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Emotions and Compensation

Author

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  • Matthias Kräkel

Abstract

I introduce a concept of emotions that emerge when workers evaluate their individual performances or when they compare their own performances with those of co-workers. I analyze the interplay of emotions and incentives by focusing on a certain scheme of worker compensation that is frequently used in practice: a piece-rate system. My findings show that standard results of compensation theory significantly change when introducing emotions. I identify certain conditions under which emotions lead to additional incentives and under which the employer benefits from emotional workers, and I sketch the impact of risk aversion on the interplay of emotions and incentives, and the influence of a worker’s success probability on the intensity of his emotions.

Suggested Citation

  • Matthias Kräkel, 2008. "Emotions and Compensation," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 60(2), pages 145-159, April.
    • Handle: RePEc:sbr:abstra:v:60:y:2008:i:2:p:145-159
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    Citations

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    Cited by:

    1. Kräkel, Matthias, 2016. "Peer effects and incentives," Games and Economic Behavior, Elsevier, vol. 97(C), pages 120-127.
    2. Ying Yang & Niladri Syam & James Hess, 2013. "Thrill of victory and agony of defeat: Emotional rewards and sales force compensation," Quantitative Marketing and Economics (QME), Springer, vol. 11(4), pages 379-402, December.

    More about this item

    Keywords

    Emotions; Incentives; Piece Rates; Worker Compensation;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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