Resource title

The rise of individual performance pay

Resource image

image for OpenScout resource :: The rise of individual performance pay

Resource description

Why does individual performance pay seem to prevail in human capital intensive industries? We present a model that may explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer dependent incentive regimes when agents possess indispensable human capital. We show that the larger the share of values that the agents can hold-up, the lower is the implementable degree of peer dependent incentives. In a setting with team effects complementary tasks and peer pressure, respectively we show that while team-based incentives are optimal if agents are dispensable, it may be costly, and in fact suboptimal, to provide team incentives once the agents become indispensable.

Resource author

Ola Kvaloy, Trond Olsen

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26189

Resource license

Adapt according to the presented license agreement and reference the original author.