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Promotions as Work Incentives

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  • Berkowitz, M K
  • Kotowitz, Y

Abstract

Why do professional partnerships, like law firms, accounting practices, and management consulting groups to name a few, rely almost exclusively on promotions for incentives and do not typically use incentive pay to motivate their associates? The authors compare three schemes (relative-input-based piece rates, tournaments with monetary prizes, and tournaments with promotions as prizes) within an environment characterized by group production and double moral hazard induced by possible wealth constraints on the supervisors. They find that the difficulty in implementing promotion tournaments is possibly an important reason for the existence of firms. Copyright 1993 by Oxford University Press.

Suggested Citation

  • Berkowitz, M K & Kotowitz, Y, 1993. "Promotions as Work Incentives," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 342-353, July.
    • Handle: RePEc:oup:ecinqu:v:31:y:1993:i:3:p:342-53
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    Cited by:

    1. Huffman, Wallace E. & Just, Richard E., 1995. "Transactions Costs, Fads, and Politically Motivated Misdirection in Agricultural Research," Working Papers 197818, University of Maryland, Department of Agricultural and Resource Economics.
    2. Ugarte, Armando & Oren, Shmuel, 2000. "Coordination of internal supply chains in vertically integrated high-tech manufacturing organizations (HTMOs)," International Journal of Production Economics, Elsevier, vol. 67(3), pages 235-252, October.
    3. Giorgio Coricelli & Luigi Luini, 1999. "Double Moral Hazard: an Experiment on Warranties," CEEL Working Papers 9901, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.

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