2021/07/13 by Stephan Leitner, Leitner, Stephan, Friederike Wall +1
Decision Sciences · Economics, Econometrics and Finance · Social Sciences · #90B50 #91B69 #91B70 #Complex Systems and Time Series Analysis #Experimental Behavioral Economics Studies #FOS: Economics and business #Game Theory and Applications #General Economics (econ.GN)
paper · pdf · doi:10.48550/arxiv.2107.06002
openalex publication_date 2021/07/13 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
The hidden-action model provides an optimal sharing rule for situations in\nwhich a principal assigns a task to an agent who makes an effort to carry out\nthe task assigned to him. However, the principal can only observe the task\noutcome but not the agent's actual action, which is why the sharing rule can\nonly be based on the outcome. The hidden-action model builds on somewhat\nidealized assumptions about the principal's and the agent's capabilities\nrelated to information access. We propose an agent-based model that relaxes\nsome of these assumptions. Our analysis lays particular focus on the\nmicro-level dynamics triggered by limited access to information. For the\nprincipal's sphere, we identify the so-called Sisyphus effect that explains why\nthe sharing rule that provides the agent with incentives to take optimal action\nis difficult to achieve if the information is limited, and we identify factors\nthat moderate this effect. In addition, we analyze the behavioral dynamics in\nthe agent's sphere. We show that the agent might make even more of an effort\nthan optimal under unlimited access to information, which we refer to as excess\neffort. Interestingly, the principal can control the probability of making an\nexcess effort via the incentive mechanism. However, how much excess effort the\nagent finally makes is out of the principal's direct control.\n