The paper by Falk and Kosfeld examines the hidden costs of control in a principal-agent relationship, where the principal can enforce a minimum performance requirement before the agent chooses a productive activity. The study uses an experimental principal-agent game to analyze how agents perceive and respond to the principal's controlling decision. Key findings include: 1. **Hidden Costs of Control**: Agents reduce their performance in response to the principal's controlling decision, leading to lower overall payoffs for the principal. The effect of control on the principal's payoff is nonmonotonic, with lower levels of control resulting in lower profits, but higher levels eventually breaking even. 2. **Agent Perceptions**: Agents perceive control as a signal of distrust and a limitation of their choice autonomy. This perception is positively correlated with their behavior, leading to lower performance when controlled. 3. **Principals' Behavior**: Most principals choose to trust their agents rather than control them, anticipating the adverse effects of control. Principals who control have lower expectations about agent performance compared to those who trust. 4. **Heterogeneity Among Agents**: There is significant heterogeneity among agents, with a majority reacting negatively to control. These agents choose lower levels of performance when controlled, while a smaller group reacts positively or neutrally. 5. **Robustness of Results**: The negative impact of control is robust across different treatments, including exogenous control and gift-exchange scenarios. Agents' behavior is not significantly affected by the elicitation method used. 6. **Psychological and Economic Implications**: The study highlights the psychological and economic implications of control, suggesting that explicit incentives and control mechanisms can harm more than help in employment contracts and workplace environments. The paper contributes to the literature on incomplete contracts and the interaction of psychological and economic incentives, providing a behavioral rationale for the deliberate incompleteness of many real-life contracts.The paper by Falk and Kosfeld examines the hidden costs of control in a principal-agent relationship, where the principal can enforce a minimum performance requirement before the agent chooses a productive activity. The study uses an experimental principal-agent game to analyze how agents perceive and respond to the principal's controlling decision. Key findings include: 1. **Hidden Costs of Control**: Agents reduce their performance in response to the principal's controlling decision, leading to lower overall payoffs for the principal. The effect of control on the principal's payoff is nonmonotonic, with lower levels of control resulting in lower profits, but higher levels eventually breaking even. 2. **Agent Perceptions**: Agents perceive control as a signal of distrust and a limitation of their choice autonomy. This perception is positively correlated with their behavior, leading to lower performance when controlled. 3. **Principals' Behavior**: Most principals choose to trust their agents rather than control them, anticipating the adverse effects of control. Principals who control have lower expectations about agent performance compared to those who trust. 4. **Heterogeneity Among Agents**: There is significant heterogeneity among agents, with a majority reacting negatively to control. These agents choose lower levels of performance when controlled, while a smaller group reacts positively or neutrally. 5. **Robustness of Results**: The negative impact of control is robust across different treatments, including exogenous control and gift-exchange scenarios. Agents' behavior is not significantly affected by the elicitation method used. 6. **Psychological and Economic Implications**: The study highlights the psychological and economic implications of control, suggesting that explicit incentives and control mechanisms can harm more than help in employment contracts and workplace environments. The paper contributes to the literature on incomplete contracts and the interaction of psychological and economic incentives, providing a behavioral rationale for the deliberate incompleteness of many real-life contracts.