We present a sorting model in which workers with greater ability and greater risk tolerance move into performance pay jobs and contrast it with the classic agency model of performance pay. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our sorting model....

Profit sharing generates conflicting changes in the relationship between supervisors and workers. It may increase cooperation and helping effort. At the same time it can increase direct monitoring and pressure by the supervisor, and mutual monitoring and peer pressure from other workers that is...

The 1/n problem potentially limits the effectiveness of profit sharing in motivating workers. While the economic literature suggests that reciprocity can mitigate this problem, it remains silent on the optimal degree of reciprocity. We present a representative model demonstrating that...

A government authority regulates an upstream monopolist only if there is a sufficient welfare increase to justify doing so. A downstream firm strategically increases costs in order to force regulation upstream. The decision to regulate increases profit downstream, reduces profit upstream and...

Theory presents two channels through which profit sharing can cause workers to increase their coworkers' productivity: greater cooperation and increased peer pressure. This paper argues that these generate opposite influences on coworker relations, and that which dominates varies according to...

Using establishment data from the Australian Workplace Industrial Relations Survey, this paper estimates the determinants of performance appraisal systems. The results indicate that performance appraisal is associated with workers having shorter expected tenure and greater influence over...