Optimal Incentives for Teams
- (pp. 525-541)
AbstractMuch of the existing theory of incentives describes a static relationship that lasts for just one transaction. This static assumption is not only unrealistic, but the resulting predictions appear to be at odds with many work organizations. The current paper introduces possible long-term interaction among agents, and studies how the design of explicit incentives and work organizations can exploit, and interact with, the implicit incentives generated by the repeated interaction of the agents. The optimal incentive scheme is shown to display observed features of the increasingly popular "teams," such as the use of low-powered, group incentives.
CitationChe, Yeon-Koo, and Seung-Weon Yoo. 2001. "Optimal Incentives for Teams." American Economic Review, 91 (3): 525-541. DOI: 10.1257/aer.91.3.525
- M54 Personnel Economics: Labor Management
- D23 Organizational Behavior; Transaction Costs; Property Rights
- J33 Compensation Packages; Payment Methods
- J41 Labor Contracts