Effects of Competitive Pressure on Principal-Agent Relationships: an Experimental Investigation
Abstract
This paper analyzes the effects of competitive pressure among agents on principal-agent relationships. We examine both situations where competitive pressure is valuable for the principal from a theoretical perspective and situations where it is not. Our results show that competitive pressure significantly affects both effort levels and surplus sharing in principal-agent relationships. In particular, even if competitive pressure should not have any effect from a theoretical point of view, effort levels significantly increase and surplus sharing is significantly shifted towards the principal. This suggests that the perception of what is a 'fair' contract offer shifts under situations of competitive pressure. However, within a given treatment, agents' effort choices are influenced by reciprocal considerations both in settings with competitive pressure and without.
Date Issued
2007-12
Publication Type
Article
Language(s)
en
Additional Credits
Journal
Journal of management accounting research
Publisher
American Accounting Association
ISSN
1558-8033
Access(Rights)
restricted