This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts...

We analyze the impact of social comparison on optimal contract design under imperfect labor market competition for managerial talent. Adding a disutility of social comparison as induced by a ranking of verifiable efforts to the multi-task model by Bénabou and Tirole (2016), we demonstrate that...

This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents who have private information on their ability. Two heterogenous firms - characterized by vertical, respectively horizontal,...

This paper investigates whether a designer can improve both the incentive provision and the selection performance of a promotion contest by making the competition more (or less) dynamic. A comparison of static (one-stage) and dynamic (two-stage) contests reveals that this is not the case. A...

Tournaments are widely used in organizations, explicitly or implicitly, to reward the best-performing employees, e.g., through promotion or bonuses, and to punish the worst-performing employees, e.g., through firing or unfavorable job assignments. We use a principal-agent model to compare the...

Managers often use tournaments which motivate workers to compete for the top, compete to avoid the bottom, or both. In this paper we compare the effectiveness and efficiency of the corresponding incentive schemes. To do so, we utilize optimal contracts in a principal-agent setting, using a...

We study experimentally the relationship between intra-firm wage dispersion chosen by principals and workers' performance. Principals show a preference for more egalitarian wage schemes, and workers are negatively influenced by high levels of wage inequality. -- wage dispersion ; effort ;...

This paper studies how external incentives can help agents to coordinate in summary-statistic games. Agents follow a myopic best-reply rule and face a trade-off between efficiency and strategic uncertainty. A principal can help agents to coordinate on the Pareto optimal equilibrium by monitoring...

As we have demonstrated in a recent laboratory experiment [see Sebald and Walzl (2012)], individuals tend to sanction others who subjectively evaluate their performance whenever this assessment falls short of the individual's self-evaluation even if their earnings are unaffected by the...