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Optimal Incentive Contracts when Workers envy their Boss

Dur, Robert; Glazer, Amihai - Tinbergen Institute - 2004

A worker's utility may increase with his income, but envy can make his utility decline with his employer's income. This … article uses a principal-agent model to study profit-maximizing contracts when a worker envies his employer. Envy tightens the … applications of our theoretical work: envy can explain why a lower-level worker is awarded stock options, why incentive pay is …

Persistent link: https://www.econbiz.de/10005136986

The Effect of Noise in a Performance Measure on Work Motivation

Sloof, Randolph; Praag, C. Mirjam van - Tinbergen Institute - 2008

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is...

Persistent link: https://www.econbiz.de/10005144498

Wage Structure and the Incentive Effect of Promotions

Herpen, Marco van; Cools, Kees; Praag, Mirjam van - Tinbergen Institute - 2004

This paper studies wage structure characteristics and their incentive effects within one firm. Based on personnel records and an employee survey, we provide evidence that wages are attached to jobs and that promotions play a dominant role as a wage determinant. We furthermore show that a...

Persistent link: https://www.econbiz.de/10005144477

The Degradation of Distorted Performance Measures

Sloof, Randolph; Praag, Mirjam van - Tinbergen Institute - 2008

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

Persistent link: https://www.econbiz.de/10005137095

Self-Selection and the Power of Incentive Schemes: An Experimental Study

Vyrastekova, Jana; Onderstal, Sander; Koning, Pierre - Tinbergen Institute - 2010

choose between (low-powered) team incentives and (high-powered) individual incentives. We observe that subjects exhibiting … high trust or reciprocity in the trust game are more likely to choose team incentives. When exposed to individual … incentives, workers who chose team incentives perform worse if both the unobservable interdependency between workers and their …

Persistent link: https://www.econbiz.de/10008838641

Where To Go? Workers' Reasons to Quit and Intra- versus Interindustry Job Mobility

Delfgaauw, Josse - Tinbergen Institute - 2005

This paper employs survey data on the reasons to quit of Dutch job changers who entered or left a public sector job in 2001. We show that workers' reasons to quit their public sector job influence their decision to stay in or leave their industry of employment. A bad experience with, for...

Persistent link: https://www.econbiz.de/10005137349

Performance Measurement, Expectancy and Agency Theory: An Experimental Study

Sloof, Randolph; Praag, Mirjam van - Tinbergen Institute - 2007

Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. This model implies that, for a given compensation scheme, the agent’s optimal effort is unrelated to the amount of noise in the performance measure. In contrast,...

Persistent link: https://www.econbiz.de/10005209530

Disciplining and Screening Top Executives

Martinez, Silvia Dominguez; Swank, Otto H.; Visser, Bauke - Tinbergen Institute - 2006

Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers...

Persistent link: https://www.econbiz.de/10005016271

Entrepreneurial Moral Hazard in Income Insurance

Ejrnaes, Mette; Hochguertel, Stefan - Tinbergen Institute - 2008

We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a...

Persistent link: https://www.econbiz.de/10005144470

Insurance and Information: Firms as a Commitment Device

Bovenberg, A.L.; Teulings, C.N. - Tinbergen Institute - 2001

We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently risk averse and the firm can base its incentive payments on good...

Persistent link: https://www.econbiz.de/10005144574