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Optimal Incentive Contracts when Workers envy their Boss
Dur, Robert; Glazer, Amihai - 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/10010325487
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Splitting Leagues
Kräkel, Matthias - 2003
Splitting leagues or tournaments seems to be puzzling when agents are homogeneous and splitting leads to a negative … tournaments (i.e., tournaments that are intertemporally linked), which also enhances incentives. …
Persistent link: https://www.econbiz.de/10010263059
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You Don't Always Get What You Pay For
Schnedler, Wendelin - 2007
Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...
Persistent link: https://www.econbiz.de/10011422168
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A game theoretical approach to road safety
Pedersen, Pål Andreas - 2001
A theoretical model is adopted in order to explain incentives and actual safety behaviour for drivers, pedestrians and other road users which do not utilise motorised vehicles. A road user's outcome is supposed to be dependent on her individual actions and cares decided upon by other individuals...
Persistent link: https://www.econbiz.de/10010290672
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The Optimality of Simple Contracts: Moral Hazard and Loss Aversion
Herweg, Fabian; Müller, Daniel - 2008
This paper extends the standard principal-agent model with moral hazard to allow for agents having reference- dependent preferences according to Köszegi and Rabin (2006, 2007). The main finding is that loss aversion leads to fairly simple contracts. In particular, when shifting the focus from...
Persistent link: https://www.econbiz.de/10010264926
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Envy minimization in the optimal tax context
Nishimura, Yukihiro - 2008
This paper examines the second-best tax policy to minimize envy in the sense of Chaudhuri (1986) and Diamantaras and … in the sense of Hemming and Keen (1983), with respect to the intensity of envy. Envy is then minimized in the most …
Persistent link: https://www.econbiz.de/10010290320
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The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents
Bartling, Björn; Siemens, Ferdinand von - 2006
. We offer an explanation for this observation based on envy among agents in an otherwise standard moral hazard model with …. The necessary compensation for expected envy renders incentive provision more expensive, which generates a tendency … towards flat-wage contracts. Moreover, empirical evidence suggests that social comparisons like envy are more pronounced among …
Persistent link: https://www.econbiz.de/10010427455
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Will there be a concentration of alikes? The impact of labor market structure on industry mix in the presence of product market shocks
Stahl, Konrad O.; Walz, Uwe - 2001
We analyze determinants of regional industry mix and focus especially on the influence of labor market characteristics. By combining a labor market pooling argument with an argument involving the cost of switching a worker from one firm to another, we show that in the presence of product market...
Persistent link: https://www.econbiz.de/10010295572
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From Public Monopsony to Competitive Market: More Efficiency but Higher Prices
Delfgaauw, Josse; Dur, Robert A.J. - 2002
This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimizing public firm. Workers in the economy are heterogeneous in their intrinsic motivation to work in the sector. In line with empirical findings, our model implies that...
Persistent link: https://www.econbiz.de/10010325044
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Incentives and Workers' Motivation in the Public Sector
Delfgaauw, Josse; Dur, Robert - 2004
Civil servants have a reputation for being lazy. However, people's personal experiences with civil servants frequently run counter to this stereotype. We develop a model of an economy in which workers differ in laziness and in public service motivation, and characterise optimal incentive...
Persistent link: https://www.econbiz.de/10010325258