This paper studies the role played by the social norms of working hours in a household labor- leisure and fertility decision model. We suppose that social norms enforce workers not to deviate from the ideal level of working hours, which depends on past and current observations of working hours...

We analyze a simple task-assignment model in which a principal assigns a task to one of two agents depending on the state. If the agents have standard concave utility, the principal assigns the task to an agent with the highest productivity in each state. In contrast, if the agents are loss...

We investigate moral-hazard problems with limited liability where agents have expectation-based reference-dependent preferences. We show that stochastic compensation for low performance can be optimal. Because of loss aversion, the agents have first-order risk aversion to wage uncertainty. This...

We study the effects of peer pressure on incentives. To this end, we extend a multiagent model with moral hazard and limited liability by introducing a peer pressure function. We show that the optimal incentive for the less productive agent is more high powered than that for the more productive...

We study the effects of peer pressure on the incentives of riskaverse agents. We define the peer pressure function and then assume that each agent feels peer pressure not only when his effort level is below the standard level, but also when it is above that level. We also suppose that agents are...

We analyze the effect of peer pressure on the incentives offered by a principal, supposing that there are two agents who make costly efforts to produce a single output. The agents are rewarded by the principal, contingent on the realized output. In addition to this pecuniary payoff, we consider...