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Status and incentives

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  • Emmanuelle Auriol
  • Régis Renault

Abstract

This article introduces status as reflecting an agent's claim to recognition in her work. This is a scarce resource: increasing an agent's status requires that another agent's status be decreased. Higher‐status agents are more willing to exert effort in exchange for money; better‐paid agents would exert higher effort in exchange for improved status. The results are consistent with actual management practices: (i) egalitarianism is desirable in a static context; (ii) in a long‐term work relationship, juniors' compensation is delayed; and (iii) past performance is rewarded by pay increases along with improved status within the organization's hierarchy.

Suggested Citation

  • Emmanuelle Auriol & Régis Renault, 2008. "Status and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 305-326, March.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:305-326
    DOI: 10.1111/j.1756-2171.2008.00015.x
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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