Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80570
Authors: 
Dur, Robert A. J.
Tichem, Jan
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7363
Abstract: 
This paper studies how altruism between managers and employees affects relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The con- tract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that altruism undermines the credibility of a threat of dis- missal but strengthens the credibility of a bonus. Among others, these two mechanisms imply that higher altruism sometimes leads to higher bonuses, while lower altruism may increase productivity and players utility in equilibrium.
Subjects: 
altruism
spite
incentives
relational contracts
efficiency wages
subjective performance evaluation
Nash bargaining
JEL: 
D23
J33
M52
M55
Document Type: 
Working Paper

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