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Incentives in Managerial Compensation: A Survey of Experimental Research. (Draft Paper)

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  • Alessandro Rossi

Abstract

The issue of designing effective managerial incentives has recently gained considerable attention in both theoretical analysis and business practices. Despite the importance of the theoretical achievements, to date little attempt has been made to test the major theoretical hypotheses empirically. More recently, the debate has been fuelled by the development of economic experimental studies explicitly designed to shed light on how real decision makers behave in such settings. The aim of this paper is to provide a comprehensive survey of experimental contributions to mechanism and incentive design issues and to offer some suggestions for future research.

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Bibliographic Info

Paper provided by Department of Computer and Management Sciences, University of Trento, Italy in its series ROCK Working Papers with number 003.

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Length: 41 pages
Date of creation: Jan 1999
Date of revision: 12 Jun 2008
Handle: RePEc:trt:rockwp:003

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  1. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 12(2), pages 155-79, April.
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  3. Brunello, Giorgio & Graziano, Clara & Parigi, Bruno, 2001. "Executive compensation and firm performance in Italy," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(1-2), pages 133-161, January.
  4. Levinthal, Daniel, 1988. "A survey of agency models of organizations," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 9(2), pages 153-185, March.
  5. Schotter, Andrew & Weigelt, Keith, 1990. "Asymmetric Tournaments, Equal Opportunity Laws And Affirmative Action: Some Experimental Result," Working Papers, C.V. Starr Center for Applied Economics, New York University 90-14, C.V. Starr Center for Applied Economics, New York University.
  6. Robert H. Frank, 1984. "Interdependent Preferences and the Competitive Wage Structure," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 510-520, Winter.
  7. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 841-64, October.
  8. Kreps, David M, 1996. "Markets and Hierarchies and (Mathematical) Economic Theory," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 561-95.
  9. Beth J. Asch, 1990. "Do incentives matter? The case of Navy recruiters," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 89-106, February.
  10. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1998. "Gift exchange and reciprocity in competitive experimental markets," ULB Institutional Repository 2013/5909, ULB -- Universite Libre de Bruxelles.
  11. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
  12. Sherwin Rosen, 1984. "The Distribution of Prizes in a Match-Play Tournament with Single Eliminations," NBER Working Papers 1516, National Bureau of Economic Research, Inc.
  13. Walker, Martin, 1989. "Agency theory: A falsificationist perspective," Accounting, Organizations and Society, Elsevier, vol. 14(5-6), pages 433-453, October.
  14. Fehr, Ernst & Kirchsteiger, George & Riedl, Arno, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(2), pages 437-59, May.
  15. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 255-83, May.
  16. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 314-41, June.
  17. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
  18. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985. "Tournaments and Piece Rates: An Experimental Study," Working Papers, C.V. Starr Center for Applied Economics, New York University 85-21, C.V. Starr Center for Applied Economics, New York University.
  19. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(4), pages 543-69, November.
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Cited by:
  1. Alessandro Rossi & Massimo Warglien, 2001. "An experimental Investigation of Fairness and Reciprocal Behavior in a Triangular Principal-Multiagent Relationship," ROCK Working Papers, Department of Computer and Management Sciences, University of Trento, Italy 014, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
  2. Alessandro Rossi, 2001. "The Effective Design of Managerial Incentive Systems: Combining Theoretical Principlesand Practical Trade-offs," ROCK Working Papers, Department of Computer and Management Sciences, University of Trento, Italy 015, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
  3. Alessandro Rossi & Massimo Warglien, 2000. "An Experimental Investigation of Fairness and Reciprocal Behavior in a Simple Principal-Multiagent Relationship (Updated version of the older "Fairness in Hierarchical Triangles: an Experimental ," ROCK Working Papers, Department of Computer and Management Sciences, University of Trento, Italy 009, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.

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