By incentive reversal we refer to situations in which an increase in rewards for all agents results in fewer agents exerting effort. We show that externalities among peers may give rise to such intriguing situations even when all agents are fully rational. We provide a necessary and sufficient condition for the organizational technology so that it will be susceptible to incentive reversal. The condition implies that some degree of complementarity is enough to allow incentive reversal. (JEL D23, D82, M54)
(This abstract was borrowed from another version of this item.)
References listed on IDEAS
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- Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001.
"Are people conditionally cooperative? Evidence from a public goods experiment,"
Elsevier, vol. 71(3), pages 397-404, June.
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- repec:rje:randje:v:37:y:2006:2:p:376-390 is not listed on IDEAS
- Eyal Winter, 2006. "Optimal incentives for sequential production processes," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 376-390, 06.
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American Economic Review,
American Economic Association, vol. 94(3), pages 764-773, June.
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