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Abstract

Much of the existing theory of incentives describes a static relationship that lasts for just one transaction. This static assumption is not only unrealistic, but the resulting predictions appear to be at odds with many work organizations. The current paper introduces possible long-term interaction among agents, and studies how the design of explicit incentives and work organizations can exploit, and interact with, the implicit incentives generated by the repeated interaction of the agents. The optimal incentive scheme is shown to display observed features of the increasingly popular "teams," such as the use of low-powered, group incentives.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.3.525
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 3 (June)
Pages: 525-541

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:3:p:525-541

Note: DOI: 10.1257/aer.91.3.525
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Find related papers by JEL classification:

• M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
• D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
• J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
• J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

References

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