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The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems

Author

Listed:
  • Encinosa III, William E.

    (Agency for Health Care Research and Quality)

  • Gaynor, Martin

    (Carnegie Mellon University)

  • Rebitzer, James B.

    (Boston University)

Abstract

When working together, people engage in non-contractual and informal interactions that constitute the sociology of the group. We use behavioral models and a unique survey of medical groups to analyze how group sociology influences physician incentive pay and behavior. We conclude that informal interactions among group members influence pay practices and behaviors, but the relationship is complex. No single aspect of group sociology is entirely consistent with all the patterns in the data. Factors emphasized in the economic theory of agency, notably risk aversion, also shape pay policies but these factors cannot account for all the observed empirical relationships.

Suggested Citation

  • Encinosa III, William E. & Gaynor, Martin & Rebitzer, James B., 2005. "The Sociology of Groups and the Economics of Incentives: Theory and Evidence on Compensation Systems," IZA Discussion Papers 1851, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1851
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    References listed on IDEAS

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    More about this item

    Keywords

    incentives; social norms; physicians;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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