Positive Self-image and Incentives in Organisations
AbstractThis paper investigates the implications of workers' mistaken beliefs about their abilities on incentives in organisations. It shows that if effort is observable, then an agent's mistaken beliefs about his own ability are favourable to the principal. However, when effort is unobservable an agent's mistaken beliefs about his own ability can be either favourable or unfavourable to the principal. The article provides conditions under which an agent's overestimation about his own ability is favourable to the principal when effort is unobservable. The article shows that workers' mistaken beliefs about their co-workers' abilities make interdependent incentive schemes more attractive to firms than individualistic ones. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2008.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 118 (2008)
Issue (Month): 531 (08)
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Other versions of this item:
- Santos-Pinto, Luís, 2003. "Positive self-image and incentives in organizations," MPRA Paper 3141, University Library of Munich, Germany, revised 14 Feb 2007.
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
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