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Incentives and discrimination: A functional optimization approach

Author

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  • Tetsutaro Hatakeyama

    (Graduate School of Economics, Keio University)

Abstract

In team production models, an optimal incentive scheme that guarantees workers’ effort investment can be discriminatory (Winter, 2004). We demonstrate how this trade-off in incentives and discrimination disappears in a complementary setting. In our model, as well as payment scheme for workers, the firm chooses a production technology, mapping from workers’ effort choice to the success probability of the project. Contrary to the known result, our firm-optimal incentive scheme does not discriminate any symmetric workers.

Suggested Citation

  • Tetsutaro Hatakeyama, 2025. "Incentives and discrimination: A functional optimization approach," Keio-IES Discussion Paper Series DP2025-003, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:dp2025-003
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    More about this item

    Keywords

    team production; discrimination; incentives; production technology;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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