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Group vs. Individual Performance Pay When Workers Are Envious

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  • Dominique Demougin
  • Claude Fluet

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Abstract

We compare the wage costs of providing incentives through group versus individual bonus schemes. When workers are envious, either scheme may be the least cost one owing to the trade-off between the dissatisfaction with the prospect of unequal pay and the incentives it generates Nous comparons les coûts salariaux des rémunérations incitatives par bonus de groupe et par bonus individuels. Quand les travailleurs ont une propension à l'envie, l'un ou l'autre de ces modes de rémunération peut s'avérer le moins coûteux étant donné l'arbitrage entre l'insatisfaction associée aux inégalités salariales et les incitations à l'effort qu'elles engendrent.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-10.

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Date of creation: 01 Apr 2003
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Handle: RePEc:cir:cirwor:2003s-10

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Keywords: Bonus; Efficiency Wage; Envy; Fairness; Incentives; Bonus; salaire d'efficience; envie; équité; incitations;

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  1. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  2. Baker, G.P. & Jensen, M.C. & Murphy, K.J., 1988. "Compensation And Incentives: Practice Vs. Theory," Papers 88-05, Rochester, Business - Managerial Economics Research Center.
  3. Andrew E. Clark and Andrew J. Oswald, . "Satisfaction and Comparison Income," Economics Discussion Papers 419, University of Essex, Department of Economics.
  4. Mui, V.L., 1992. "The Economics of Envy," Papers 9306, Southern California - Department of Economics.
  5. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
  6. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  7. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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Cited by:
  1. David, Gill & Rebecca, Stone, 2012. "Desert and inequity aversion in teams," MPRA Paper 36864, University Library of Munich, Germany.
  2. Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 217, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Dominique Demougin & Claude Fluet & Carsten Helm, 2004. "Output and Wages with Inequality Averse Agents," CIRANO Working Papers 2004s-47, CIRANO.
  4. Bartling, Björn, 2011. "Relative performance or team evaluation? Optimal contracts for other-regarding agents," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 183-193, August.
  5. Abeler, Johannes & Altmann, Steffen & Kube, Sebastian & Wibral, Matthias, 2006. "Reciprocity and Payment Schemes: When Equality Is Unfair," IZA Discussion Papers 2500, Institute for the Study of Labor (IZA).
  6. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
  7. Bartling, Björn, 2004. "The Role of Investment Banks in IPOs and Incentives in Firms: Essays in Financial and Behavioral Economics," Munich Dissertations in Economics 2642, University of Munich, Department of Economics.
  8. Giuseppe De Marco & Giovanni Immordino, 2012. "Reciprocity in the Principal Multiple Agent Model," CSEF Working Papers 314, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  9. 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.
  10. Robert Dur & Amihai Glazer, 2004. "Optimal Incentive Contracts For a Worker Who Envies His Boss," CESifo Working Paper Series 1282, CESifo Group Munich.
  11. Grund, Christian & Przemeck, Judith, 2008. "Subjective Performance Evaluation and Inequality Aversion," IZA Discussion Papers 3382, Institute for the Study of Labor (IZA).
  12. Kragl, Jenny & Schmid, Julia, 2009. "The impact of envy on relational employment contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 766-779, November.

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