Defensive behavior in principal-agent relationships

In this doctoral thesis, I explore how vague behavioural or legal standards affect agents’ decision-making. In particular, I test the extent to which agents engage in defensive behaviour in order to signal a professional qualification or in the face of vague legal standards. I measure defensive behaviour as the extent to which agents make less than efficient decisions for their principals in order to increase the probability of complying with the vague standard. This behaviour is of great interest as it is associated with vast costs to principals and to society as a whole.I find that defensive behaviour is not easily eroded and very sensitive to legal standard vagueness. Policy makers seeking to minimize defensive behaviour face a complex task in which the reduction of legal uncertainty or financial liability is not always an effective strategy. All three papers are based on economic experiments.