We analyze a model in which agents exert effort to create innovations within an organization. When payments are infeasible, the decision on the implementation of a proposal is shown to be made by simple monotonic decision rules. Then we look for optimal rules in several contexts. A trade-off...

If a manager stays in office for a long time he will have learned much about his subordinates. Thus competition among them will be weakened as the manager has made up his mind who is suited best for which position. With a new manager the ``rat race'' for favorable tasks is restarted leading...

We examine the question whether a decision should be delegated to a subordinate and whether this is done efficiently. We illustrate that delegation is useful for several reasons. First, it serves to test agents with unknown ability. Then, it may improve their motivation when carrying out...

We provide an explanation for peer pressure in teams based on inequity aversion. Analyzinga two-period model with two agents, we find that the effect of inequity aversion stronglydepends on the information structure. When contributions are unobservable, agents act as ifthey were purely selfish....

A theory of responsibility is provided in a simple model where agents care for their career prospects. First, two agents with uncertain abilities work on a task. Second, a principal decides to promote one of them. Three types of equilibria occur. One in which no agent is responsible for the task...

It is often claimed that (i) managers work too hard on operational issues and do not spend enough effort on strategic activities and (ii) something can be done about this by introducing nonfinancial performance measures as for instance with a balanced scorecard. We give an explanation for both...

In an asymmetric tournament model with endogenous risk choice by the agents it is shown that equilibrium efforts decrease (increase) with risk if abilities are sufficiently similar (different). Risk also affects winning probabilities. The interaction of both effects is analyzed.

We derive a natural definition of responsibility in a formal model where employees care for their career prospects: A superior holds a subordinate responsible for a task, when she announces her beliefs that this subordinate contributes most to this task. We show, that those announced beliefs...

The impact of wage increases on job satisfaction are explored. First, it is empirically established that current job satisfaction rises with absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and...

The impact of wage increases on job satisfaction is explored. First, it is empirically confirmed that current job satisfaction rises with the absolute wage level as well as with wage increases. Second, a basic job satisfaction function is constructed based on the empirical results, and...