Envy and Compassion in Tournaments
AbstractMany experiments and field studies indicate that most individuals are not purely motivated by material self-interest but also care about the well being of others. In this paper, we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse agents exert higher efforts than purely self-interested agents for a given prize structure. Contrary to standard tournament theory, first-best efforts cannot be implemented when prizes are endogenous. Furthermore, the choice between vertical and lateral promotions is examined and it is shown that inequity costs have to be traded off against losses in human capital. Copyright Blackwell Publishing 2005.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 14 (2005)
Issue (Month): 1 (03)
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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/
Other versions of this item:
- M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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