Get access

Subjective Performance Evaluations and Reciprocity in Principal–Agent Relations

Authors


  • Financial support by METEOR (Maastricht University) and the Department of Economics at the University of Copenhagen is gratefully acknowledged. Furthermore, we are grateful to Charles Bellemare, Daniel le Maire, and seminar participants at the University of Copenhagen and Université Laval for very helpful comments on an earlier version of this paper. Lastly, we are grateful to Ralph Ferré Koch for programming the experimental software used in this research project. All remaining errors are ours.

Abstract

We conduct a laboratory experiment with agents working on, and principals benefiting from, a real effort task in which the agents' performance can only be evaluated subjectively. Principals give subjective performance feedback to agents, and agents have an opportunity to sanction principals. In contrast to existing models of reciprocity, we find that agents tend to sanction whenever the feedback of principals is below their subjective self-evaluations even if agents' pay-offs are independent of it. In turn, principals provide more positive feedback (relative to their actual performance assessment of the agent) if this does not affect their pay-off.

Ancillary