Optimal Incentive Contracts when Workers envy their Boss

Arbeitspapier

A worker's utility may increase with his income, but envy can make his utility decline with his employer's income. This article uses a principal-agent model to study profit-maximizing contracts when a worker envies his employer. Envy tightens the worker's participation constraint and so calls for higher pay and/or a softer effort requirement. Moreover, a firm with an envious worker can benefit from profit sharing, even when the worker's effort is fully contractible. We discuss several applications of our theoretical work: envy can explain why a lower-level worker is awarded stock options, why incentive pay is lower in nonprofit organizations, and how governmental production of a good can be cheaper than private production.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 04-046/1

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Wage Level and Structure; Wage Differentials ; Compensation Packages; Payment Methods ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Thema: Principal-agent ; Envy ; Compensation ; Contracts ; Profit-sharing ; Stock options ; Public vs. private production ; Anreizvertrag ; Prinzipal-Agent-Theorie ; Moral Hazard ; Neid

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dur, Robert ; Glazer, Amihai
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/86527
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