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Social norms and optimal incentives in firms

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Author Info
Huck, Steffen (Royal Holloway, Dept. of Economics)
Kübler, Dorothea (Humboldt University Berlin, Dept. of Economics)
Weibull, Jörgen () (Dept. of Economics, Stockholm School of Economics)

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Abstract

This paper deals with the interplay between economic incentives and social norms in firms. We outline a simple model of team production and provide preliminary results on linear incentive schemes in the presence of a social norm that may cause multiple equilibria. The effect of the social norm on the optimal bonus rate is discussed, as well as the effectiveness of temporary changes in the bonus rate as a means to move a firm from a bad to a good equilibrium.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 466.

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Length: 12 pages
Date of creation: 16 Oct 2001
Date of revision:
Handle: RePEc:hhs:hastef:0466

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Related research
Keywords: social norms; incentives; contracts;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine. [Downloadable!]
  2. Barron, John M & Gjerde, Kathy Paulson, 1997. "Peer Pressure in an Agency Relationship," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 234-54, April. [Downloadable!] (restricted)
  3. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
    Other versions:
  4. Oliver Hart, 2001. "Norms and the Theory of the Firm," NBER Working Papers 8286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February. [Downloadable!] (restricted)
    Other versions:
  6. Oliver Hart, 2001. "Norms and the Theory of the Firm," Harvard Institute of Economic Research Working Papers 1923, Harvard - Institute of Economic Research. [Downloadable!]
  7. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August. [Downloadable!] (restricted)
    Other versions:
  8. Besley, Timothy & Coate, Stephen, 1992. "Understanding welfare stigma: Taxpayer resentment and statistical discrimination," Journal of Public Economics, Elsevier, vol. 48(2), pages 165-183, July. [Downloadable!] (restricted)
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  9. Iris Bohnet & Bruno S. Frey & Steffen Huck, . "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers iewwp052, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  10. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October. [Downloadable!] (restricted)
  11. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December. [Downloadable!] (restricted)
  12. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Küpper, Hans-Ulrich & Sandner, Kai, 2008. "Differences in Social Preferences - Are They Profitable for the Firm?," Discussion Papers in Business Administration 2122, University of Munich, Munich School of Management. [Downloadable!]
  2. Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA. [Downloadable!]
    Other versions:
  3. Fabio Sabatini, 2005. "Does Social Capital Improve Labour Productivity in Small and Medium Enterprises?," Others 0508005, EconWPA. [Downloadable!]
  4. Weibull, Jörgen & Villa, Edgar, 2005. "Crime, punishment and social norms," Working Paper Series in Economics and Finance 610, Stockholm School of Economics. [Downloadable!]
  5. Luigi Bonaventura, 2005. "The Underground Labor Market between Social Norms and Economic Inventives," Labor and Demography 0501008, EconWPA. [Downloadable!]
  6. Rupert Sausgruber, 2005. "Testing for Team Spirit - An Experimental Study," Experimental 0508001, EconWPA. [Downloadable!]
  7. Gerd Muehlheusser & Andreas Roider, 2004. "Black Sheep and Walls of Silence," Bonn Econ Discussion Papers bgse17_2005, University of Bonn, Germany, revised Jun 2005. [Downloadable!]
    Other versions:
  8. Patricia Crifo & Marc-Arthur Diaye, 2005. "The Composition of Compensation Policy: From Cash to Fringe Benefits," Working Papers hal-00243030_v1, HAL. [Downloadable!]
  9. Dirk Sliwka, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Topi Miettinen, 2007. "Moral Hazard and Clear Conscience," Jena Economic Research Papers in Economics 2007-008, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics, Thueringer Universitaets- und Landesbibliothek. [Downloadable!]
    Other versions:
  11. Radosveta Ivanova-Stenzel & Dorothea Kübler, 2005. "Courtesy and Idleness: Gender Differences in Team Work and Team Competition," Discussion Papers 91, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  12. repec:att:wimass:1920220 is not listed on IDEAS
  13. Fabio Sabatini, 2005. "Does Social Capital Improve Labour Productivity in Small and Medium Enterprises?," Others 0509011, EconWPA. [Downloadable!]
  14. Abigail Barr & Pieter Serneels, 2004. "Wages and Reciprocity in the Workplace," Development and Comp Systems 0409064, EconWPA. [Downloadable!]
  15. Burkhard Hehenkamp & Oddvar Kaarbøe, 2004. "When the Talented Should Receive Weaker Incentives: Peer Pressure in Teams," Discussion Papers in Economics 04_02, University of Dortmund, Department of Economics. [Downloadable!]
  16. Topi Miettinen, 2006. "Promises and Conventions - An Approach to Pre-play Agreements," Papers on Strategic Interaction 2006-29, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  17. Falk, Armin & Ichino, Andrea, 2003. "Clean Evidence on Peer Pressure," IZA Discussion Papers 732, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  18. Sandner, Kai, 2008. "Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies," Discussion Papers in Business Administration 2112, University of Munich, Munich School of Management. [Downloadable!]
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