Arbeitspapier

Social Relations and Relational Incentives

This paper studies how social relationships between managers and employees affect relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that good social relationships undermine the credibility of a threat of dismissal but strengthen the credibility of a bonus. Among others, these two mechanisms imply that better social relationships sometimes lead to higher bonuses, while worse social relationships may increase productivity and players' utility in equilibrium.

Language
Englisch

Bibliographic citation
Series: Tinbergen Institute Discussion Paper ; No. 12-054/1

Classification
Wirtschaft
Organizational Behavior; Transaction Costs; Property Rights
Compensation Packages; Payment Methods
Personnel Economics: Compensation and Compensation Methods and Their Effects
Personnel Economics: Labor Contracting Devices
Subject
Altruism
spite
social relations
incentives
relational contracts
efficiency wages
subjective performance evaluation
Nash bargaining
Arbeitsbeziehungen
Soziale Beziehungen
Leistungsanreiz
Unvollständiger Vertrag
Prinzipal-Agent-Theorie
Dynamisches Spiel
Verhandlungstheorie
Theorie

Event
Geistige Schöpfung
(who)
Dur, Robert
Tichem, Jan
Event
Veröffentlichung
(who)
Tinbergen Institute
(where)
Amsterdam and Rotterdam
(when)
2012

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dur, Robert
  • Tichem, Jan
  • Tinbergen Institute

Time of origin

  • 2012

Other Objects (12)