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Project Choice and Social Image Concerns

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Employees' desire to impress their employer may lead to suboptimal choices, such as performing tasks that are out of their depth. In this paper, we formalise this intuition in a principal-agent setting and we experimentally analyse its practical relevance. Through a theoretical model, we show that an agent's desire to appear competent to their employer (social image concerns), can result in inefficient project selection. We test this prediction using a laboratory experiment and find that social image concerns increase the likelihood of suboptimal project choices when agents are male and the principal-agent interaction is not anonymous. Our findings have implications for organisational design.

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UB Economics – Working Papers, 2025, E25/484

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Project Choice and Social Image Concerns