The simple trade-off between incentive and risk, which is crucial to the agency problem, is not a sufficient explanation for the ineffectiveness of a specific output-related pay such as the contract system adopted in the US iron and steel industry during the second half of the...

This paper examines changes in the motivation of physicians at work since the start of the salary reforms in 2008. These reforms included a shift from a fixed salary system to performance-based remuneration and an overall increase in salaries. The data of six surveys of health workers from...

Awards in the form of orders, medals, decorations and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit and profit-oriented firms. Nevertheless, economists have disregarded this kind of non-material extrinsic incentive. The demand for awards relies on an...

Incentives theory suggests that compensation schemes should be analyzed along two dimensions: controllability and congruence. Most schemes cannot satisfy both criteria at once. EVA bonus schemes, a major managerial innovation of the 90's, favor the congruence criterion. This paper questions ist...

By enriching a principal-agent model it is shown that the introduction of monetary incentives may reduce an agent?s motivation. In a first step, we allow for the possibility that some agents stick to unverifiable agreements. The larger the fraction of reliable agents, the lower powered will then...

We experimentally investigate a simple version of Holmström?s career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents? unknown ability and the effort they choose. Before making second-period wage offers firms are informed...

This paper tests two hypotheses from the theory of elimination tournaments: (i) that uneven tournaments, where the contestants are ex ante heterogeneous, entail lower effort exertion; this is a prediction from agency theory that has not been tested empirically before; and (ii) whether incentives...

Variable pay not only creates a link between pay and performance but may also help firms in attracting the more productive employees (Lazear 1986, 2000). However, due to lack of natural data, empirical analyses of the relative importance of the selection and incentive effects of pay schemes are...

This study uses panel data describing about 6,500 employees in a large international company to study the incentive effects of performance related pay. The company uses two performance related remuneration mechanisms. One is an individual "surprise" bonus payment. The other is a more structured...

Recent thinking has emphasized the importance of consistency in a firm?s compensation policy. By starting from Williamson?s ideas about idiosyncratic exchange, this view can be supplied with some theoretical foundation. At the same time, the consistency view can be applied to a number of...