Labour Incentive Schemes, Effort, and Market Outcomes in a Differentiated Duopoly with Simple Institutional Constraints
This paper compares two alternative incentive schemes, performance-related pay (PRP) and relative performance evaluation (RPE), in a differentiated duopoly where institutional features constrain firms to pay workers a given salary. It is shown that RPE endogenously arises as the optimal choice by firms and outperforms PRP as regards overall output, profits, and social welfare. This holds true irrespective of the degree of product substitutability and the mode of competition (i.e., à la Cournot or à Bertrand). Moreover, under Cournot competition, RPE attains the same outcome of the classic agency model, where all wage components are chosen inside each employment relationship.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 168 (2012)
Issue (Month): 2 (June)
|Contact details of provider:|| Web page: https://www.mohr.de/jite|
|Order Information:|| Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
- Vicente Cuñat & Maria Guadalupe, 2005.
"How Does Product Market Competition Shape Incentive Contracts?,"
Journal of the European Economic Association,
MIT Press, vol. 3(5), pages 1058-1082, 09.
- Vicente Cuñat & María Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," CEP Discussion Papers dp0687, Centre for Economic Performance, LSE.
- Vicente Cuñat & Maria Guadalupe, 2005. "How does product market competition shape incentive contracts?," LSE Research Online Documents on Economics 19894, London School of Economics and Political Science, LSE Library.
- Haucap, Justus & Wey, Christian, 2003.
"Unionization Structures and Innovation Incentives,"
CEPR Discussion Papers
4079, C.E.P.R. Discussion Papers.
- Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research.
- Haucap, Justus & Wey, Christian, 2003. "Unionisation Structures and Innovation Incentives," Working Paper 21/2003, Helmut Schmidt University, Hamburg.
- Fumas, Vicente Salas, 1992. "Relative performance evaluation of management : The effects on industrial competition and risk sharing," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 473-489, September.
- Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
- Bughin, J., 1995. "Unions and strategic managerial incentives," Economics Letters, Elsevier, vol. 47(1), pages 95-100, January.
When requesting a correction, please mention this item's handle: RePEc:mhr:jinste:urn:sici:0932-4569(201206)168:2_290:liseam_2.0.tx_2-a. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.