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On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan
On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan
ESI Working Papers
Influence costs models predict that organizations should limit managerial discretion to deter organizational members from engaging in wasteful politicking activities. We test this conjecture in a controlled, yet realistic, work environment in which we allow employees to influence managers’ decisions about rewards. We find that influence activities are pervasive and significantly lower organizational performance. Organizational performance suffers because principals offer weaker incentives when influence activities are allowed than when they are not. Importantly, we show that equal pay incentive schemes perform better when influence activities are available than when they are not. Our results thus support the idea that prevalent …
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
ESI Working Papers
Despite its central role in the theory of incentives, empirical evidence of a tradeoff between risk and incentives remains scarce. We reexamine this empirical puzzle in a controlled laboratory environment so as to isolate possible confounding factors encountered in the field. In line with the principal-agent model, we find that principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier. Unexpectedly, agents produce substantially more in the noisy environment than in the baseline despite lesser pay for performance. We show that this result can be accounted for by introducing agents’ loss aversion in …