%0 Journal Article %1 brosig2010monotonicity %A Brosig, Jannette %A Lukas, Christian %A Riechmann, Thomas %D 2010 %J BuR - Business Research %K agency contracts experimental non-monotone %N 1 %P 8-35 %T The Monotonicity Puzzle: An Experimental Investigation of Incentive Structures %U http://www.business-research.org/2010/1/accounting/2498/hihrig1274174422.33.pdf %V 3 %X Non-monotone incentive structures, which - according to theory - are able to induce optimal behavior, are often regarded as empirically less relevant for labor relationships. We compare the performance of a theoretically optimal non-monotone contract with a monotone one under controlled laboratory conditions. Implementing some features relevant to real-world employment relationships, our paper demonstrates that, in fact, the frequency of income-maximizing decisions made by agents is higher under the monotone contract. Although this observed behavior does not change the superiority of the non-monotone contract for principals, they do not choose this contract type in a significant way. This is what we call the monotonicity puzzle. Detailed investigations of decisions provide a clue for solving the puzzle and a possible explanation for the popularity of monotone contracts.

@article{brosig2010monotonicity, abstract = {Non-monotone incentive structures, which - according to theory - are able to induce optimal behavior, are often regarded as empirically less relevant for labor relationships. We compare the performance of a theoretically optimal non-monotone contract with a monotone one under controlled laboratory conditions. Implementing some features relevant to real-world employment relationships, our paper demonstrates that, in fact, the frequency of income-maximizing decisions made by agents is higher under the monotone contract. Although this observed behavior does not change the superiority of the non-monotone contract for principals, they do not choose this contract type in a significant way. This is what we call the monotonicity puzzle. Detailed investigations of decisions provide a clue for solving the puzzle and a possible explanation for the popularity of monotone contracts.}, added-at = {2010-06-09T09:42:06.000+0200}, author = {Brosig, Jannette and Lukas, Christian and Riechmann, Thomas}, biburl = {https://www.bibsonomy.org/bibtex/20c2270040dadc4ddc0900f235b7f8e23/usbk}, interhash = {49a5ce6dc72adc35d27ae21a529779a4}, intrahash = {0c2270040dadc4ddc0900f235b7f8e23}, journal = {BuR - Business Research}, keywords = {agency contracts experimental non-monotone}, month = may, number = 1, pages = {8-35}, timestamp = {2010-06-09T09:42:06.000+0200}, title = {The Monotonicity Puzzle: An Experimental Investigation of Incentive Structures}, url = {http://www.business-research.org/2010/1/accounting/2498/hihrig1274174422.33.pdf}, volume = 3, year = 2010 }