Alexandros Karakostas, Axel Sonntag, Daniel John Zizzo
Scandinavian Journal of Economics, 119(4), 962–986, doi: 10.1111/sjoe.12200
Publication year: 2017

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.