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

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  • Sabrina Teyssier

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

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 HAL in its series Post-Print with number halshs-00303727.

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Date of creation: 2008
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Handle: RePEc:hal:journl:halshs-00303727

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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. Anya Savikhin & Roman M. Sheremeta, 2010. "Simultaneous Decision-Making in Competitive and Cooperative Environments," Working Papers 10-09, Chapman University, Economic Science Institute.
  2. Sabrina Teyssier, 2009. "Inequity and Risk Aversion in Sequential Public Good Games," Post-Print halshs-00422669, HAL.
  3. Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0512, University of Heidelberg, Department of Economics.
  4. Antoni Cunyat & Randolph Sloof, 2009. "Employee types and endofenous organizational design: An experiment," Working Papers. Serie AD 2009-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2010. "Physicians self selection of a payment mechanism: Capitation versus fee-for-service," Post-Print halshs-00523370, HAL.

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