Inequity Aversion and Team Incentives

Pedro Rey‐Biel
Authors registered in the RePEc Author Service: Pedro Rey-Biel

Scandinavian Journal of Economics, 2008, vol. 110, issue 2, 297-320

Abstract: We study optimal contracts in a simple model where employees are averse to inequity, as modeled by Fehr and Schmidt (1999). A “selfish” employer can profitably exploit envy or guilt by offering contracts which create inequity off‐equilibrium, i.e., when employees do not meet his demands. Such contracts resemble team and relative performance contracts. We derive conditions for inequity aversion to be in itself a reason to form work teams of distributionally concerned employees, even in situations in which effort is contractible.

Date: 2008
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Citations: View citations in EconPapers (71)

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https://doi.org/10.1111/j.1467-9442.2008.00540.x

Related works:
Working Paper: Inequity Version and Team Incentives (2007)
Working Paper: Inequity aversion and team incentives (2004)
Working Paper: Inequity Aversion and Team Incentives
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