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Games of Status and Discrininatory Contract

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  • Dhillon, Amrita

    (Department of Economics, University of Warwick)

  • Herzog-Stein, Alexander

    (Department of Economics, University of Warwick)

Abstract

Following recent empirical evidence which indicates the importance of rank for the determination of workers’ wellbeing, this paper introduces status seeking preferences in the form of rank-dependent utility functions into a moral hazard framework with one firm and multiple workers, but no correlation in production. Workers’ concern for the rank of their wage in the firm’s wage distribution may induce the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2006/twerp_759.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 759.

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Length: 46 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:759

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  1. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  2. Eyal Winter, 2003. "Incentives and Discrimination," Discussion Paper Series dp313, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  3. Baron, James N., 1988. "The employment relation as a social relation," Journal of the Japanese and International Economies, Elsevier, vol. 2(4), pages 492-525, December.
  4. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
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Cited by:
  1. Ed Hopkins & Tatiana Kornienko, 2007. "Status, Affluence, and Inequality: Rank-Based Comparisons in Games of Status," Levine's Bibliography 122247000000001442, UCLA Department of Economics.
  2. Ramalingam, Abhijit, 2009. ""Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm," MPRA Paper 18759, University Library of Munich, Germany.
  3. Cardoso, Ana Rute, 2012. "Money and rank in the labor market," Economics Letters, Elsevier, vol. 115(2), pages 325-328.
  4. Ed Hopkins & Tatiana Kornienko, 2006. "Methods of Social Comparison in Games of Status," Levine's Bibliography 122247000000001183, UCLA Department of Economics.
  5. Dunia López-Pintado & Juan D. Moreno-Ternero, 2011. "On the optimal management of teams under budget constraints," Working Papers 11.11, Universidad Pablo de Olavide, Department of Economics.

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