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Social norms and optimal incentives in firms

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  • Huck, Steffen

    (Royal Holloway, Dept. of Economics)

  • Kübler, Dorothea

    (Humboldt University Berlin, Dept. of Economics)

  • Weibull, Jörgen

    (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper deals with the interplay between economic incentives and social norms in firms. We outline a simple model of team production and provide preliminary results on linear incentive schemes in the presence of a social norm that may cause multiple equilibria. The effect of the social norm on the optimal bonus rate is discussed, as well as the effectiveness of temporary changes in the bonus rate as a means to move a firm from a bad to a good equilibrium.

Suggested Citation

  • Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2001. "Social norms and optimal incentives in firms," SSE/EFI Working Paper Series in Economics and Finance 466, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0466
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    References listed on IDEAS

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    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 1-35.
    2. Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 437-459.
    3. Barron, John M & Gjerde, Kathy Paulson, 1997. "Peer Pressure in an Agency Relationship," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 234-254, April.
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    5. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    6. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
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    9. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
    10. Bohnet, Iris & Frey, Bruno S. & Huck, Steffen, 2001. "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," American Political Science Review, Cambridge University Press, vol. 95(1), pages 131-144, March.
    11. Oliver Hart, 2001. "Norms and the Theory of the Firm," Harvard Institute of Economic Research Working Papers 1923, Harvard - Institute of Economic Research.
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    Citations

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    Cited by:

    1. Fabio Sabatini, 2005. "Does Social Capital Improve Labour Productivity in Small and Medium Enterprises?," Others 0509011, University Library of Munich, Germany.
    2. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    3. Yanez-Pagans, Patricia, 2013. "Cash for Cooperation? Payments for Ecosystem Services and Common Property Management in Mexico," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151294, Agricultural and Applied Economics Association.
    4. Gerd Muehlheusser & Andreas Roider, 2004. "Black Sheep and Walls of Silence," Diskussionsschriften dp0410, Universitaet Bern, Departement Volkswirtschaft.
    5. Ivanova-Stenzel, Radosveta & Kübler, Dorothea, 2005. "Courtesy and Idleness: Gender Differences in Team Work and Team Competition," IZA Discussion Papers 1768, Institute of Labor Economics (IZA).
    6. Agnès Festré, 2010. "Incentives And Social Norms: A Motivation‐Based Economic Analysis Of Social Norms," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 511-538, July.
    7. Miettinen, Topi, 2013. "Promises and conventions – An approach to pre-play agreements," Games and Economic Behavior, Elsevier, vol. 80(C), pages 68-84.
    8. Topi Miettinen, 2011. "Moral Hazard and Clear Conscience," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 224-235, June.
    9. Armin Falk & Andrea Ichino, "undated". "Clean Evidence on Peer Pressure," IEW - Working Papers 144, Institute for Empirical Research in Economics - University of Zurich.
    10. Yanez-Pagans, Patricia, 2013. "Cash for Cooperation? Payments for Ecosystem Services and Common Property Management in Mexico," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151295, Agricultural and Applied Economics Association.
    11. Sandner, Kai, 2008. "Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies," Discussion Papers in Business Administration 2113, University of Munich, Munich School of Management.
    12. Küpper, Hans-Ulrich & Sandner, Kai, 2008. "Differences in Social Preferences - Are They Profitable for the Firm?," Discussion Papers in Business Administration 2122, University of Munich, Munich School of Management.
    13. Luigi Bonaventura, 2005. "The Underground Labor Market between Social Norms and Economic Inventives," Labor and Demography 0501008, University Library of Munich, Germany.
    14. Abigail Barr & Pieter Serneels, 2004. "Wages and Reciprocity in the Workplace," CSAE Working Paper Series 2004-18, Centre for the Study of African Economies, University of Oxford.
    15. Dan Ofori & Jocelyn Sackey, 2010. "Assessing Social Capital for Organisational Performance: Initial Exploratory Insights From Ghana," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 1(2).
    16. Fabio Sabatini, 2005. "Does Social Capital Improve Labour Productivity in Small and Medium Enterprises?," Others 0508005, University Library of Munich, Germany.
    17. Rupert Sausgruber, 2005. "Testing for Team Spirit - An Experimental Study," Experimental 0508001, University Library of Munich, Germany.
    18. Fabio Sabatini, 2006. "Does Social Capital Improve Labour Productivity in Small and Medium Enterprises," Working Papers in Public Economics 92, University of Rome La Sapienza, Department of Economics and Law.

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    More about this item

    Keywords

    social norms; incentives; contracts;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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