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Incentives and status

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  • Dey, Oindrila
  • Banerjee, Swapnendu

Abstract

This paper characterizes the structure of monetary incentives in an organization with varying differences in employee status. With the help of a moral hazard framework with limited liability we show that for agents with lower outside option increased status leads to lower incentive pay whereas exactly the opposite happens for agents with higher outside option. For agents with very high status such that the limited liability doesn’t bind, an exogenous increase in status level leads to an unambiguous decrease in optimal incentive payment.

Suggested Citation

  • Dey, Oindrila & Banerjee, Swapnendu, 2014. "Incentives and status," MPRA Paper 58399, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58399
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    References listed on IDEAS

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    Cited by:

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    6. Sultan Sikandar Mirza & Tanveer Ahsan, 2020. "Corporates' strategic responses to economic policy uncertainty in China," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 375-389, February.
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    8. Zheng, Xiao-Xue & Li, Deng-Feng & Liu, Zhi & Jia, Fu & Sheu, Jiuh-Biing, 2019. "Coordinating a closed-loop supply chain with fairness concerns through variable-weighted Shapley values," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 227-253.
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    More about this item

    Keywords

    Status; incentives; motivation; moral hazard; optimal contract;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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