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Interpersonal Comparison, Status and Ambition in Organisations

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  • Andrea Patacconi
  • Florian Ederer

Abstract

This paper argues that the prevalence of compensation systems which reward winners without explicitly identifying losers can be rationalized by workers` concern for relative payoffs. If the workers` participation constraints are binding, the firm must compensate its employees for the disutility that they may derive from low status. It follows that profit-maximizing employers may be particularly reluctant to penalize or give poor performance evaluation to employees. The theory also sheds light on many other puzzling features of incentive schemes in practice, such as small salary premia, rat races, job title proliferation, the gender wage gap, the gender/happiness paradox and the widespread use of tournaments as a sorting device.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 222.

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Date of creation: 01 Feb 2005
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Handle: RePEc:oxf:wpaper:222

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Keywords: Reference-Dependent Preferences; Status; Ambition; Expectations; Tournaments;

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Citations

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Cited by:
  1. Kosfeld, Michael & Neckermann, Susanne, 2010. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," IZA Discussion Papers 5040, Institute for the Study of Labor (IZA).
  2. Robert Dur & Jan Tichem, 2012. "Social Relations and Relational Incentives," Tinbergen Institute Discussion Papers 12-054/1, Tinbergen Institute.
  3. Bruno S. Frey, 2010. "Geld oder Anerkennung? Zur Ökonomik der Auszeichnungen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(1), pages 1-15, 02.
  4. Bjørnskov, Christian & Dreher, Axel & Fischer, Justina A.V. & Schnellenbach, Jan & Gehring, Kai, 2013. "Inequality and happiness: When perceived social mobility and economic reality do not match," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 75-92.
  5. Gürtler, Marc & Gürtler, Oliver, 2011. "Inequality aversion and externalities," Working Papers IF36V1, Technische Universität Braunschweig, Institute of Finance.
  6. Ludwig, Sandra & Lünser, Gabriele K., 2012. "Observing your competitor – The role of effort information in two-stage tournaments," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 166-182.
  7. Robert Dur & Jan Tichem, 2012. "Social Relations and Relational Incentives," CESifo Working Paper Series 3826, CESifo Group Munich.
  8. repec:hal:wpaper:halshs-00590436 is not listed on IDEAS
  9. Mirjam van Praag, 2009. "Who values the status of the entrepreneur?," Jena Economic Research Papers 2009-045, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  10. Beno�t S.Y. Crutzen & Otto H. Swank & Bauke Visser, 2007. "Confidence Management: On Interpersonal Comparisons in Teams," Tinbergen Institute Discussion Papers 07-040/1, Tinbergen Institute.
  11. Dessi, Roberta & Miquel-Florensa, Josepa, 2013. "When to Pay More: Incentives, Culture and Status in Principal‐ Agent Interactions," TSE Working Papers 13-413, Toulouse School of Economics (TSE).
  12. C. Mirjam van Praag,, 2009. "Who values the Status of the Entrepreneur?," Tinbergen Institute Discussion Papers 09-056/3, Tinbergen Institute.

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