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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/10419/26460
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| Title: | | Contractual and organizational structure with reciprocal agents  |
| Authors: | | Englmaier, Florian Leider, Stephen |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2415 |
| Abstract: | | Empirically, compensation systems generate substantial effort despite weak monetary incentives. We consider reciprocal motivations as a source of incentives. We solve for the optimal contract in the basic principal-agent problem and show that reciprocal motivations and explicit performance-based pay are substitutes. A firm endogenously determines the mix of the two sources of incentives to best induce effort from the agent. Analyzing extended versions of the model allows us to examine how organizational structure impacts the effectiveness of reciprocity and to derive specific empirical predictions. We use the UK-WERS workplace compensation data set to confirm the predictions of our extended model. |
| Subjects: | | Optimal contracts reciprocity organizational structure |
| JEL: | | D82 J33 M52 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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