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Cooperation versus Competition between Agents in Relational Contracts

Author

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  • Ola Kvaløy
  • Trond E. Olsen

Abstract

How should firms provide incentives to a group of workers when performance measures are unverifiable? We provided some answers to this question in our paper "Team Incentives in Relational Employment Contracts" in 2006. Here we reflect upon the contribution of that paper and provide a further analysis of this research question.We propose a more applied theoretical framework and explore stochastic properties of performance variables, including correlations that make one agent's performance informative about another agent's effort. In this framework cooperative incentives tend to be preferable when performances are negatively correlated, while competitive incentives tend to prevail under positive correlation.

Suggested Citation

  • Ola Kvaløy & Trond E. Olsen, 2023. "Cooperation versus Competition between Agents in Relational Contracts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(3-4), pages 616-638.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2023-0045
    DOI: 10.1628/jite-2023-0045
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    More about this item

    Keywords

    relational contracts; team incentives; cooperation; competition; relationalcontracts; teamincentives;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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