%0 Journal Article
%T The Monotonicity Puzzle: An Experimental Investigation of Incentive Structures
%A Jeannette Brosig
%A Christian Lukas
%A Thomas Riechmann
%J BuR : Business Research
%D 2010
%I Verband der Hochschullehrer f¨¹r Betriebswirtschaft e.V.
%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.
%K experimental agency
%K non-monotone contracts
%U http://www.business-research.org/2010/1/accounting/2498/hihrig1274174422.33.pdf