Altruism and Relational Incentives in the Workplace

Arbeitspapier

This paper studies how altruism between managers and employees affects 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 con- tract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that altruism undermines the credibility of a threat of dis- missal but strengthens the credibility of a bonus. Among others, these two mechanisms imply that higher altruism sometimes leads to higher bonuses, while lower altruism may increase productivity and players utility in equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 7363

Classification and Topics

• 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 ; incentives ; relational contracts ; efficiency wages ; subjective performance evaluation ; Nash bargaining

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Dur, Robert A. J. ; Tichem, Jan
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/80570
• Last update: 20.09.2024, 8:20 AM CEST