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

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Author Info
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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Paper provided by HAL in its series Post-Print with number halshs-00303727_v1.

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Date of creation: 2008
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Handle: RePEc:hal:journl:halshs-00303727_v1

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

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  2. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, 01. [Downloadable!] (restricted)
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    • Ernst Fehr & Alexander Klein & Klaus M. Schmidt, 2005. "Fairness and Contract Design," Discussion Papers 67, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  5. Jeffrey Carpenter & Erika Seki, 2005. "Do Social Preferences Increase Productivity? Field Experimental Evidence from Fishermen in Toyama Bay," IZA Discussion Papers 1697, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. Sturm, Bodo & Riechmann, Thomas & Dannenberg, Astrid & Vogt, Carsten, 2007. "Inequity Aversion and Individual Behavior in Public Good Games: An Experimental Investigation," ZEW Discussion Papers 07-034 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  8. Urs Fischbacher & Simon Gächter, 2006. "Heterogeneous Social Preferences and the Dynamics of Free Riding in Public Goods," IZA Discussion Papers 2011, Institute for the Study of Labor (IZA). [Downloadable!]
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  9. Roberto Burlando & Francesco Guala, 2005. "Heterogeneous Agents in Public Goods Experiments," Experimental Economics, Springer, vol. 8(1), pages 35-54, April. [Downloadable!] (restricted)
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  11. Edward Lazear & Ulrike Malmendier & Roberto Weber, 2006. "Sorting in Experiments with Application to Social Preferences," NBER Working Papers 12041, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
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  14. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
  15. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away from Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1067-1101, 08. [Downloadable!] (restricted)
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  16. Simon Gächter & Christian Thöni, 2005. "Social Learning and Voluntary Cooperation Among Like-Minded People," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 303-314, 04/05. [Downloadable!] (restricted)
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  18. Christian Grund & Dirk Sliwka, 2006. "Performance Pay and Risk Aversion," IZA Discussion Papers 2012, Institute for the Study of Labor (IZA). [Downloadable!]
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    • Christian Grund & Dirk Sliwka, 2006. "Performance Pay and Risk Aversion," Discussion Papers 101, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  19. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
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  21. Benno Torgler & Markus Schaffner & Bruno S. Frey & Sascha L. Schmidt, 2008. "Looking Awkward When Winning and Foolish When Losing: Inequity Aversion and Performance in the Field," IEW - Working Papers iewwp369, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  22. Thomas Dohmen & Armin Falk, 2006. "Performance Pay and Multi-dimensional Sorting: Productivity, Preferences and Gender," IZA Discussion Papers 2001, Institute for the Study of Labor (IZA). [Downloadable!]
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