Cognitive dissonance and the overtaking anomaly: Psychology in the principal-agent relationship
We propose that the concept of cognitive dissonance contributes to the explanation of the regularity that wages grow faster than productivity. Cognitive dissonance is the tendency of a person to engage in self-justification after a decision. We show that a consequence of this tendency is that agents prefer increasing sequences of surplus over their career. This is achieved by paying wages less than productivity early in the career and more than productivity later. We refer to this as the overtaking anomaly. We distinguish the cognitive dissonance explanation from other explanations of the overtaking anomaly by identifying their divergent implications.
Year of publication: |
2009
|
---|---|
Authors: | Smith, John |
Published in: |
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics). - Elsevier, ISSN 2214-8043. - Vol. 38.2009, 4, p. 684-690
|
Publisher: |
Elsevier |
Keywords: | Increasing wages Cognitive dissonance Overtaking anomaly Behavioral economics |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Smith, John, (1743)
-
Smith, John, (1744)
-
Towards an understanding of the endogenous nature of identity in games
Bezrukova, Katerina, (2008)
- More ...