Incentivizing by example and money

Thomas Bauer and Franz Wirl
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Thomas Bauer: University of Vienna

Central European Journal of Operations Research, 2021, vol. 29, issue 1, No 5, 89-111

Abstract: Abstract Leaders are role models that affect their employees’ efforts. The effect depends on how much an employee identifies with the “boss”. Since this degree of identification is private information of the employee, additional financial incentives must be provided. Therefore, we study a principal-agent problem in which the principal affects the agent’s effort by her own effort and by financial incentives. The resulting principal-agent problem has a few non-standard specifics such as: (i) bilateral externalities as the principal’s effort affects the agent and vice versa and (ii) endogenous reservation utility of the agent. Combined, this leads to non-trivial and interesting contracts.

Keywords: Personal identification; Non-monetary incentives; Leading by example; Principal-agent model (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10100-020-00726-1

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