Social Norms and Optimal Incentives in Firms
This paper deals with the interplay between economic incentives and social norms in firms. We outline a simple model of team production and provide preliminary results on linear incentive schemes in the presence of a social norm that may cause multiple equilibria. The effect of the social norm on the optimal bonus rate is discussed, as well as the effectiveness of temporary changes in the bonus rate as a means to move a firm from a bad to a good equilibrium.
|Date of creation:||08 Oct 2001|
|Contact details of provider:|| Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden|
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- George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
- Oliver Hart, 2001. "Norms and the Theory of the Firm," Harvard Institute of Economic Research Working Papers 1923, Harvard - Institute of Economic Research.
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