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Prizes versus Wages with Envy and Pride

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Author Info

  • Pradeep K. Dubey

    (Center for Game Theory, Department of Economics, SUNY at Stony Brook, Stony Brook, NY 11794, Cowles Foundation for Research in Economics, Yale University)

  • John Geanakoplos

    ()
    (Cowles Foundation, Yale University)

  • Ori Haimanko

    (Department of Economics, Ben-Gurion University of the Negev)

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    Abstract

    We show that if agents are risk neutral, prizes outperform wages when there is sufficient pride and envy relative to the noisiness of performance. If agents are risk averse, prizes are a necessary supplement to wages (as bonuses).

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    File URL: http://cowles.econ.yale.edu/P/cd/d15a/d1537.pdf
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    Bibliographic Info

    Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1537.

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    Length: 25 pages
    Date of creation: Oct 2005
    Date of revision:
    Handle: RePEc:cwl:cwldpp:1537

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    Related research

    Keywords: Envy; Pride; Wages; Prizes; Bonus;

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    References

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    1. Pradeep Dubey & John Geanakoplos, 2005. "Grading in Games of Status: Marking Exams and Setting Wages," Cowles Foundation Discussion Papers 1544, Cowles Foundation for Research in Economics, Yale University, revised Dec 2005.
    2. Pradeep Dubey & John Geanakoplos, 2005. "Grading in Games of Status: Marking Exams and Setting Wages," Cowles Foundation Discussion Papers 1544, Cowles Foundation for Research in Economics, Yale University.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
    4. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
    5. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
    6. Kirchsteiger, Georg, 1994. "The role of envy in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 373-389, December.
    7. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
    8. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
    9. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-64, June.
    10. Chaim FERSHTMAN & Hans K. HVIDE & Yoram WEISS, 2003. "A behavioral Explanation for the Relative Performance Evaluation Puzzle," Annales d'Economie et de Statistique, ENSAE, issue 71-72, pages 349-361.
    11. Alexis DIRER, 2001. "Interdependent Preferences and Aggregate Saving," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 297-308.
    12. Bolle, Friedel, 2000. "Is altruism evolutionarily stable? And envy and malevolence?: Remarks on Bester and Guth," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 131-133, May.
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