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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

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

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

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

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

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

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

Incentives and workers' motivation in the public sector

Delfgaauw, Josse; Dur, Robert - 2004

Civil servants have a bad reputation of being lazy. However, citizens' personal experiences with civil servants appear to be significantly better. We develop a model of an economy in which workers differ in laziness and in public service motivation, and characterise optimal incentive contracts...

Persistent link: https://www.econbiz.de/10010261219

The Effect of Search Frictions on Wages

van den Berg, Gerard J.; van Vuuren, Aico - 2003

Labor market theories allowing for search frictions make marked predictions on the effect of the degree of frictions on wages. Often, the effect is predicted to be negative. Despite the popularity of these theories, this has never been tested. We perform tests with matched worker-firm data. The...

Persistent link: https://www.econbiz.de/10010261542

Candidate Quality

Takalo, Tuomas; Poutvaara, Panu - 2004

We analyze the topical question of how the compensation of elected politicians affects the set of citizens choosing to run. To this end, we develop a sparse and tractable citizen-candidate model of representative democracy with ability differences, informative campaigning and political parties....

Persistent link: https://www.econbiz.de/10010261945