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Experimental Evidence on Inequity Aversion and Self-Selection between Incentive Contracts

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  • Sabrina Teyssier

    ()
    (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

Abstract

This paper reports on the results of an experiment testing whether the agents selfselect between a competitive payment scheme and a revenue-sharing scheme depending on their inequity aversion. Average efficiency should be increased when these payment schemes are endogenously chosen by agents. We show that the choice of the competition is negatively affected by disadvantageous inequity aversion and risk aversion. In the second half of the experiment, the effect of individual preferences is indirect through the effect of past results. The self-selection of agents increases the efficiency of the competitive scheme but not that of the revenue-sharing scheme, due to a heterogeneity of behaviors.

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0821.

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Length: 38 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:gat:wpaper:0821

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Keywords: performance pay; incentives; self-selection; inequity aversion; competition; revenue-sharing scheme;

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References

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Citations

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Cited by:
  1. Sabrina Teyssier, 2009. "Inequity and Risk Aversion in Sequential Public Good Games," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 0919, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Jörg Oechssler, 2013. "Finitely repeated games with social preferences," Experimental Economics, Springer, vol. 16(2), pages 222-231, June.
  3. Cunyat, Antoni & Sloof, Randolph, 2011. "Employee types and endogenous organizational design: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 553-573.
  4. Anya C. Savikhin & Roman M. Sheremeta, 2013. "Simultaneous Decision-Making In Competitive And Cooperative Environments," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1311-1323, 04.
  5. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2010. "Physicians self selection of a payment mechanism: Capitation versus fee-for-service," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1024, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.

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