A behavioral Explanation for the Relative Performance Evaluation Puzzle

Chaim Fershtman, Hans Hvide and Yoram Weiss

Annals of Economics and Statistics, 2003, issue 71-72, 317-345

Abstract: We study the effects of competitive preferences, where Chief Executive Officers (CEOs) compare their wage to the wage of other CEOs within the same industry, and derive utility from being ahead of them. We show that such social concerns work in the direction of CEO wages being positively correlated, in contrast to the Relative Performance Evaluation hypothesis, but consistent with several empirical studies.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2003:i:71-72:p:317-345

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