Intrinsic Motivation and Real Individual Piecewise Linear Wages
Marie-Christine Thaize Challier
.
DOI: 10.4236/me.2011.23038   PDF    HTML     6,538 Downloads   10,618 Views   Citations

Abstract

This paper presents a simple framework for understanding the prevalence of basic piecewise linear wages in the real world. It extends the analysis of individual piecewise linear wages to environments in which the participation constraint is reinforced by intrinsic motivations. It identifies a class of “acceptable” piecewise linear wages verifying both this reinforced participation constraint and the adverse selection constraint. Among them, it restricts the characterization to a class of real-world wages. Through the advantages and drawbacks of certain acceptable piecewise linear wages, it helps explaining why they are common in the real world even if they are not optimal.

Share and Cite:

M. Challier, "Intrinsic Motivation and Real Individual Piecewise Linear Wages," Modern Economy, Vol. 2 No. 3, 2011, pp. 344-353. doi: 10.4236/me.2011.23038.

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1] O. D. Hart and B. Holmstr?m, “The Theory of Contracts,” Advances in Economic Theory: Fifth World Congress, Cambridge University Press, Cambridge, 1987. doi:10.1017/CCOL0521340446.003
[2] E. F. Fama, “Time, Salary, and Incentive Payoffs in Labor Contracts,” Journal of Labor Economics, Vol. 9, No 1, 1991, pp. 25-44. doi:10.1086/298257
[3] E. P. Lazear, “Personnel Economics,” The MIT Press, Cambridge, 1996.
[4] E. P. Lazear, “Personnel Economics for Managers,” Wiley, New York, 1998.
[5] E. P. Lazear, “Personnel Economics: Past Lessons and Future Directions,” Journal of Labor Economics, Vol. 17, No. 2, 1999, pp. 199-236. doi:10.1086/209918
[6] D. Parent, “Methods of Pay and Earnings: A Longitudinal Analysis,” Industrial and Labor Relations Review, Vol. 53, No. 1, 1999, pp. 71-86. doi:10.2307/2696162
[7] D. Collings, T. Dundon and M. Marchington (Eds.), “Human Resource Management Journal,” Special Edition on Performance and Reward, Vol. 18, No. 4, 2008.
[8] P. Picard, “On the Design of Incentive Schemes under Moral Hazard and Adverse Selection,” Journal of Public Economics, Vol. 33, No. 3, 1987, pp. 305-331. doi:10.1016/0047-2727(87)90058-2
[9] J.-J. Laffont and J. Tirole, “The Dynamics of Incentive Contracts,” Econometrica, Vol. 56, No. 5, 1988, pp. 1153- 1175. doi:10.2307/1911362
[10] F. Balmaceda, “Uncertainty, Pay for Performance, and Asymmetric Information,” Journal of Law, Economics and Organization, Vol. 25, No. 2, 2009, pp. 400-441. doi:10.1093/jleo/ewn022
[11] R. Gibbons, “Incentives in Organizations,” Journal of Economic Perspectives, Vol. 12, No. 4, 1998, pp. 115- 132.
[12] C. Prendergast, “The Provision of Incentives in Firms,” Journal of Economic Literature, Vol. 37, 1999, pp. 7-63. doi:10.1257/jel.37.1.7
[13] B. Holmstr?m and P. Milgrom, “Aggregation and Linearity in the Provision of Intertemporal Incentives,” Econometrica, Vol. 55, No. 2, 1987, pp. 303-328. doi:10.2307/1913238
[14] E. L. Deci, “Intrinsic Motivation,” Plenum Press, New York, 1975.
[15] E. L. Deci and R. M. Ryan, “Intrinsic Motivation and Self-Determination in Human Behavior,” Plenum Press, New York, 1985.
[16] M. E. P. Seligman, “Authentic Happiness: Using the New Positive Psychology to Realize Your Potential for Lasting Fulfillment,” Free Press, New York, 2002.
[17] C. Peterson and M. E. P. Seligman, “Character Strengths and Virtues: A Handbook and Classification,” Oxford University Press, Oxford, 2004.
[18] B. Frey, “Not Just for the Money. An Economic Theory of Personal Motivation,” Edward Elgar, Cheltenham, 1997.
[19] D. Kreps, “Intrinsic Motivation and Extrinsic Incentives,” American Economic Review, Vol. 87, No. 2, 1997, pp. 359-364.
[20] U. Gneezy and A. Rustichini, “Pay Enough or Don’t Pay at All,” Quarterly Journal of Economics, Vol. 115, No. 3, 2000, pp. 791-810. doi:10.1162/003355300554917
[21] R. Bénabou and J. Tirole, “Intrinsic and Extrinsic Motivation,” Review of Economic Studies, Vol. 70, 2003, pp. 489-520.
[22] R. Bénabou and J. Tirole, “Incentives and Prosocial Behavior,” American Economic Review, Vol. 96, No. 5, 2006, pp. 1652-1678.
[23] R. J. Corsini, “The Dictionary of Psychology,” Routledge, Brunner, 1999.
[24] N. Branden, “The Psychology of Self-Esteem,” Bantam, New York, 1969.
