Incentives, Compensation, and Social Welfare
AbstractAlternative wage structures under conditions of moral hazard are analyzed from a social-welfare standpoint. It is argued that ex post equity judgements in an uncertainty context should incorporate a preference for "positive correlation" of utilities of different individuals. In the design of compensation schemes, this may give rise to a conflict between ex post equity objectives and the need to provide effort incentives: relative performance clauses in compensation schemes that are useful for providing incentives are undesirable from an ex post equity standpoint. Copyright 1987 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 54 (1987)
Issue (Month): 2 (April)
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