Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary incentives (either because rewards increase or effort cost...

Incentives in Tournaments with Endogenous Prize Selection Tournament incentive schemes offer payments dependent on relative performance and thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to destroy the production of his competitors in order to improve the own relative position. In the present study we investigate whether ...

The NHS Plan welcomes the use of team rewards but does not specify how team based incentives are to be implemented or make clear what types of teams such incentives are to be given to. This paper looks for insights from economic theory on how to define teams and optimal incentive schemes within them. We give a brief description of the incentive mechanisms suggested in the NHS Plan and discuss t...

Treating Equals Unequally: Incentives in Teams, Workers’ Motivation and Production Technology The importance of fair and equal treatment of workers is at the heart of the debate in organizational management. In this regard, we study how reward mechanisms and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially increa...

Article history: Received 26 October 2012 Available online 23 October 2015 JEL classification: J41 J24 D21

This paper uses a measure of skill mismatch to separate wage flexibility from confounding variation in wages driven by differences job quality over the business cycle. I first show that high cyclicality switchers' goes beyond cyclical movements mismatch. Then uncover large across distribution. Among incumbent workers, are acyclical good matches but procyclical poor matches, particular for overq...

This paper characterizes public and private monitoring technologies with respect to which the efficient outcome is approximately implementable in team production by way of ex post budget-balanced linear transfers. JEL Classification: D21, D23, D82.

We show that in microdata, as well a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations unemployment volatility. Allowing an empirically relevant degree drives volatility the vacancies tightness to data. Thus, rigidity newly hired is not sufficient statistic determining effect macroeconomic outcomes. This fin...

Is firm behavior mainly driven by its environment or rather the characteristics of managers? We develop a cognitive theory manager fixed effects, where allocation managerial attention determines behavior. show that in complex environments, endogenous exacerbates effects. Small differences expertise then may result dramatically different behavior, as managers devote scarce way amplifies initial ...

This paper models employment relationship as a repeated principal-agent problem with private evaluation. The efficient contracts exhibit correlated movements between lagged wage and current effort that are consistent with the positive feedback between pay and morale in practice. Low morale therefore is an integral part of a well-functioning relationship. (JEL: C73, D82, J41, L14 )