[25] E. Fehr and S. Gachter, “Fairness and Retaliation: The Economics of Reciprocity,” Journal of Economic Perpectives, Vol. 14, No. 3, 2000, pp. 159-181. doi:10.1257/jep.14.3.159
[26] A. Bandura, “Self-Efficacy: The Exercise of Control,” Freeman & Co., New York, 1997.
[27] A. Bandura and E. A. Locke, “Negative Self-Efficacy and Goal Effects Revisited,” Journal of Applied Psychology, Vol. 88, No. 1, 2003, pp. 87-99. doi:10.1037/0021-9010.88.1.87
[28] J. B. Vancouver, K. M. More and R. J. Yoder, “Self- -Efficacy and Resource Allocation: Support for a Discontinuous Model,” Journal of Applied Psychology, Vol. 93, No. 1, 2008, pp. 35-47. doi:10.1037/0021-9010.93.1.35
[29] V. H. Wroom, “Work and Motivation,” Wiley, New York, 1964.
[30] L. W. Porter and E. E. Lawler, “Managerial Attitudes and Performance,” Dorsey, Homewood, 1968.
[31] E. A. Locke and G. P. Latham, “A Theory of Goal Setting and Task Performance,” Prentice-Hall, Englewood Cliffs, 1990.
[32] A. Furnham, “The Psychology of Behavior at Work: The Individual in the Organization,” Psychology Press, Hove, 1997.
[33] R. B. Myerson, “Optimal Coordination Mechanisms in Generalized Principal-Agent Problems,” Journal of Ma- thematical Economics, Vol. 10, 1982, pp. 67-81. doi:10.1016/0304-4068(82)90006-4
[34] J. A. Mirrlees, “An Exploration in the Theory of Optimum Income Taxation,” Review of Economic Studies, Vol. 38, No. 2, 1971, pp. 175-208. doi:10.2307/2296779
[35] E. Fehr, S. G?chter and G. Kirchsteiger, “Reciprocal Fairness and Noncompensating Wage Differentials,” Journal of Institutional and Theoretical Economics, Vol. 152, No. 4, 1996, pp. 608-640.
[36] E. Fehr and K. M. Schmidt, “Fairness, Incentives, and Contractual Choices,” European Economic Review, Vol. 44, No. 4-6, 2000, pp. 1057-1068. doi:10.1016/S0014-2921(99)00046-X
[37] T. F. Bewley, “Why Not Cut Pay?” European Economic Review, Vol. 42, No. 2, 1998, pp. 459-490. doi:10.1016/S0014-2921(98)00002-6
[38] E. Fehr and A. Falk, “Wage Rigidity in a Competitive Incomplete Contract Market,” Journal of Political Eco- nomy, Vol. 107, No. 1, 1999, pp. 106-134. doi:10.1086/250052
[39] M. Dufwenberg and G. Kirchsteiger, “Reciprocity and Wage Undercutting,” European Economic Review, Vol. 44, No. 4-6, 2000, pp. 1069-1078. doi:10.1016/S0014-2921(99)00047-1
[40] M. Argyle, “The Social Psychology of Work,” 2nd Edtion, Penguin, Harmondsworth, 1989.
[41] G. A. Akerlof, “Labor Contracts as Partial Gift Exch- ange,” Quarterly Journal of Economics, Vol. 97, No. 4, 1982, pp. 543-569. doi:10.2307/1885099
[42] G. A. Akerlof and J. Yellen, “Efficiency Wage Models of the Labor Market,” Cambridge University Press, Cambridge, 1986. doi:10.1017/CBO9780511559594
[43] G. A. Akerlof and J. Yellen, “The Fair Wage-Effort Hypothesis and Unemployment,” Quarterly Journal of Economics, Vol. 105, No. 2, 1990, pp. 255-283. doi:10.2307/2937787
[44] J. Q. Wilson, “Bureaucracy: What Government Agencies Do and Why They Do It,” Basic Books, New York, 1989.
[45] T. Besley and M. Ghatak, “Competition and Incentives with Motivated Agents,” American Economic Review, Vol. 95, No. 3, 2005, pp. 616-636. doi:10.1257/0002828054201413
[46] B. Jullien, “Participation Constraints in Adverse Selection Models,” Journal of Economic Theory, Vol. 93, No. 1, 2000, pp. 1-47. doi:10.1006/jeth.1999.2641
[47] P. Oyer, “Why Do Firms Use Incentives That Have No Incentive Effects,” Journal of Finance, Vol. 59, No. 4, 2004, pp. 1619-1650. doi:10.1111/j.1540-6261.2004.00674.x
[48] E. P. Lazear, “Performance Pay and Productivity,” Ame- rican Economic Review, Vol. 90, No. 5, 2000, pp. 1346- 1361. doi:10.1257/aer.90.5.1346
[49] E. Fehr, E. Kirchler, A. Weichbold and S. G?chter, “When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets,” Journal of Labor Economics, Vol. 16, No. 2, 1998, pp. 324-351. doi:10.1086/209891
[50] E. Fehr and A. Falk, “Psychological Foundations of Incentives,” European Economic Review, Vol. 46, No. 4-5, 2002, pp. 687-724. doi:10.1016/S0014-2921(01)00208-2
[51] J.-J. Laffont and J. Tirole, “Using Cost Observation to Regulate Firms,” Journal of Political Economy, Vol. 94, No. 3, 1986, pp. 614-641. doi:10.1086/261392
[52] D. Fudenberg and J. Tirole, “Game Theory,” MIT Press, Cambridge, 1991.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.