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Emotions and Incentives

  • Matthias Kräkel

We introduce a concept of emotions that emerge when workers compare their own performance with a given standard or with the performances of co-workers. Assuming heterogeneity among the workers the interplay of emotions and incentives is analysed by focusing on three incentive schemes that are frequently used in practice: tournaments, bonuses and piece rates. We identify certain conditions under which emotions lead to additional incentives and under which the employer benefits from emotional workers. Furthermore, the concept of emotions is used to explain puzzling results from laboratory and field experiments. Finally, the results provide some insights on an employer's possible preferences in favor of heterogeneous instead of homogeneous work groups.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse14_2004.pdf
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse14_2004.

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Length: 59
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:bon:bonedp:bgse14_2004
Contact details of provider: Postal:
Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany

Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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  21. Weigelt, Keith & Dukerich, Janet & Schotter, Andrew, 1989. "Reactions to discrimination in an incentive pay compensation scheme: A game-theoretic approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 44(1), pages 26-44, August.
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  23. Groh, Christian & Moldovanu, Benny & Sela, Aner & Sunde, Uwe, 2012. "Optimal seedings in elimination tournaments," Munich Reprints in Economics 20441, University of Munich, Department of Economics.
  24. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
  25. Engellandt, Axel & Riphahn, Regina T., 2004. "Incentive Effects of Bonus Payments: Evidence from an International Company," IZA Discussion Papers 1229, Institute for the Study of Labor (IZA).
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