Tichem, Jan - Tinbergen Instituut - 2013
its employees. The key assumption is that effort norms are affected by the example of superiors. In equilibrium, norms are … complies with the principal's example, and thereby transmits a lower norm to the agent. The principal optimally responds to … norm erosion by setting a higher example to begin with. In equilibrium, norm erosion gives rise to three inefficiencies …