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Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies

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  • Sandner, Kai

Abstract

This paper addresses the question, what metrics should be used for performance evaluation and in particular how they should be weighted and combined in the presence of technological interdependencies when the agents exhibit variedly strong developed rivalry. We find that the principal reacts to his agents' competitive preferences through a reallocation of incentive intensity. As a consequence, depending on the underlying sort of technological interdependency, various differences in the balancing of performance measures compared to the case of purely egoistical behavior arise and changes in the agents' basic types of compensation can occur. We further show that the principal does not want both of his agents to behave equally competitively. Instead, he can only profit when the agents are asymmetrical. Then the principal wants the more productive agent to exhibit rivalry while the other ideally should behave completely egoistically.

Suggested Citation

  • Sandner, Kai, 2008. "Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies," Discussion Papers in Business Administration 2113, University of Munich, Munich School of Management.
  • Handle: RePEc:lmu:msmdpa:2113
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    File URL: https://epub.ub.uni-muenchen.de/2113/1/Working_Paper_Sandner_4.pdf
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    References listed on IDEAS

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    1. Pedro Rey-Biel, 2008. "Inequity Aversion and Team Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 297-320, June.
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    4. 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, July.
    5. Michihiro Kandori, 2002. "The Erosion and Sustainability of Norms and Morale," Levine's Working Paper Archive 506439000000000030, David K. Levine.
    6. Ramakrishnan, Ram T S & Thakor, Anjan V, 1991. "Cooperation versus Competition in Agency," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 248-283, Fall.
    7. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, March.
    8. Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2012. "Social norms and economic incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 173-185.
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    Citations

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    Cited by:

    1. Ramalingam, Abhijit, 2009. ""Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm," MPRA Paper 18759, University Library of Munich, Germany.
    2. Küpper, Hans-Ulrich & Sandner, Kai, 2008. "Differences in Social Preferences - Are They Profitable for the Firm?," Discussion Papers in Business Administration 2122, University of Munich, Munich School of Management.

    More about this item

    Keywords

    Social Preferences; Rivalry; Technological Interdependencies; Performance Measurement; Team Composition;

    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
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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