Incentives and Relative Wealth Concerns-Reference-Cited by-同舟云学术

Incentives and Relative Wealth Concerns

Published:2014-12 Issue:04 Volume:04 Page:1450013
ISSN:2010-1392
Container-title:Quarterly Journal of Finance
language:en
Short-container-title:Quart. J. of Fin.

Author:

Miglietta Salvatore¹

Affiliation:

1. Department of Financial Economics, BI Norwegian Business School, Nydalsveien 37, 0442 Oslo, Norway

Abstract

If risk-averse agents prefer to be wealthier both in absolute terms and relative to their peers (relative wealth concerns), then (1) they prefer positive correlation, and (2) they are averse to negative correlation between their payoffs. A laboratory experiment shows that subjects prefer positively correlated payoffs. Subjects interested in relative payoffs display stronger aversion to negatively correlated payoffs. This novel evidence has implications that motivate firms' extensive use of broad-based incentive plans and firms' scarce use of Relative Performance Evaluation (RPE) contracts.

Publisher

World Scientific Pub Co Pte Lt

Subject

Strategy and Management,Economics and Econometrics,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S201013921450013X

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2. The Fair Wage-Effort Hypothesis and Unemployment

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