Interpersonal Comparison, Status and Ambition in Organisations

Andrea Patacconi, Florian Ederer and Mit

No 222, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper argues that the prevalence of compensation systems which reward winners without explicitly identifying losers can be rationalized by workers` concern for relative payoffs. If the workers` participation constraints are binding, the firm must compensate its employees for the disutility that they may derive from low status. It follows that profit-maximizing employers may be particularly reluctant to penalize or give poor performance evaluation to employees. The theory also sheds light on many other puzzling features of incentive schemes in practice, such as small salary premia, rat races, job title proliferation, the gender wage gap, the gender/happiness paradox and the widespread use of tournaments as a sorting device.

Keywords: Reference-Dependent Preferences; Status; Ambition; Expectations; Tournaments (search for similar items in EconPapers)
JEL-codes: J31 J41 (search for similar items in EconPapers)
Date: 2005-02-01
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Interpersonal comparison, status and ambition in organizations (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:222

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