Contractual and organizational structure with reciprocal agents

Arbeitspapier

Empirically, compensation systems generate substantial effort despite weak monetary incentives. We consider reciprocal motivations as a source of incentives. We solve for the optimal contract in the basic principal-agent problem and show that reciprocal motivations and explicit performance-based pay are substitutes. A firm endogenously determines the mix of the two sources of incentives to best induce effort from the agent. Analyzing extended versions of the model allows us to examine how organizational structure impacts the effectiveness of reciprocity and to derive specific empirical predictions. We use the UK-WERS workplace compensation data set to confirm the predictions of our extended model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2415

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Compensation Packages; Payment Methods ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: Optimal contracts ; reciprocity ; organizational structure ; Vergütungssystem ; Leistungsorientierte Vergütung ; Anreizvertrag ; Agency Theory ; Leistungsmotivation ; Reziprozität ; Agency Theory ; Organisationsstruktur ; Theorie ; Schätzung ; Großbritannien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Englmaier, Florian ; Leider, Stephen
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/26460
• Last update: 10.03.2025, 11:44 AM CET