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Altruism and Relational Incentives in the Workplace

Author

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  • Dur, Robert

    (Erasmus University Rotterdam)

  • Tichem, Jan

    (Erasmus University Rotterdam)

Abstract

This paper studies how altruism between managers and employees affects relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The con- tract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that altruism undermines the credibility of a threat of dis- missal but strengthens the credibility of a bonus. Among others, these two mechanisms imply that higher altruism sometimes leads to higher bonuses, while lower altruism may increase productivity and players utility in equilibrium.

Suggested Citation

  • Dur, Robert & Tichem, Jan, 2013. "Altruism and Relational Incentives in the Workplace," IZA Discussion Papers 7363, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7363
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hernán Bejarano & Brice Corgnet & Joaquín Gómez-Miñambres, 2019. "Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!," Working Papers 19-26, Chapman University, Economic Science Institute.
    2. Matthias Fahn, 2019. "Reciprocity in dynamic employment relationships," CESifo Working Paper Series 7634, CESifo.
    3. Roberto Sarkisian, 2021. "Optimal Incentives Schemes under Homo Moralis Preferences," Games, MDPI, vol. 12(1), pages 1-22, March.
    4. Brice Corgnet, 2018. "Rac(g)e Against the Machine? Social Incentives When Humans Meet Robots," Post-Print halshs-01984467, HAL.
    5. Matthias Fahn & Giorgio Zanarone, 2021. "Pay Transparency under Subjective Performance Evaluation," Economics working papers 2021-02, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Calabuig, Vicente & Olcina, Gonzalo & Panebianco, Fabrizio, 2018. "Culture and team production," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 32-45.
    7. Matthias Fahn & Anne Schade & Katharina Schüßler, 2017. "What Drives Reciprocal Behavior? The Optimal Provision of Incentives over the Course of Careers," CESifo Working Paper Series 6635, CESifo.
    8. Dur, Robert & Kvaloy, Ola & Schöttner, Anja, 2021. "Leadership Styles and Labor-Market Conditions," Rationality and Competition Discussion Paper Series 278, CRC TRR 190 Rationality and Competition.
    9. Matthias Fahn & Giorgio Zanarone, 2022. "Transparency in relational contracts," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 1046-1071, May.
    10. Michael Vlassopoulos, 2017. "‘Putting a Foot in the Door’: Volunteer Hiring and Organizational Form," Manchester School, University of Manchester, vol. 85(2), pages 133-162, March.
    11. Bejarano, Hernán & Corgnet, Brice & Gómez-Miñambres, Joaquín, 2021. "Economic stability promotes gift-exchange in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 374-398.
    12. Daniel G. Arce, 2017. "Screening for Managerial Objectives," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 442-455, October.
    13. Dur, Robert & Kvaløy, Ola & Schöttner, Anja, 2020. "Labor-Market Conditions and Leadership Styles," IZA Discussion Papers 13860, Institute of Labor Economics (IZA).
    14. Michael Krapp & Kai Sandner, 2016. "Impact of an equal pay norm on the optimal design of incentive contracts," Journal of Business Economics, Springer, vol. 86(3), pages 301-338, April.
    15. Stefano Dughera & Alain Marciano, 2022. "Supervise me if you can. Relational feelings, incentive pays and supervisory violations," Journal of Economics, Springer, vol. 136(1), pages 47-72, June.
    16. Agnieszka Rusinowska & Vassili Vergopoulos, 2020. "Ingratiation and Favoritism in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 413-445.

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    More about this item

    Keywords

    Nash bargaining; spite; subjective performance evaluation; efficiency wages; incentives; relational contracts; altruism;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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