| 来源类型 | Discussion paper
|
| 规范类型 | 论文
|
| 来源ID | DP11538
|
| DP11538 Relative Pay for Non-Relative Performance: Keeping up with the Joneses with Optimal Contracts |
| Ron Kaniel; Peter DeMarzo
|
| 发表日期 | 2016-09-26
|
| 出版年 | 2016
|
| 语种 | 英语
|
| 摘要 | We consider a multi-agent contracting setting when agents have “keeping up with the Joneses” (KUJ) preferences. Because productivity is affected by common shocks, it is optimal to base pay on performance relative to a benchmark. But when agents and care about how their pay compares to others’, relative performance evaluation increases agents’ perceived risk. We show that when a single principal (or social planner) can commit to a public contract, the optimal contract hedges the risk of the agent’s relative wage without sacrificing efficiency. While output is unchanged, hedging makes the contracts appear inefficient in the sense that performance is inadequately benchmarked. We also show that when there are multiple principals, or the principal is unable to commit, efficiency is undermined. In particular, KUJ effects induce a “rat race” in which agents are more productive, but wages increase even more, reducing profits. Renegotiation exacerbates this inefficiency when KUJ effects are weak, but can enhance efficiency when KUJ effects are sufficiently strong. Finally, public disclosure of contracts across firms can cause output to collapse. |
| 主题 | Financial Economics
|
| 关键词 | Contract
Joneses
Pay performance
Relative
Manager
|
| URL | https://cepr.org/publications/dp11538
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| 来源智库 | Centre for Economic Policy Research (United Kingdom)
|
| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/540352
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推荐引用方式
GB/T 7714 |
Ron Kaniel,Peter DeMarzo. DP11538 Relative Pay for Non-Relative Performance: Keeping up with the Joneses with Optimal Contracts. 2016.
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