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Inequity Version and Team Incentives Author info | Abstract | Publisher info | Download info | Related research | Statistics Pedro Rey-Biel ()
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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.
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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.
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Length: 27
Date of creation: 15 Jan 2007Date of revision:
Handle: RePEc:aub:autbar:677.07Contact details of provider: Postal: 08193, Bellaterra, Barcelona Phone: 34 93 592 1203 Web page: http://pareto.uab.cat More information through EDIRC
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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
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