Hidden costs of control: four repetitions and an extension

Abstract

We report four repetitions of Falk and Kosfeld's (Am. Econ. Rev. 96(5): [1611][1612][1613][1614][1615][1616][1617][1618][1619][1620][1621][1622][1623][1624][1625][1626][1627][1628][1629][1630] 2006) low and medium control treatments with 476 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. We largely confirm the existence of hidden costs of control but, contrary to the original study, hidden costs of control are usually not substantial enough to significantly undermine the effectiveness of economic incentives. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld's (Am. Econ. Rev. 96(5):1611-1630, 2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid : Experimental Economics ; 15 (2012), 2. -S. 323-340 https://dx.doi.org/10.1007 according to a flat participation fee. We observe that hidden costs significantly outweigh benefits of control under hypothetical incentives.

Is there a hidden cost of imposing a minimum contribution level for public good contributions?

“…Similarly, Wang (2012) finds that when a minimum wage policy is introduced, the signaling or anchoring effect of a low level of the minimum wage results in a strong negative effect on wages offered by firms. However, Ziegelmeyer et al (2012) do not generally observe a hidden cost of control in a follow-up study based on Falk and Kosfeld (2006), and, moreover, the results from our second experiment using endogenous MCLs do not fully support an interpretation where the MCL sends a strong signal of distrust. Thus, more research seems warranted to better understand the psychology behind the effects.…”

“…The general finding is that a minimum level does not completely crowd out voluntary contributions by reducing intrinsic motivations to contribute to the public good (for an in-depth discussion on motives, see, e.g., Bénabou and Tirole, 2006). In the context of principal-agent games where the principal can set a minimum effort level that has to be exerted by the agent, Falk and Kosfeld (2006) find that MCLs have a negative overall effect on voluntary contributions, while in a follow-up study Ziegelmeyer et al (2012) do not generally find a similar effect.…”

Incentives and group identity

“…10 We thank Matteo Ploner and Anthony Ziegelmeyer (Ziegelmeyer et al, 2012) for providing us with the original instructions and the original z-tree code of Falk and Kosfeld (2006). An agent's payoff is y A = 24 − t. He can choose t from t ∈ {0, ..., 24} points if he is not controlled by the principal and from t ∈ {1, ..., 24} points if he is controlled by the principal.…”

Orientação De Valor Social, Sistema De Valores E Comportamento Cooperativo: Um Estudo Experimental

“…Em outras pesquisas (Ziegelmeyer, Schmelz, & Ploner, 2012), no entanto, aponta-se que o uso de controle tem um impacto positivo em jogos de agente-principal, porque tem um efeito disciplinador, que compensa um eventual risco de efeito de substituição. O presente trabalho contribui para a discussão do assunto ao aprofundar a investigação do efeito do controle por tipo social.…”