This paper studies how pay transparency affects organizations that reward employees based on their efforts (i.e., using "subjective performance evaluation"). First, we show that transparency triggers social comparisons that require the organization to pay its employees an "envy premium". This...

We analyze a repeated principal-agent setting in which the principal cares about the agent's verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes' rule. An exploitation...

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational...

According to economists, severe legal sanctions deter violations of the law. According to legal scholars, people may obey law backed by mild sanctions because of norm-activation. We experimentally investigate the effects of mild and severe legal sanctions in the provision of public goods. The...

Money illusion means that people behave differently when the same objective situation is represented in nominal or in real terms. To examine the behavioral impact of money illusion we studied the adjustment process of nominal prices after a fully anticipated negative nominal shock in an...