Economics at your fingertips  

Inequity-averse agents’ deserved concerns under the linear contract: a social network setting

Biao Luo, Chengyuan Wang () and Tieshan Li
Additional contact information
Biao Luo: University of Science and Technology of China
Chengyuan Wang: University of Science and Technology of China
Tieshan Li: Concordia University

Annals of Operations Research, 2018, vol. 268, issue 1, 129-148

Abstract: Abstract We model how inequity-averse agents’ deserved concerns generated by a social network setting impact on their behaviors and interactions under linear contract. Based on self-perception in the network, the agent will have deserved perception on the two essential elements of linear contract, i.e., deserved fixed wage and deserved output sharing, and thus generate deserved pay gap. By incorporating deserved pay gap into pay comparisons, we obtain three main findings: (1) perceived relative incentive fairness or inequity over the entire networks decides agents’ effort competition. When agents perceive over-incentivized over the networks, the heterogeneity in the network will stimulate agents to compete. While in an overall under-incentivized network, the agent tends to compete with homogenous ones, and will instead reduce effort with increasing heterogeneity in the network; (2) the normal conclusion that inequity aversion can enhance agent effort will be reversed when the agent perceives under-incentivized; and (3) wage compression remains valid, yet we provide a definitive range for the optimal incentive level.

Keywords: Inequity aversion; Deserved concerns; Social networks; Behavioral agency model; Operating systems (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:spr:annopr:v:268:y:2018:i:1:d:10.1007_s10479-017-2436-0