Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238243 
Year of Publication: 
2020
Series/Report no.: 
Working Papers in Economics and Statistics No. 2020-19
Publisher: 
University of Innsbruck, Research Platform Empirical and Experimental Economics (eeecon), Innsbruck
Abstract: 
We analyze the impact of social comparison on optimal contract design under imperfect labor market competition for managerial talent. Adding a disutility of social comparison as induced by a ranking of verifiable efforts to the multi-task model by Bénabou and Tirole (4238), we demonstrate that rankings can reduce welfare distortions of optimal screening contracts if the degree of competition for talent is sufficiently low. In contrast, a ranking unambiguously reduces welfare if the competition intensity is high and agents suffer from lagging behind while it can enhance welfare (depending on the fraction of high and low productivity types) if agents suffer from leading in a ranking (e.g., because the ranked activity is perceived as a substitute for other potentially pro-social activities).
Subjects: 
Incentive compensation
screening
imperfect labor market competition
socialcomparison
rankings
JEL: 
D02
D21
D43
D86
D91
G35
G41
J33
J41
Document Type: 
Working Paper

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