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Incentive Reversal

Author Info

Listed author(s):
  • Eyal Winter

Abstract

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.)

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File URL: http://www.dklevine.com/archive/refs4843644000000000241.pdf
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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 843644000000000241.

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Date of creation: 22 Jul 2007
Handle: RePEc:cla:levarc:843644000000000241
Contact details of provider: Web page: http://www.dklevine.com/

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Find related papers by JEL classification:
  • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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  1. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
  2. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough or Don't Pay at All," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 791-810.
  3. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-636, May.
  4. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
  5. Baliga, Sandeep & Sjostrom, Tomas, 1998. "Decentralization and Collusion," Journal of Economic Theory, Elsevier, vol. 83(2), pages 196-232, December.
  6. Eyal Winter, 2006. "Optimal incentives for sequential production processes," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 376-390, 06.
  7. repec:rje:randje:v:37:y:2006:2:p:376-390 is not listed on IDEAS
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Cited by:

  1. Smirnov, Vladimir & Wait, Andrew, 2016. "Technology, team production and incentives," Economics Letters, Elsevier, vol. 141(C), pages 91-94.
  2. Balmaceda, Felipe, 2016. "Optimal task assignments," Games and Economic Behavior, Elsevier, vol. 98(C), pages 1-18.
  3. repec:eee:deveco:v:127:y:2017:i:c:p:72-90 is not listed on IDEAS
  4. Steiger, Eva-Maria & Zultan, Ro'i, 2014. "See no evil: Information chains and reciprocity," Journal of Public Economics, Elsevier, vol. 109(C), pages 1-12.
  5. Esteban F. Klor & Sebastian Kube & Eyal Winter & Ro'i Zultan, 2011. "Can Higher Bonuses Lead to Less E ort? Incentive Reversal in Teams," Levine's Working Paper Archive 786969000000000073, David K. Levine.
  6. Klor, Esteban F. & Kube, Sebastian & Winter, Eyal & Zultan, Ro’i, 2014. "Can higher rewards lead to less effort? Incentive reversal in teams," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 72-83.
  7. Uri Weiss, 2015. "The Robber Wants To Be Punished," Discussion Paper Series dp685, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  8. Sven Fischer & Eva-Maria Steiger, 2009. "Exploring the Effects of Unequal and Secretive Pay," Jena Economic Research Papers 2009-107, Friedrich-Schiller-University Jena.
  9. Bag, Parimal Kanti & Pepito, Nona, 2011. "Double-edged transparency in teams," Journal of Public Economics, Elsevier, vol. 95(7), pages 531-542.
  10. Roi Zultan & Eva-Maria Steiger, 2011. "See No Evil: Information Chains and Reciprocity in Teams," Working Papers 1108, Ben-Gurion University of the Negev, Department of Economics.
  11. Eyal Winter & Ignacio Garcia-Jurado & Jose Mendez-Naya & Luciano Mendez-Naya, 2009. "Mental Equilibrium and Rational Emotions," Discussion Paper Series dp521, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.

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