IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Differences in Social Preferences - Are They Profitable for the Firm?

  • Küpper, Hans-Ulrich
  • Sandner, Kai
Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by University of Munich, Munich School of Management in its series Discussion Papers in Business Administration with number 2122.

    in new window

    Date of creation: 21 Feb 2008
    Date of revision:
    Handle: RePEc:lmu:msmdpa:2122
    Contact details of provider: Postal: Ludwigstr. 28,80539 Munich, Germany
    Phone: +49-(0)89-2180-3888
    Fax: +49-(0)89-344054
    Web page:

    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
    2. 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.
    3. 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.
    4. Dominique Demougin & Claude Fluet & Carsten Helm, 2006. "Output and wages with inequality averse agents," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 399-413, May.
    5. 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, Elsevier.
    6. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
    7. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
    8. 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.
    9. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, 03.
    10. James Andreoni, 2001. "Giving According to GARP," Theory workshop papers 339, UCLA Department of Economics.
    11. 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.
    12. Dominique Demougin & Claude Fluet, 2003. "Group vs. Individual Performance Pay When Workers Are Envious," CIRANO Working Papers 2003s-10, CIRANO.
    13. Bester, H. & Güth, W., 1994. "Is altruism evolutionarily stable ?," Discussion Paper 1994-103, Tilburg University, Center for Economic Research.
    14. 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.
    15. 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.
    16. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    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: (Debbie Claassen)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.