Market Competition and Lower Tier Incentives
AbstractThe relationship between competition and performancerelated pay has been analyzed in singleprincipalsingleagent models. While this approach yields good predictions for managerial pay schemes, the predictions fail to apply for employees at lower tiers of a firm's hierarchy. This paper describes a principal multi-agent model of incentive pay that analyzes the effect of changes in the competitiveness of markets on lower tier incentive payment schemes. The results explain why the payment schemes of agents located at low and mid tiers are less sensitive to changes in competition when aggregated firm data is used.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.
Volume (Year): 9 (2009)
Issue (Month): 1 (June)
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Web page: http://www.degruyter.com
Other versions of this item:
- Bernd Theilen, 2008. "Market Competition and Lower Tier Incentives," CESifo Working Paper Series 2453, CESifo Group Munich.
- Theilen, Bernd, 2007. "Market Competition and Lower Tier Incentives," Working Papers 2072/4055, Universitat Rovira i Virgili, Department of Economics.
- Theilen, Bernd, 2009. "Market Competition and Lower Tier Incentives," Working Papers 2072/15843, Universitat Rovira i Virgili, Department of Economics.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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