Games of status and discriminatory contracts
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. We show that workers' concern for the rank of their wage in the firm's wage distribution induces the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort.
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- Fehr, Ernst & Schmidt, Klaus M., 1998.
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- Dhillon, Amrita & Herzog-Stein, Alexander, 2009.
"Games of status and discriminatory contracts,"
Games and Economic Behavior,
Elsevier, vol. 65(1), pages 105-123, January.
- Dhillon, Amrita & Herzog-Stein, Alexander, 2006. "Games of Status and Discrininatory Contract," The Warwick Economics Research Paper Series (TWERPS) 759, University of Warwick, Department of Economics.
- Eyal Winter, 2003.
"Incentives and Discrimination,"
Discussion Paper Series
dp313, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
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