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Many experiments indicate that most individuals are not purely motivated by material self interest, but also care about the well being of others. In this paper we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse agents exert higher effort(More)
Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence We provide an explanation for peer pressure in teams based on inequity aversion. Analyzing a two-period model with two agents, we find that the effect of inequity aversion strongly depends on the information structure. When contributions are unobservable, agents(More)
Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes An explanation for motivation crowding-out phenomena is developed in a social preferences framework. Besides selfish and fair or altruistic types a third type of agents is introduced: These ‘conformists' have social preferences if they believe that sufficiently many of the others(More)
We consider a situation where an agent’s effort is monitored by a supervisor who cares for the agent’s well–being. This is modeled by incorporating the agent’s utility into the utility function of the supervisor. The first–best solution can be implemented even if the supervisor’s preferences are unknown. The corresponding optimal contract is similar to what(More)
Performance Appraisals and the Impact of Forced Distribution: An Experimental Investigation A real effort experiment is investigated in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. We compare a baseline treatment in which supervisors were not restricted in their rating(More)
Should You Allow Your Agent to Become Your Competitor? On Non-Compete Agreements in Employment Contracts We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal as the possibility to leave the(More)
Individual and Job-Based Determinants of Performance Appraisal: Evidence from Germany We investigate the use of performance appraisal (PA) in German Firms. First, we derive hypotheses on individual and job based determinants of PA usage. Based on a representative German data set on individual employees, we test these hypotheses and also explore the impact(More)
Reference Dependent Preferences and the Impact of Wage Increases on Job Satisfaction: Theory and Evidence The impact of wage increases on job satisfaction is explored theoretically and empirically. To do this, we apply a utility function that rises with the absolute wage level as well as with wage increases. It is shown that when employees can influence(More)
Performance Pay and Risk Aversion A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of data, there has so far been(More)