cultural activities. One possibility is that the payment scheme chosen reflects an attempt on the
part of managers to minimize transaction costs.
From principal-agent theory, it is known that, in
the absence of appropriate monitoring, piece rates
allow the agent to shirk in terms of quality,
whereas time rates encourage shirking in terms of
. quantity (Stiglitz, 1975; Lucas, 1979 ). Thus, Datta
. et al. (1986) found that, in practice, one would
. observe less wage contracts (a) the greater the
. labor-intensity of the activity; (b) the harder it is
. to detect shirking; and (c) the greater the agent’s
marginal gain from shirking. Fundamentally, it is
a moral hazard problem and one solution is that,
in choosing a payment method, the principal seeks
. to minimize agent (employee) payoffs while providing adequate incentives to avoid shirking
(Braverman and Stiglitz, 1986; Bardhan and Singh,
.
1987) .