Differences in Social Preferences - Are They Profitable for the Firm?
This paper analyzes the impact of heterogeneous (social) preferences on the weighting and combination of performance measures as well as on a firm’s profitability. We consider rivalry, egoism and altruism as extreme forms within the continuum of possible preferences and show that the principal can typically exploit both the altruistic and rivalistic behavior of his agents. Firm profits reach their maximum value if the agents are differentiated as much as possible in their individual characteristics. We provide further insight; namely, that in order to realize these gains in profitability, it is necessary to reallocate participation in performance measures such that competitive agents are privileged as compared to altruistic agents. In this context, stochastic interdependencies are of importance since they yield overlapping functions of the share parameters, causing additional adaptations in the optimal design of the wage compensation system.
|Date of creation:||21 Feb 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bwl.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Grund & Dirk Sliwka, 2005.
"Envy and Compassion in Tournaments,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 14(1), pages 187-207, 03.
- Bartling, Björn & Siemens, Ferdinand von, 2006.
"The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
115, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- 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.
- Bartling, Björn & Siemens, Ferdinand von, 2006. "The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents," Discussion Papers in Economics 913, University of Munich, Department of Economics.
- Levy-Garboua, Louis & Meidinger, Claude & Rapoport, Benoit, 2006.
"The Formation of Social Preferences: Some Lessons from Psychology and Biology,"
Handbook on the Economics of Giving, Reciprocity and Altruism,
- Louis Lévy-Garboua & Claude Meidinger & BenoŒt Rapoport, 2004. "The formation of social preferences : some lessons from psychology and biology," Cahiers de la Maison des Sciences Economiques bla04010, Université Panthéon-Sorbonne (Paris 1).
- Pedro Rey-Biel, 2007.
"Inequity Aversion and Team Incentives,"
319, Barcelona Graduate School of Economics.
- Englmaier, Florian & Wambach, Achim, 2010.
"Optimal incentive contracts under inequity aversion,"
Munich Reprints in Economics
22027, University of Munich, Department of Economics.
- Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Games and Economic Behavior, Elsevier, vol. 69(2), pages 312-328, July.
- Englmaier, Florian & Wambach, Achim, 2005. "Optimal Incentive Contracts under Inequity Aversion," IZA Discussion Papers 1643, Institute for the Study of Labor (IZA).
- Fehr, Ernst & Falk, Armin, 2002.
"Psychological foundations of incentives,"
European Economic Review,
Elsevier, vol. 46(4-5), pages 687-724, May.
- Ernst Fehr & Armin Falk, . "Psychological Foundations of Incentives," IEW - Working Papers 095, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA.
- Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
- Ernst Fehr & Armin Falk, 2002. "Psychological Foundations of Incentives," CESifo Working Paper Series 714, CESifo Group Munich.
- Falk, Armin & Fehr, Ernst, 2002. "Psychological Foundations of Incentives," CEPR Discussion Papers 3185, C.E.P.R. Discussion Papers.
- Dominique Demougin & Claude Fluet & Carsten Helm, 2004.
"Output and Wages with Inequality Averse Agents,"
Cahiers de recherche
- Bester, Helmut & Guth, Werner, 1998.
"Is altruism evolutionarily stable?,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 34(2), pages 193-209, February.
- Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2001.
"Social Norms and Optimal Incentives in Firms,"
Working Paper Series
565, Research Institute of Industrial Economics.
- Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2001. "Social norms and optimal incentives in firms," SSE/EFI Working Paper Series in Economics and Finance 466, Stockholm School of Economics.
- S. Huck & D. Kübler & J. Weibull, 2002. "Social norms and optimal incentives in firms," SFB 373 Discussion Papers 2002,11, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- 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.
- Dominique Demougin & Claude Fluet, 2003.
"Group vs. Individual Performance Pay When Workers Are Envious,"
Cahiers de recherche
- Dominique Demougin & Claude Fluet, 2003. "Group vs. Individual Performance Pay When Workers Are Envious," CIRANO Working Papers 2003s-10, CIRANO.
- Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
- Bengt Holmstrom & Paul R. Milgrom, 1985.
"Aggregation and Linearity in the Provision of Intertemporal Incentives,"
Cowles Foundation Discussion Papers
742, Cowles Foundation for Research in Economics, Yale University.
- Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
- 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.
- James Andreoni, 2001. "Giving According to GARP," Theory workshop papers 339, UCLA Department of Economics.
- Henrich, Joseph, 2004. "Cultural group selection, coevolutionary processes and large-scale cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 53(1), pages 3-35, January.
When requesting a correction, please mention this item's handle: RePEc:lmu:msmdpa:2122. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Philipp Beltz)
If references are entirely missing, you can add them using this form.