Working Paper Series
Steffen Huck, Dorothea Kübler and Jörgen Weibull
Social Norms and Optimal Incentives in Firms
Abstract: This paper deals with the interplay between economic
incentives and social norms in firms. We outline a simple model of team
production and provide preliminary results on linear incentive schemes in
the presence of a social norm that may cause multiple equilibria. The
effect of the social norm on the optimal bonus rate is discussed, as well
as the effectiveness of temporary changes in the bonus rate as a means to
move a firm from a bad to a good equilibrium.
Keywords: Social Norms; Incentives; Contracts; (follow links to similar papers)
JEL-Codes: D23; (follow links to similar papers)
12 pages, October 8, 2001
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