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Team Incentives in Relational Employment Contracts

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Author Info
Ola Kvaløy (University of Stavanger)
Trond E. Olsen (Norwegian School of Economics and Business Administration)
Abstract

The article analyzes conditions for implementing incentive schemes based on, respectively, joint, relative, and independent performance in a relational contract between a principal and a team of two interacting agents. A main result is that the optimal incentive regime depends crucially on the productivity of the agents. This occurs because agents' productivities affect the principal's temptation to renege on the relational contract. The analysis suggests that we will see a higher frequency of relative performance evaluationand schemes that lie close to independent performance evaluationas we move from low-productive to high-productive environments.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JOLE240105
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 24 (2006)
Issue (Month): 1 (January)
Pages: 139-170
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:ucp:jlabec:v:24:y:2006:i:1:p:139-170

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  1. Bouwe R. Dijkstra & Dirk T.G. Rübbelke, 2007. "Group Rewards and Individual Sanctions in Environmental Policy," Working Papers 2007.44, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  2. Kvaløy, Ola & Olsen, Trond E., 2006. "The rise of individual performance pay," Discussion Papers 2006/22, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  3. Ola Kvaloy & Trond Olsen, 2007. "The Rise of Individual Performance Pay," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  4. Kvaløy, Ola & Olsen, Trond E., 2007. "Relative Performance Evaluation, Agent Hold-Up and Firm Organization," Discussion Papers 2007/26, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  5. Kvaløy, Ola & Olsen, Trond E., 2007. "Cooperation in knowledge-intensive firms," Discussion Papers 2007/27, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
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This page was last updated on 2008-12-21.

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