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Games with Money and Status: How Bes to Incentivize Work

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  • Pradeep Dubey
  • John Geanakoplos

Abstract

Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status together to get his employees to work hard for the least total cost. We find that he should motivate workers of low skill mostly by status and high skill mostly by money. Moreover, he should do so by using a small number of titles and wage levels. This often results in star wages to the elite performers.

Suggested Citation

  • Pradeep Dubey & John Geanakoplos, 2014. "Games with Money and Status: How Bes to Incentivize Work," Department of Economics Working Papers 14-02, Stony Brook University, Department of Economics.
  • Handle: RePEc:nys:sunysb:14-02
    as

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    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Dubey, Pradeep & Haimanko, Ori, 2003. "Optimal scrutiny in multi-period promotion tournaments," Games and Economic Behavior, Elsevier, vol. 42(1), pages 1-24, January.
    3. Alexis Direr, 2001. "Interdependent Preferences and Aggregate Saving," Annals of Economics and Statistics, GENES, issue 63-64, pages 297-308.
    4. Dubey, Pradeep & Geanakoplos, John, 2010. "Grading exams: 100,99,98,... or A,B,C?," Games and Economic Behavior, Elsevier, vol. 69(1), pages 72-94, May.
    5. Milton Friedman, 1953. "Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 61, pages 277-277.
    6. Gary S. Becker & Kevin M. Murphy & Ivan Werning, 2005. "The Equilibrium Distribution of Income and the Market for Status," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 282-310, April.
    7. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    8. Ed Hopkins & Tatiana Kornienko, 2003. "Ratio Orderings and Comparative Statics," ESE Discussion Papers 91, Edinburgh School of Economics, University of Edinburgh.
    9. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-857, July.
    10. Emmanuelle Auriol & Régis Renault, 2008. "Status and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 305-326.
    11. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279-279.
    12. Park, Eun-Soo, 1995. "Incentive Contracting under Limited Liability," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 477-490, Fall.
    13. repec:dau:papers:123456789/12479 is not listed on IDEAS
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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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