Author: Albertus Johannes DurPublisher:
ISBN:
Category :
Languages : en
Pages : 29
Book Description
Optimal Incentive Contracts when Workers Envy Their Boss
Author: Albertus Johannes DurPublisher:
ISBN:
Category :
Languages : en
Pages : 29
Book Description
Optimal Incentive Contracts when Workers Envy Their Boss
Author: Robert A. J. DurOptimal Incentive Contracts for a Worker who Envies His Boss
Author: Robert A. J. DurOptimal Incentive Contracts For a Worker Who Envies His Boss
Author: Optimal Incentive Contracts in the Presence of Career Concerns
Author: Robert GibbonsPublisher:
ISBN:
Category : Compensation management
Languages : en
Pages : 70
Book Description
This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a worker's current output to update its belief about the worker's ability and competition then forces future wages (or wage contracts) to reflect these updated beliefs. Career concerns are stronger when a worker is further from retirement, because a longer prospective career increases the return to changing the market's belief. In the presence of career concerns, the optimal compensation contract optimizes total incentives -- the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract. Thus, the explicit incentives from the optimal compensation contract should be strongest when a worker is close to retirement. We find empirical support for this prediction in the relation between chief-executive compensation and stock-market performance.
Optimal Contracts When a Worker Envies His Boss
Author: Robert DurPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
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 worker's participation constraint and so calls for higher pay and/or a softer effort requirement. Moreover, a firm with an envious worker can benefit from profit sharing, even when the worker's effort is fully contractible. We discuss several applications of our theoretical work: envy can explain why a lower-level worker is awarded stock options, why incentive pay is lower in nonprofit organizations, and how governmental production of a good can be cheaper than private production.
Optimal Contracts When Agents Envy Each Other
Author: Anjan V. ThakorPublisher:
ISBN:
Category :
Languages : en
Pages : 51
Book Description
We examine the characteristics of endogenously-determined optimal incentive contracts for agents who envy each other and work for a risk-neutral (non-envious) principal. Envy makes each agent care not only about absolute consumption but also about relative consumption. Incentive contracts in this setting display properties strikingly different from those associated with optimal contracts in standard principal-agent theory. We derive results that help explain some of the discrepancies between the predictions of principal-agent theory and the stylized facts about real-world contracts.
The Intensity of Incentives in Firms and Markets
Author: Björn BartlingPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
While most market transactions are subject to strong incentives, transactions within firms are often not explicitly incentivized. This paper offers an explanation for this observation based on the assumption that agents are envious and suffer utility losses if others receive higher wages. We analyze the impact of envy on optimal incentive contracts in a general moral hazard model and isolate the countervailing effects of envy on the costs of providing incentives. We show that envy creates a tendency towards flat-wage contracts if agents are risk-averse and there is no limited liability. Empirical evidence suggests that social comparisons are more pronounced among employees within firms than among individuals that interact in markets. Flat-wage contracts are then more likely to be optimal in firms.
Envy at Work and in Organizations
Author: Richard H. SmithPublisher: Oxford University Press
ISBN: 0190228059
Category : Business & Economics
Languages : en
Pages : 545
Book Description
Competition for resources, recognition, and favorable outcomes are all facts of life in professional settings. When one falls short in comparison to colleagues or subordinates, feelings of envy may arise. Fueled by inferiority, hostility and resentment, envy is both ubiquitous and painful. Will employees "level up" with their envied counterpart through self-improvement behaviors? Or will they "level down" through sabotage and undermine their peers and subordinates in the process?Envy at Work and in Organizations aims to determine the direction workplace envy takes. Contributors are drawn from many countries and from an extraordinary range of disciplines to share their insight: experimental social psychologists offer insights from lab studies, psychoanalytical scholars emphasize unconscious processes, organizational psychologists describe groundbreaking research from disparate work settings, and cross-cultural psychologists reveal the variety of ways that envy can emerge as a function of cultures as wide-ranging as the Japanese school system to the fascinating structure of the Israeli kibbutzim. Work and insight from behavioral economists and organizational consultants is also included.Envy at Work and in Organizations is a valuable, distinctive resource for both scholars and practitioners looking to grasp the nature of envy. Edited by Richard H. Smith, Ugo Merlone, and Michelle K. Duffy, this volume will help readers understand the factors that help individuals and organizations overcome envy and transform it into something positive to promote workplace well-being.
Psychology, Rationality and Economic Behaviour
Author: B. AgarwalPublisher: Springer
ISBN: 0230522343
Category : Business & Economics
Languages : en
Pages : 281
Book Description
Economics has paid little attention to the psychology of economic behaviour, leading to somewhat simplistic assumptions about human nature. The psychological aspects have typically been reduced to standard utility theory, based on a narrow conception of rationality and self-interest maximization. The contributions in this volume, some focused on analytical models and methodology, others on laboratory and field experiments, challenge these assumptions, and provide novel and complex understandings of human motivation and economic decision-making. With a pioneering introduction by the book's two editors, this volume brings together exciting contributions to a field that is rapidly growing in influence and reach.