Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive...

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...

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 announced her beliefs that this subordinate contributes most to this task. We show, that those announced beliefs...

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 importance of fair and equal treatment of workers is at the heart of the debate in organizational management. In this regard, we study how reward mechanisms and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially...

Two alternative relative compensation schemes are compared with respect to total output that can be generated at a given sum of salaries. While the promotion regime guarantees that any salary increase is permanent, the premium system allows a reduction in the income of an agent to the base...

This paper studies a principal-agent relation in which the principal's private information about the agent's effort choice is more accurate than a noisy public performance measure. For some contingencies the optimal contract has to specify ex post inefficiencies in the form of inefficient...

The importance of fair and equal treatment of workers is at the heart of the debate in organizational management. In this regard, we study how reward mechanisms and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially...

We theoretically and experimentally analyze the role of verifiability and privacy in strategic performance feedback using a “one principal-two agent” context with real effort. We confirm the theoretical prediction that information transmission occurs only in verifiable feedbackmechanisms and...

We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a...