English, Article, Journal or magazine article edition: Optimal Group Incentives with Social Preferences and Self-Selection Sabrina Teyssier

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Bookmark: http://trove.nla.gov.au/version/200203
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Optimal Group Incentives with Social Preferences and Self-Selection
Author
  • Sabrina Teyssier
Physical Description
  • preprint
Notes
  • RePEc:hal:journl:halshs-00144901_v1
  • In this paper, we analyze group incentives when a proportion of agents feel in- equity aversion as defined by Fehr and Schmidt (1999). We define a separating equilibrium that explains the co-existence of multiple payment schemes in firms. We show that a tournament provides strong incentives to agents who only care about their own payo¤ but that it is not efficient when agents are inequity averse. In fact, inequity averse agents are attracted by a revenue-sharing scheme in which the joint production is equally distributed, under the constraint that selfish agents have no incentive to join the revenue sharing organization. If the market is perfectly flexi- ble, this separating equilibrium induces a high effort level for both types of agents. Pareto gains are achieved by offering organizational choice to agents and the optimal contract is thus to propose both payment schemes to agents and to allow them to self-select into the different payment schemes.
  • Incentives, performance pay, revenue sharing, self-selection, social preferences, tournament
  • RePEc:gat:wpaper:0710
Language
  • English
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