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Turning relative deprivation into a performance incentive device

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  • Oded Stark
  • Grzegorz Kosiorowski

Abstract

The inclination of individuals to improve their performance when it lags behind that of others with whom they naturally compare themselves can be harnessed to optimize the individuals’ effort in work and study. In a given set of individuals, we characterize each individual by his relative deprivation, which measures by how much the individual trails behind other individuals in the set doing better than him. We seek to divide the set into an exogenously predetermined number of groups (subsets) in order to maximize aggregate relative deprivation, so as to ensure that the incentive for the individuals to work or study harder because of unfavorable comparison with others is at its strongest. We find that the solution to this problem depends only on the individuals’ ordinally measured levels of performance independent of the performance of comparators.

Suggested Citation

  • Oded Stark & Grzegorz Kosiorowski, 2021. "Turning relative deprivation into a performance incentive device," The Journal of Mathematical Sociology, Taylor & Francis Journals, vol. 45(1), pages 22-36, January.
    • Handle: RePEc:taf:gmasxx:v:45:y:2021:i:1:p:22-36
    DOI: 10.1080/0022250X.2020.1787407
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    References listed on IDEAS

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    1. Azmat, Ghazala & Iriberri, Nagore, 2010. "The importance of relative performance feedback information: Evidence from a natural experiment using high school students," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 435-452, August.
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    5. Oded Stark & Walter Hyll, 2011. "On the Economic Architecture of the Workplace: Repercussions of Social Comparisons among Heterogeneous Workers," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 349-375.
    6. Oded Stark, 1990. "A Relative Deprivation Approach to Performance Incentives in Career Games and Other Contests," Kyklos, Wiley Blackwell, vol. 43(2), pages 211-227, May.
    7. Stark, Oded & Bielawski, Jakub & Falniowski, Fryderyk, 2017. "A class of proximity-sensitive measures of relative deprivation," Economics Letters, Elsevier, vol. 160(C), pages 105-110.
    8. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
    9. Oded STARK & Wiktor Budzinski, 2019. "Repercussions of Negatively Selective Migration for the Behavior of Non-Migrants when Preferences Are Social," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 85(2), pages 165-179, June.
    10. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2010. "Social Incentives in the Workplace," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 417-458.
    11. Alain Cohn & Ernst Fehr & Benedikt Herrmann & Frédéric Schneider, 2014. "Social Comparison And Effort Provision: Evidence From A Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 877-898, August.
    12. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 681-704.
    13. Stark, Oded, 1990. "A Relative Deprivation Approach to Performance Incentives in Career Games and Other Contests," Kyklos, Wiley Blackwell, vol. 43(2), pages 211-227.
    14. Shlomo Yitzhaki, 1979. "Relative Deprivation and the Gini Coefficient," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(2), pages 321-324.
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    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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