Managing social comparison costs in organizations

Arbeitspapier

This paper studies how organizations manage the social comparisons that arise when their employees' pay and tasks, and hence their status vis-à-vis peers, differ. We show that under a "pay transparency policy", the organization may compress pay and distort the employees' tasks to minimize social comparison costs. We subsequently show that if the organization can credibly commit to informal agreements, it may remove social comparisons by implementing a "pay secrecy" policy. Under such a policy, the organization makes employees "officially equal" by granting them similar formal terms, while optimally differentiating their pay through self-enforcing informal adjustments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2018-25

Classification and Topics

• Classification: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Personnel Economics: Compensation and Compensation Methods and Their Effects ; Personnel Economics: Labor Management
• Subject: Social Comparisons ; Organization Design ; Informal Contracts ; Formal Contracts

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Contreras, Óscar F. ; Zanarone, Giorgio
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/240666
• Last update: 10.03.2025, 11:42 AM CET