Technology Choice and Incentives under Relative Performance Schemes

Arbeitspapier

We identify a new problem that may arise when heterogeneous workers are motivated by relative performance schemes: If workers’ abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly increase each worker’s productivity. Due to the complementarity between ability and technology, under technology adoption the productivity of a more able worker increases more strongly than the productivity of a less able colleague, thereby reducing the motivation of both workers to exert effort under a relative incentive scheme. We show that this adverse incentive effect is dominant and, consequently, keeps the firm from introducing a better production technology if talent uncertainty is sufficiently high and/or monitoring of workers is sufficiently precise.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 10/2010

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Economics of Contract: Theory ; Compensation Packages; Payment Methods ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: complementarities ; heterogeneous workers ; production technology ; tournament ; Technologiewahl ; Leistungsorientierte Vergütung ; Hochqualifizierte Arbeitskräfte ; Arbeitsproduktivität ; Leistungsmotivation ; Extensives Spiel ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kräkel, Matthias ; Schöttner, Anja
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38802
• Last update: 10.03.2025, 11:44 AM CET