Market competition and lower tier incentives

The relationship between competition and performance-related pay has been analyzed in single-principal-single-agent models. While this approach yields good predictions for managerial pay schemes, the predictions fail to apply for employees at lower tiers of a firm's hierarchy. In this paper, a principal-multi-agent model of incentive pay is developed which makes it possible to analyze the effect of changes in the competitiveness of markets on lower tier incentive payment schemes. The results explain why the payment schemes of agents located at low and mid tiers are less sensitive to changes in competition when aggregated firm data is used.

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Year of publication:	2008
Authors:	Theilen, Bernd
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	Leistungsorientierte Vergütung \| Mittleres Management \| Agency Theory \| Wettbewerb \| Marktstruktur \| Theorie \| Cournot competition \| contract delegation \| moral hazard \| entry \| market size \| wage cost

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Series:	CESifo Working Paper ; 2453
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	589205072 [GVK] hdl:10419/26498 [Handle]
Classification:	D82 - Asymmetric and Private Information ; J21 - Labor Force and Employment, Size, and Structure ; L13 - Oligopoly and Other Imperfect Markets ; L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration
Source:	EconStor

Persistent link: https://www.econbiz.de/10010264481