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Emotions and Incentives

  • Kräkel, Matthias

    ()

    (University of Bonn)

We introduce a concept of emotions that emerge when workers compare their own performance with a given standard or with the performances of co-workers. Assuming heterogeneity among the workers the interplay of emotions and incentives is analyzed by focusing on three incentive schemes that are frequently used in practice: tournaments, bonuses and piece rates. We identify certain conditions under which emotions lead to additional incentives and under which the employer benefits from emotional workers. Furthermore, the concept of emotions is used to explain puzzling results from laboratory and field experiments. Finally, the results provide some insights on an employer's possible preferences in favor of heterogeneous instead of homogeneous work groups.

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File URL: http://ftp.iza.org/dp1270.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1270.

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Length: 59 pages
Date of creation: Aug 2004
Date of revision:
Publication status: published as 'Emotions in tournaments' in: Journal of Economic Behavior and Organization, 2008, 67 (1), 204 - 214
Handle: RePEc:iza:izadps:dp1270
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  12. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers.
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  18. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
  19. Elster, Jon, 1996. "Rationality and the Emotions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1386-97, September.
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  23. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  24. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
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  26. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
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  30. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
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