2010-01-05
Gift-Exchange, Incentives, and Heterogeneous Workers
Publication
Publication
Using a formal principal-agent model, I investigate the relation between monetary gift-exchange and incentive pay, while allowing for worker heterogeneity. I assume that some agents care more for their principal when they are convinced that the principal cares for them. Principals can signal their altruism by offering a generous contract, consisting of a base salary and an output-contingent bonus. I find that principals signal their altruism by offering relatively weak incentives and a relatively high expected total compensation, but the latter does not necessarily hold. Furthermore, since some agents do not reciprocate the principal's altruism, the principal may find it optimal to write a contract that simultaneously signals his altruism and screens reciprocal worker types. I show that such a contract is characterised by excessively strong incentives and relatively high expected total compensation.
Additional Metadata | |
---|---|
, , | |
, , , | |
Tinbergen Institute | |
hdl.handle.net/1765/17666 | |
Tinbergen Institute Discussion Paper Series | |
Discussion paper / Tinbergen Institute | |
Organisation | Tinbergen Institute |