This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Inequity Version and Team Incentives

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Pedro Rey-Biel ()

Additional information is available for the following registered author(s):

Abstract

We study optimal contracts in a simple model where employees are averse to inequity as modelled by Fehr and Schmidt (1999). A "selfish" employer can profitably exploit such preferences among its employees by offering contracts which create inequity off-equilibrium and thus, they would leave employees feeling envy or guilt when they do not meet the employer's demands. Such contracts resemble team and relative performance contracts, and thus we derive conditions under which it may be beneficial to form work teams of employees with distributional concerns who were previously working individually. Similar results are obtained for status-seeking and efficiency concerns preferences.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://pareto.uab.es/wp/2007/67707.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 677.07.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 27
Date of creation: 15 Jan 2007
Date of revision:
Handle: RePEc:aub:autbar:677.07

Contact details of provider:
Postal: 08193, Bellaterra, Barcelona
Phone: 34 93 592 1203
Web page: http://pareto.uab.cat
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Xavier Vila).

Related research
Keywords: Inequity aversion; team incentives; behavioral contract theory;

Other versions of this item:

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. David Masclet, 2002. "Peer Pressure in Work Teams : The effects of Inequity Aversion," Post-Print halshs-00178476_v1, HAL. [Downloadable!]
  3. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September. [Downloadable!]
    Other versions:
  4. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45. [Downloadable!] (restricted)
  5. Fehr, Ernst & Schmidt, Klaus M., 2001. "Theories of Fairness and Reciprocity," Discussion Papers in Economics 14, University of Munich, Department of Economics. [Downloadable!]
  6. Andreoni, James & Miller, John H., 2008. "Analyzing Choice with Revealed Preference: Is Altruism Rational?," Handbook of Experimental Economics Results, Elsevier. [Downloadable!] (restricted)
    Other versions:
  7. Ernst Fehr & Klaus M. Schmidt, . "Fairness, Incentives, and Contractual Choices," IEW - Working Papers iewwp020, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  8. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  9. Antonio Cabrales & Antoni Calvó, 2002. "Social Preferences and Skill Segregation," Economics Working Papers 629, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  10. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September. [Downloadable!] (restricted)
  11. Dufwenberg, Martin & Kirchsteiger, Georg, 2000. "Reciprocity and wage undercutting," European Economic Review, Elsevier, vol. 44(4-6), pages 1069-1078, May. [Downloadable!] (restricted)
  12. Englmaier, Florian & Wambach, Achim, 2002. "Contracts and Inequity Aversion," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  13. Ma, Ching-to & Moore, John & Turnbull, Stephen, 1988. "Stopping agents from "cheating"," Journal of Economic Theory, Elsevier, vol. 46(2), pages 355-372, December. [Downloadable!] (restricted)
  14. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April. [Downloadable!] (restricted)
    Other versions:
  15. Dominique Demougin & Claude Fluet, 2003. "Inequity Aversion in Tournaments," Cahiers de recherche 0322, CIRPEE. [Downloadable!]
    Other versions:
  16. Robert Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts when Workers envy their Boss," Tinbergen Institute Discussion Papers 04-046/1, Tinbergen Institute, revised 13 Jun 2006. [Downloadable!]
  17. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  18. Ernst Fehr & Klaus M. Schmidt, . "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers iewwp075, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  19. Pedro Rey Biel & Steffen Huck, 2005. "Endogenous Leadership in Teams," Microeconomics 0506004, EconWPA. [Downloadable!]
    Other versions:
  20. Gary E. Bolton & Axel Ockenfels, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March. [Downloadable!] (restricted)
  21. repec:att:wimass:19199814 is not listed on IDEAS
  22. Mookherjee, Dilip, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 433-46, July. [Downloadable!] (restricted)
  23. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
  24. Jonas Agell, 2004. "Why are Small Firms Different? Managers' Views," Scandinavian Journal of Economics, Blackwell Publishing, vol. 106(3), pages 437-452, October. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Küpper, Hans-Ulrich & Sandner, Kai, 2008. "Differences in Social Preferences - Are They Profitable for the Firm?," Discussion Papers in Business Administration 2122, University of Munich, Munich School of Management. [Downloadable!]
  2. Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Papers in Economics 2027, University of Munich, Department of Economics. [Downloadable!]
  3. Robert Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts when Workers envy their Boss," Tinbergen Institute Discussion Papers 04-046/1, Tinbergen Institute, revised 13 Jun 2006. [Downloadable!]
  4. Jianpei Li, 2009. "Team production with inequity-averse agents," Portuguese Economic Journal, Springer, vol. 8(2), pages 119-136, August. [Downloadable!] (restricted)
  5. Alexander K. Koch & Eloïc Peyrache, 2008. "Aligning Ambition and Incentives," Economics Working Papers 2008-16, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
  6. Robert A. J. Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts For a Worker Who Envies His Boss," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  7. Björn Bartling & Ferdinand von Siemens, 2006. "The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents," Discussion Papers 115, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  8. Sabrina Teyssier, 2007. "Optimal Group Incentives with Social Preferences and Self-Selection," Working Papers 0710, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  9. Sabrina Teyssier, 2007. "Optimal Group Incentives with Social Preferences and Self-Selection," Post-Print halshs-00144901_v1, HAL. [Downloadable!]
  10. Sandner, Kai, 2008. "Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies," Discussion Papers in Business Administration 2112, University of Munich, Munich School of Management. [Downloadable!]
  11. Bartling, Björn & Siemens, Ferdinand von, 2006. "The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents," Discussion Papers in Economics 913, University of Munich, Department of Economics. [Downloadable!]
  12. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2008. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," Discussion Papers 08-06, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? To receive notification of recent additions to the database, subscribe to the free NEP reports.

This page was last updated on 2009-11-24.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.