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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26189
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| Title: | | The rise of individual performance pay  |
| Authors: | | Kvaloy, Ola Olsen, Trond |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2145 |
| Abstract: | | Why does individual performance pay seem to prevail in human capital intensive industries? We present a model that may explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer dependent incentive regimes when agents possess indispensable human capital. We show that the larger the share of values that the agents can hold-up, the lower is the implementable degree of peer dependent incentives. In a setting with team effects complementary tasks and peer pressure, respectively we show that while team-based incentives are optimal if agents are dispensable, it may be costly, and in fact suboptimal, to provide team incentives once the agents become indispensable. |
| Subjects: | | relational contracts multiagent moral hazard indispensable human capital |
| JEL: | | D23 J33 L14 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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