 Technology choice, relative performance pay, and worker heterogeneityMatthias Kräkel and Anja Schöttner Journal of Economic Behavior & Organization, 2010, vol. 76, issue 3, 748-758 Abstract: Abstract We identify a new problem that may arise when heterogeneous workers are motivated by relative performance pay: if workers' abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly increase each worker's productivity. Due to the complementarity between ability and technology, under technology adoption the productivity of a more able worker increases more strongly than the productivity of a less able colleague. As a consequence, both workers' motivation to exert effort is reduced. We show that this adverse incentive effect is dominant and, consequently, keeps the firm from introducing a better production technology if talent uncertainty is sufficiently high and/or monitoring of workers is sufficiently precise. Keywords: Complementarities; Heterogeneous; workers; Production; technology; Relative; performance; pay (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:76:y:2010:i:3:p:748-758 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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