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Inequity Aversion in Tournaments

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  • Dominique Demougin
  • Claude Fluet

Abstract

We consider the cost of providing incentives through tournaments when workers are inequity averse and performance evaluation is costly. The principal never benefits from empathy between the workers, by he may benefit from their propensity for envy depending on the costs of assessing performance. More envious employees are preferred when these costs are high, less envious ones when they are low.

Suggested Citation

  • Dominique Demougin & Claude Fluet, 2003. "Inequity Aversion in Tournaments," Cahiers de recherche 0322, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0322
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    References listed on IDEAS

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    Cited by:

    1. Matthias Kräkel, 2006. "Zur Reform der Professorenbesoldung in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(1), pages 105-126, February.
    2. Harbring, Christine & Irlenbusch, Bernd, 2004. "Incentives in Tournaments with Endogenous Prize Selection," IZA Discussion Papers 1340, Institute for the Study of Labor (IZA).
    3. Christine Harbring & Bernd Irlenbusch, 2005. "Incentives in Tournaments with Endogenous Prize Selection," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 636-636, December.
    4. Gill, David & Stone, Rebecca, 2009. "Fairness and desert in tournaments," Discussion Paper Series In Economics And Econometrics 0903, Economics Division, School of Social Sciences, University of Southampton.
    5. Kräkel, Matthias, 2004. "Tournaments versus Piece Rates under Limited Liability," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 15, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Gill, David & Stone, Rebecca, 2015. "Desert and inequity aversion in teams," Journal of Public Economics, Elsevier, vol. 123(C), pages 42-54.
    7. Kräkel, Matthias, 2004. "Emotions and Incentives," IZA Discussion Papers 1270, Institute for the Study of Labor (IZA).
    8. Gill, David & Stone, Rebecca, 2010. "Fairness and desert in tournaments," Games and Economic Behavior, Elsevier, vol. 69(2), pages 346-364, July.
    9. Kale, Jayant R. & Reis, Ebru & Venkateswaran, Anand, 2014. "Pay inequalities and managerial turnover," Journal of Empirical Finance, Elsevier, vol. 27(C), pages 21-39.
    10. Alwine Mohnen & Kathrin Pokorny & Dirk Sliwka, 2008. "Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 26(4), pages 693-720, October.
    11. Sabrina Teyssier, 2007. "Optimal Group Incentives with Social Preferences and Self-Selection," Post-Print halshs-00144901, HAL.
    12. Axel Ockenfels & Dirk Sliwka & Peter Werner, 2015. "Bonus Payments and Reference Point Violations," Management Science, INFORMS, vol. 61(7), pages 1496-1513, July.
    13. Matthias Kräkel, 2008. "Emotions and the optimality of uneven tournaments," Review of Managerial Science, Springer, vol. 2(1), pages 61-79, March.
    14. Grund, Christian & Przemeck, Judith, 2008. "Subjective Performance Evaluation and Inequality Aversion," IZA Discussion Papers 3382, Institute for the Study of Labor (IZA).
    15. Kvaløy, Ola, 2010. "Performance pay and dynamic social preferences," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 698-704, August.
    16. Kragl, Jenny & Schmid, Julia, 2009. "The impact of envy on relational employment contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 766-779, November.
    17. Ederer, Florian & Patacconi, Andrea, 2010. "Interpersonal comparison, status and ambition in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 348-363, August.
    18. Pedro Rey-Biel, 2008. "Inequity Aversion and Team Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 297-320, June.
    19. Stefanie Aniela Lehmann, 2008. "When Randomization in Collective Tournaments is Profitable for the Principal," Bonn Econ Discussion Papers bgse19_2008, University of Bonn, Germany, revised Mar 2009.
    20. Santos-Pinto, Luís, 2006. "Reciprocity, inequity-aversion, and oligopolistic competition," MPRA Paper 3143, University Library of Munich, Germany, revised 14 Apr 2007.
    21. Jenny Kragl & Julia Schmid, 2006. "Relational Contracts and Inequity Aversion," SFB 649 Discussion Papers SFB649DP2006-085, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    22. Kragl, Jenny & Gogova, Martina, 2013. "Wage Bargaining when Workers Have Fairness Concerns," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79790, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Tournaments; Inequity aversion; Envy; Incentives; Performance;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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