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Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn >
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http://hdl.handle.net/10419/38802
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| Title: | | Technology choice and incentives under relative performance schemes  |
| Authors: | | Kräkel, Matthias Schöttner, Anja |
| Issue Date: | | 2010 |
| Series/Report no.: | | Bonn econ discussion papers 2010,10 |
| Abstract: | | We identify a new problem that may arise when heterogeneous workers are motivated by relative performance schemes: If workers' abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly increase each worker's productivity. Due to the complementarity between ability and technology, under technology adoption the productivity of a more able worker increases more strongly than the productivity of a less able colleague, thereby reducing the motivation of both workers to exert effort under a relative incentive scheme. We show that this adverse incentive effect is dominant and, consequently, keeps the firm from introducing a better production technology if talent uncertainty is sufficiently high and/or monitoring of workers is sufficiently precise. |
| Subjects: | | complementarities heterogeneous workers production technology tournament |
| JEL: | | D82 D86 J33 M52 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn
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