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Games of Status and Discrininatory Contract

  • Dhillon, Amrita

    (Department of Economics, University of Warwick)

  • Herzog-Stein, Alexander

    (Department of Economics, University of Warwick)

Following recent empirical evidence which indicates the importance of rank for the determination of workers’ wellbeing, this paper introduces status seeking preferences in the form of rank-dependent utility functions into a moral hazard framework with one firm and multiple workers, but no correlation in production. Workers’ concern for the rank of their wage in the firm’s wage distribution may induce the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2006/twerp_759.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 759.

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Length: 46 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:759
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  1. Dhillon, Amrita & Herzog-Stein, Alexander, 2006. "Games of Status and Discrininatory Contract," The Warwick Economics Research Paper Series (TWERPS) 759, University of Warwick, Department of Economics.
  2. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  3. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
  4. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  5. Robert H. Frank, 1984. "Interdependent Preferences and the Competitive Wage Structure," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 510-520, Winter.
  6. Baron, James N., 1988. "The employment relation as a social relation," Journal of the Japanese and International Economies, Elsevier, vol. 2(4), pages 492-525, December.
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