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On the Merit of Equal Pay: When Influence Activities Interact with Incentive Setting

Author

Listed:
  • Brice Corgnet

    () (Chapman University, Economic Science Institute)

  • Ludivine Martin

    (Luxembourg Institute of Socio-Economic Research)

  • Peguy Ndodjang

    (Luxembourg Institute of Socio-Economic Research)

  • Angela Sutan

    (ESC Dijon, LESSAC)

Abstract

Influence costs models predict that organizations should limit managerial discretion to deter organizational members from engaging in wasteful politicking activities. We test this conjecture in a controlled, yet realistic, work environment in which we allow employees to influence managers’ decisions about rewards. We find that influence activities are pervasive and significantly lower organizational performance. Organizational performance suffers because principals offer weaker incentives when influence activities are allowed than when they are not. Importantly, we show that equal pay incentive schemes perform better when influence activities are available than when they are not. Our results thus support the idea that prevalent politicking activities may account for the widespread use of bureaucratic, and apparently inefficient, compensation rules in organizations.

Suggested Citation

  • Brice Corgnet & Ludivine Martin & Peguy Ndodjang & Angela Sutan, 2015. "On the Merit of Equal Pay: When Influence Activities Interact with Incentive Setting," Working Papers 15-09, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:15-09
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    File URL: http://www.chapman.edu/research-and-institutions/economic-science-institute/_files/WorkingPapers/merit-of-equal-pay-2015.pdf
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    References listed on IDEAS

    as
    1. Brice Corgnet & Roberto Hernán-González & Eric Schniter, 2015. "Why real leisure really matters: incentive effects on real effort in the laboratory," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 284-301, June.
    2. Brice Corgnet & Joaquín Gómez-Miñambres & Roberto Hernán-González, 2015. "Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough," Management Science, INFORMS, vol. 61(12), pages 2926-2944, December.
    3. Drew Fudenberg & Jean Tirole, 1986. "A "Signal-Jamming" Theory of Predation," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 366-376, Autumn.
    4. Corgnet, Brice & Rodriguez-Lara, Ismael, 2013. "Are you a good employee or simply a good guy? Influence costs and contract design," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 259-272.
    5. Jeffrey Carpenter & Peter Hans Matthews & John Schirm, 2010. "Tournaments and Office Politics: Evidence from a Real Effort Experiment," American Economic Review, American Economic Association, vol. 100(1), pages 504-517, March.
    6. Corgnet, Brice & Hernan-Gonzalez, Roberto & Rassenti, Stephen, 2015. "Peer Pressure and Moral Hazard in Teams: Experimental Evidence," Review of Behavioral Economics, now publishers, vol. 2(4), pages 379-403, December.
    7. Brice Corgnet & Roberto Hernán-Gonzalez & Stephen Rassenti, 2013. "Firing Threats and Tenure: Incentive effects and impression management," Working Papers 13-15, Chapman University, Economic Science Institute.
    8. Dickinson, David L, 1999. "An Experimental Examination of Labor Supply and Work Intensities," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 638-670, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Influence activities; incentive theory; theory of the firm; organizational economics;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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