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Games of Status and Discrininatory Contract

Author

Listed:
  • Dhillon, Amrita

    (Department of Economics, University of Warwick)

  • Herzog-Stein, Alexander

    (Department of Economics, University of Warwick)

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:wrk:warwec:759
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    References listed on IDEAS

    as
    1. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
    2. Eyal Winter, 2004. "Incentives and Discrimination," American Economic Review, American Economic Association, vol. 94(3), pages 764-773, June.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    4. Dhillon, Amrita & Herzog-Stein, Alexander, 2009. "Games of status and discriminatory contracts," Games and Economic Behavior, Elsevier, vol. 65(1), pages 105-123, January.
    5. 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.
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Cardoso, Ana Rute, 2012. "Money and rank in the labor market," Economics Letters, Elsevier, vol. 115(2), pages 325-328.
    2. López-Pintado, Dunia & Moreno-Ternero, Juan D., 2014. "On discrimination in the optimal management of teams," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 154-162.
    3. Dey, Oindrila & Banerjee, Swapnendu, 2014. "Status and incentives: A critical survey," MPRA Paper 57658, University Library of Munich, Germany.
    4. Dey, Oindrila & Banerjee, Swapnendu, 2014. "Incentives and status," MPRA Paper 58399, University Library of Munich, Germany.
    5. Dhillon, Amrita & Herzog-Stein, Alexander, 2009. "Games of status and discriminatory contracts," Games and Economic Behavior, Elsevier, vol. 65(1), pages 105-123, January.
    6. 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.
    7. Dunia López-Pintado & Juan D. Moreno-Ternero, 2011. "On the optimal management of teams under budget constraints," Working Papers 11.11, Universidad Pablo de Olavide, Department of Economics.
    8. Hopkins, Ed & Kornienko, Tatiana, 2009. "Status, affluence, and inequality: Rank-based comparisons in games of status," Games and Economic Behavior, Elsevier, vol. 67(2), pages 552-568, November.
    9. Dey, Oindrila & Banerjee, Swapnendu, 2015. "Endogenous favouritism with status incentives: A model of optimum inefficiency," MPRA Paper 62828, University Library of Munich, Germany.
    10. Dey, Oindrila & Banerjee, Swapnendu, 2010. "Incentive, status and thereafter: A critical survey," MPRA Paper 57058, University Library of Munich, Germany.
    11. Ed Hopkins & Tatiana Kornienko, 2006. "Methods of Social Comparison in Games of Status," Levine's Bibliography 122247000000001183, UCLA Department of Economics.

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