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Contract Choice: Efficiency and Fairness in Revenue-Sharing Contracts

Lookup NU author(s): Dr Alexandros Karakostas, Professor Daniel ZizzoORCiD

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This is the authors' accepted manuscript of an article that has been published in its final definitive form by Wiley-Blackwell, 2017.

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Abstract

We present a simple principal-agent experiment in which the principals are allowed to choose between a revenue sharing, a bonus and a trust contract, to offer to an agent. Our findings suggest that a large majority of experimental subjects choose the revenue sharing contract. This choice not only turns out to be the most efficient but at the same time is fair. Overall, the distribution of earnings is only mildly skewed towards the principal. We conclude that under revenue sharing contracts concerns for fairness can go in hand with the use of monetary incentives.

Publication metadata

Author(s): Karakostas A, Sonntag A, Zizzo DJ

Publication type: Article

Publication status: Published

Journal: Scandinavian Journal of Economics

Year: 2017

Volume: 119

Issue: 4

Pages: 962-986

Print publication date: 01/10/2017

Online publication date: 26/06/2016

Acceptance date: 17/11/2015

Date deposited: 22/11/2015

ISSN (print): 0347-0520

ISSN (electronic): 1467-9442

Publisher: Wiley-Blackwell

URL: https://doi.org/10.1111/sjoe.12200

DOI: 10.1111/sjoe.12200

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