Altruism and Relational Incentives in the Workplace

Robert Dur, J Tichem

Research output: Contribution to journalArticleAcademicpeer-review

22 Citations (Scopus)

Abstract

This paper studies how altruism between managers and employees affects relational incentive contracts. To this end, we develop a simple dynamic principal–agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that altruism undermines the credibility of a threat of dismissal but strengthens the credibility of a bonus. Among others, these two mechanisms imply that higher altruism sometimes leads to higher bonuses, whereas lower altruism may increase productivity and players' utility in equilibrium.
Original languageEnglish
Pages (from-to)485-500
Number of pages16
JournalJournal of Economics and Management Strategy
Volume24
Issue number3
DOIs
Publication statusPublished - 2015

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