Does business abilities of the manager increase efficiency of incentive

In this work, we intend to answer the question if ability of the manager increase efficiency of incentive. We first create a mathematical model on a principal-agent relationship. The assumption is to consider the performance of the manager as a source of legitimacy which is a factor that will change the tolerance to inequity of the agent. Two main prediction of this model are: 1) if the performance of the manager is lowers than the performance of the agent, every thing held equal the agent will decrease his effort. 2) if the performance of the manager is lowers than the performance of the agent, he will have to increase the piece rate he proposes in the contract to limit the negative impact of his illegitimacy on the agent effort. Then, we design and make an pilot experiment that attempt to observe in lab the first prediction of the model. Our preliminary results with a session of 14 participant are not statistically significant. However, they go in the direction of the theoretical model and could inspire us to perform other session.