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"Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm

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  • Ramalingam, Abhijit

Abstract

This paper explores the rationality of status concerns amongst co-workers and the impact of such rational status concerns on a firm's profits. We find that it is individually rational for agents in a firm to develop and exhibit status concerns. Workers are, by their choices of status concerns, able to transfer surplus from the the rm to themselves. Further, relative concerns are shaped by the relative strengths and weaknesses of the workers in the firm. Finally, a firm's profit is reduced (relative to the benchmark moral-hazard model) by workers who exhibit such "endogenous" relative concerns.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:18759
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    More about this item

    Keywords

    status; incentives; endogenous preferences; surplus transfer; profits;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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