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The Impact of Envy on Relational Employment Contracts

[journal article]

Kragl, Jenny; Schmid, Julia

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-314388

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Abstract We study the effects of envy on relational employment contracts in a standard moral hazard setup with two agents. Performance is evaluated via an observable, but non-contractible signal which reects an agent's individual contribution to firm value. Both agents exhibit horizontal disadvantageous inequity aversion. In contrast to the literature, we find that inequity aversion may be beneficial; in the presence of envy, for a certain range of interest rates, relational contracts may be more profitable. For some interest rates reputational equilibria exist only with envious agents.
Classification Applied Psychology
Free Keywords Principal-agent; Relational contract; Inequity aversion; Envy
Document language English
Publication Year 2009
Page/Pages p. 766-779
Journal Journal of Economic Behavior & Organization, 72 (2009) 2
DOI http://dx.doi.org/10.1016/j.jebo.2009.07.016
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)