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Prizes versus Wages with Envy and Pride

  • Pradeep K. Dubey

    (Center for Game Theory, Department of Economics, SUNY at Stony Brook, Stony Brook, NY 11794, Cowles Foundation for Research in Economics, Yale University)

  • John Geanakoplos

    ()

    (Cowles Foundation, Yale University)

  • Ori Haimanko

    (Department of Economics, Ben-Gurion University of the Negev)

We show that if agents are risk neutral, prizes outperform wages when there is sufficient pride and envy relative to the noisiness of performance. If agents are risk averse, prizes are a necessary supplement to wages (as bonuses).

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File URL: http://cowles.yale.edu/sites/default/files/files/pub/d15/d1537.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1537.

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Length: 25 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:cwl:cwldpp:1537
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  1. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
  2. Frank, Robert H., 1993. "Choosing the Right Pond: Human Behavior and the Quest for Status," OUP Catalogue, Oxford University Press, number 9780195049459.
  3. William S. Neilson & Jill Stowe, 2010. "Piece-Rate Contracts For Other-Regarding Workers," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 575-586, 07.
  4. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
  5. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  6. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  7. repec:adr:anecst:y:2003:i:71-72:p:13 is not listed on IDEAS
  8. Pradeep Dubey & John Geanakoplos, 2005. "Grading in Games of Status: Marking Exams and Setting Wages," Cowles Foundation Discussion Papers 1544, Cowles Foundation for Research in Economics, Yale University.
  9. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  10. Pedro Rey-Biel, . "Inequity Aversion and Team Incentives," Working Papers 319, Barcelona Graduate School of Economics.
  11. Georg Kirchsteiger, 1994. "The role of envy in ultimatum games," ULB Institutional Repository 2013/5925, ULB -- Universite Libre de Bruxelles.
  12. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  13. Amihai Glazer, 2008. "Optimal Contracts When a Worker Envies His Boss," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 120-137, May.
  14. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
  15. Englmaier, Florian & Achim Wambach, 2003. "Contracts and Inequity Aversion," Royal Economic Society Annual Conference 2003 74, Royal Economic Society.
  16. Bolle, Friedel, 2000. "Is altruism evolutionarily stable? And envy and malevolence?: Remarks on Bester and Guth," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 131-133, May.
  17. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  18. Bartling, Björn, 2011. "Relative performance or team evaluation? Optimal contracts for other-regarding agents," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 183-193, August.
  19. repec:adr:anecst:y:2001:i:63-64:p:15 is not listed on IDEAS
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