Abstract

Principal-agent relationships are typically motivated by efficiency gains from comparative advantage. However, such delegation may also arise because it allows principals the pursuit of selfish outcomes while avoiding explicitly selfish behavior. We report laboratory experiments in which principals repeatedly either decide how much money to share with a recipient or select agents to make sharing decisions on their behalf. Across several treatments, recipients receive significantly less when agents make allocation decisions. This results from principals seeking those agents willing to reliably share the least. We observe instances in which sharing is almost entirely extinguished when decisions are made through agents.

Keywords: fairness, principal-agent, experiments

JEL Classification: C72, D03, D64, D82, M54

Suggested Citation

Hamman, John and Loewenstein, George F. and Weber, Roberto A., Self-Interest Through Agency: An Alternative Rationale for the Principal-Agent Relationship (July 28, 2008). Available at SSRN: https://ssrn.com/abstract=1271921 or http://dx.doi.org/10.2139/ssrn.1271921

John Hamman (Contact Author)

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

George F. Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States
412-268-8787 (Phone)
412-268-6938 (Fax)

Roberto A. Weber

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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