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Pay for Performance with Motivated Employees

Claudia Cerrone () and Ester Manna ()

The B.E. Journal of Economic Analysis & Policy, 2018, vol. 18, issue 1, 8

Abstract: Heterogeneity in intrinsic motivation affects the optimal contract offered to employees in teams. Under individual incentives, the effort exerted by both motivated and selfish employees is distorted. This distortion is mitigated if employees receive a wage based on team performance. As a result, the principal prefers to use team incentives, while motivated employees are better off with individual incentives.

Keywords: adverse selection; intrinsic motivation; individual and team incentives (search for similar items in EconPapers)
JEL-codes: D03 D82 D86 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1515/bejeap-2017-0190

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The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

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