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| Author: | Rey-Biel, P. |
| Title: | Inequity aversion and team incentives |
| Journal: | Scandinavian Journal of Economics
2008 : VOL. 110: 2, p. 297-320 |
| Index terms: | incentives inequality team work |
| Language: | eng |
| Abstract: | This paper studies optimal contracts in a simple model where employees are averse to inequity. A "selfish" employer can profitably exploit envy or guilt by offering contracts which create inequity off-equilibrium, that is, when employees do not meet his/her demands. Such contracts resemble team and relative performance contracts. The study derives conditions for inequity to be in itself a reason to form work teams of distributionally concerned employees, even in situations in which effort is contractible. |
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