We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral … incentives and become superior when there are also fair-minded players. These predictions are strongly supported by the results …

provision of informal incentives. Developing a model of a long-term employment relationship, I show that generous upfront wages … incentives promising a bonus in exchange for effort are more effective. Then, a longer remaining time horizon increases the … employer’s commitment. Generally, direct and reciprocity-based incentives reinforce each other and should thus optimally be …

rents can be used to provide incentives. Preferences for reciprocity still affect the structure of an employment … interaction. Therefore, reciprocity-based and repeated-game incentives are dynamic substitutes, but complements at any given point …

bargaining, leading to stronger effort incentives and higher output. However, it also reduces incentives for labor market …