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We analyze optimal labor contracts when the worker is inequity averse towards the employer. Welfare is maximized for an equal sharing rule of surplus between the worker and the firm. That is, profit sharing is optimal even if effort is contractible. If the firm can make a take-it-or leave-it...
Persistent link: https://www.econbiz.de/10010341624
We present a model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the...
Persistent link: https://www.econbiz.de/10010250173
paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade …-off between getting the agent to exert effort and ensuring that this effort is used well. The theory covers various moral …
Persistent link: https://www.econbiz.de/10010344596
We explore how inherent preferences for reciprocity and repeated interaction interact in an optimal incentive system. Developing a theoretical model of a long-term employment relationship, we first show that reciprocal preferences are more important when an employee is close to retirement. At...
Persistent link: https://www.econbiz.de/10011718616
We present a model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the...
Persistent link: https://www.econbiz.de/10013057261
This study examines the relation between CEO tournament incentives, proxied by the difference between CEO pay and the median pay of the senior executives of a given firm, and corporate debt contracting. We find negative relations between CEO pay gap and the cost of debt and default risk, and a...
Persistent link: https://www.econbiz.de/10014235416
Persistent link: https://www.econbiz.de/10001229532
In our model, an agent produces an outcome by a costly effort and then distributes it among heterogeneous users. The agents̕ payoff is the weighted sum of the users ̕shares and the coefficient reflecting their heterogeneity. When the agent neglects users ̕heterogeneity the game leads to an...
Persistent link: https://www.econbiz.de/10002520792
Persistent link: https://www.econbiz.de/10009304202
Persistent link: https://www.econbiz.de/10003473917