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Contract Incentives and Effort

Author

Listed:
  • Peter Chinloy

    () (American University)

  • Daniel T. Winkler

    () (University of North Carolina at Greensboro)

Abstract

In a prevailing employment contract, the agent receives a proportional split of commissions. Alternatively, the agent receives a contract paying 100% of revenue above a fixed payment to the firm. In this contract the firm has a prior payment position, similar to a landlord or lender. The coexistence of these equity-only and debt-equity type contracts allows testing incentives for productivity and effort for U.S. real estate licensees. Hourly wages and productivity are increasing in the agent's split, up to and including 100%. Effort as measured by hours worked also positively affected by the split. The contract incentives motivate productivity and induce effort without requiring monitoring.

Suggested Citation

  • Peter Chinloy & Daniel T. Winkler, 2010. "Contract Incentives and Effort," Journal of Real Estate Research, American Real Estate Society, vol. 32(4), pages 397-412.
  • Handle: RePEc:jre:issued:v:32:n:4:2010:p:397-412
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    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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