Incentives and discrimination: A functional optimization approach

Tetsutaro Hatakeyama
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Tetsutaro Hatakeyama: Graduate School of Economics, Keio University

No DP2025-003, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: In team production models, an optimal incentive scheme that guarantees workers’ effort investment can be discriminatory (Winter, 2004). We demonstrate how this trade-off in incentives and discrimination disappears in a complementary setting. In our model, as well as payment scheme for workers, the firm chooses a production technology, mapping from workers’ effort choice to the success probability of the project. Contrary to the known result, our firm-optimal incentive scheme does not discriminate any symmetric workers.

Keywords: team production; discrimination; incentives; production technology (search for similar items in EconPapers)
JEL-codes: C72 D23 D62 D63 J71 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2025-03-21
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