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Organizational power: Should remuneration heterogeneity mirror hierarchy?

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  • Philipp E. Otto

    (European University Viadrina)

  • Friedel Bolle

    (European University Viadrina)

Abstract

We model and experimentally investigate effort levels in team production as a public good game with heterogeneous remuneration. In a hierarchically organized firm, team leaders (allocators) determine the effort levels of all team members. When the allocator receives equal payment or twice as much as the other workers, this results in the same team production, but when the allocator receives only half of what the other workers receive, team production is diminished.

Suggested Citation

  • Philipp E. Otto & Friedel Bolle, 2016. "Organizational power: Should remuneration heterogeneity mirror hierarchy?," Review of Economic Design, Springer;Society for Economic Design, vol. 20(3), pages 187-205, September.
    • Handle: RePEc:spr:reecde:v:20:y:2016:i:3:d:10.1007_s10058-016-0189-x
    DOI: 10.1007/s10058-016-0189-x
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    More about this item

    Keywords

    Public good participation; Hierarchical delegation; Principal-agent models; Employee contribution; Payment differentiation;
    All these keywords.

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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